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EXHIBIT 1.1
12,850,000 SHARES
ALLEGIANCE TELECOM, INC.
COMMON STOCK, PAR VALUE $.01 PER SHARE
UNDERWRITING AGREEMENT
April [ ], 1999
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April [ ], 1999
Xxxxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxx & Co.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation
Xxxxxx Xxxxxxx & Co. Incorporated
Warburg Dillon Read LLC
c/o Xxxxxxx Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
ALLEGIANCE TELECOM, INC., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "UNDERWRITERS") and certain shareholders of the Company
(the "SELLING SHAREHOLDERS") named in Schedule II hereto, severally propose to
sell to the Underwriters, an aggregate of 12,850,000 shares of Common Stock,
par value $.01 per share of the Company (the "FIRM SHARES"), of which
10,000,000 shares are to be issued and sold by the Company and 2,850,000 shares
are to be sold by the Selling Shareholders, each Selling Shareholder selling
the amount set forth opposite such Selling Shareholder's name in Schedule II
hereto.
The Company also proposes to issue and sell to the several
Underwriters not more than an additional 1,927,500 shares of its Common Stock,
par value $.01 per share (the "ADDITIONAL SHARES") if and to the extent that
you, as representatives of the several Underwriters (the "REPRESENTATIVES"),
shall have determined to exercise, on behalf of the Underwriters, the right to
purchase such shares of common stock granted to the Underwriters in Section 2
hereof. The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "SHARES". The shares of Common Stock, par value $.01 per
share, of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the "COMMON STOCK". The
Company and the Selling Shareholders are hereinafter sometimes collectively
referred to as the "SELLERS".
The Company has filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement, including a prospectus,
relating to the Shares. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
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referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS".
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective;
no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are
pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this paragraph do not
apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
the State of Delaware, has the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole. Schedule A to the form of opinion
of Xxxxxxxx & Xxxxx, attached hereto as Exhibit B, sets forth each
jurisdiction in which the conduct of the Company's business or its
ownership or leasing of property requires it to be qualified to
transact business and be in good standing.
(d) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of
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its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole; all of the issued shares of
capital stock of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
are owned directly by the Company, free and clear of all liens,
encumbrances, equities or claims, except for such liens, encumbrances,
equities and claims as are disclosed in the Prospectus. There are no
active subsidiaries of the Company other than those listed on Schedule
A to the form of opinion of Xxxxxxxx & Xxxxx, attached hereto as
Exhibit B and such Schedule A sets forth each jurisdiction in which
the conduct of the Company's business or its ownership or leasing of
property requires any subsidiary of the Company to be qualified to
transact business and be in good standing.
(e) This Agreement has been duly authorized,
executed and delivered by the Company. Each of the Irrevocable Power
of Attorney and Custody Agreements (collectively, the "POWER OF
ATTORNEY AND CUSTODY AGREEMENTS"), each dated the date hereof and
signed by each Selling Shareholder and the Company as Custodian (the
"CUSTODIAN"), appointing certain individuals as the Selling
Shareholders' attorneys-in-fact to the extent set forth therein and
relating to the deposit of the Shares to be sold by such Selling
Shareholder and the transactions contemplated hereby and by the
Registration Statement, have been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in
the Prospectus.
(g) The shares of Common Stock (including the Shares
to be sold by the Selling Shareholders) outstanding prior to the
issuance of the Shares to be sold by the Company have been duly
authorized and are validly issued, fully paid and nonassessable.
(h) The Shares to be sold by the Company have been
duly authorized and, when issued and delivered against payment
therefor in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of,
and the performance by the Company of its obligations under, this
Agreement and the Power of Attorney and Custody Agreements will not
contravene any provision of applicable law or the certificate of
incorporation or bylaws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the
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Company and its subsidiaries, taken as a whole, or any judgment, order
or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no permit,
license, consent, approval, authorization or order of, or filing,
declaration or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under
this Agreement or the Power of Attorney and Custody Agreements, except
such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Shares.
The exhibit index to the Registration Statement sets forth all
agreements and instruments to which the Company or any of its
subsidiaries is a party that are required by Item 601 of Regulation
S-K to be filed as exhibits to the Registration Statement.
(j) There has not occurred any material adverse
change, or any development involving a prospective material adverse
change, in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement). Furthermore, except in each case as described in the
Prospectus, (i) the Company and its subsidiaries have not incurred any
material liability or obligation, direct or contingent, nor entered
into any material transaction not in the ordinary course of business;
(ii) neither the Company nor any of its subsidiaries has purchased any
of the Company's outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on the
Company's capital stock; and (iii) there has not been any material
change in the capital stock, short-term debt or long-term debt of the
Company and its subsidiaries, taken as a whole.
(k) There are no legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of
its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities
Act and the applicable rules and regulations of the Commission
thereunder.
(m) The Company is not and, after giving effect to
the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended.
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(n) The Company and its subsidiaries (i) are 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, including all such laws and
regulations concerning electromagnetic radio frequency emissions
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permit, license or approval,
except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(o) There are no costs or liabilities associated
with Environmental Laws (including, without limitation, any capital or
operating expenditures required for cleanup, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(p) Except as described in or contemplated by the
Prospectus, the Company and each of its subsidiaries (i) have all
necessary licenses, consents, authorizations, approvals, orders,
certificates and permits of and from, and have made all declarations
and filings with, all federal, state, local and other governmental,
administrative and regulatory authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease,
license and use its properties and assets and to conduct its business
in the manner described in the Prospectus, except to the extent that
the failure to obtain such licenses, consents, authorizations,
approvals, orders, certificates and permits or make such declarations
and filings would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole and (ii) have not received any
notice of proceedings relating to revocation or modification of any
such license, consent, authorization, approval, order, certificate or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected
to result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.
(q) The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
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assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(r) The Company and each of its subsidiaries have
good and marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, taken as
a whole, in each case free and clear of all liens, encumbrances and
defects, except such as are described in the Prospectus and such other
liens as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not materially interfere with
the use made and proposed to be made of such property and buildings by
the Company and its subsidiaries, in each case except as described in
or contemplated by the Prospectus.
(s) The Company and its subsidiaries own or possess,
or can acquire on reasonable terms, all material patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks and trade names currently employed by them in connection with
the business now operated by them, and neither the Company nor any of
its subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(t) No material labor dispute with the employees of
the Company or any of its subsidiaries exists or, to the knowledge of
the Company, is imminent; and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees of
any of its principal suppliers, manufacturers or contractors that
could have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(u) The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are customary in the
businesses in which they are engaged; neither the Company nor any of
its subsidiaries has been refused any insurance coverage sought or
applied for; and neither the Company nor any of its subsidiaries 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 have a material and adverse effect
on the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
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(v) All licenses issued by the Federal
Communications Commission (the "FCC LICENSES") required for the
operation of the business of the Company and its subsidiaries are in
full force and effect and there are no pending modifications,
amendments or revocation proceedings which would adversely affect the
operations of the Company and its subsidiaries. All fees due and
payable to governmental authorities pursuant to the rules governing
FCC Licenses have been paid and no event has occurred with respect to
the FCC Licenses held by the Company and its subsidiaries which, with
the giving of notice or the lapse of time or both, would constitute
grounds for revocation thereof. Each of the Company and its
subsidiaries is in compliance in all material respects with the terms
of the FCC Licenses, as applicable, and there is no condition, event
or occurrence existing, nor is there any proceeding being conducted of
which the Company has received notice, nor, to the Company's
knowledge, is there any proceeding threatened, by any governmental
authority, which would cause the termination, suspension, cancellation
or nonrenewal of any of the FCC Licenses, or the imposition of any
penalty or fine by any regulatory authority. No registrations,
filings, applications, notices, transfers, consents, approvals,
audits, qualifications, waivers or other action of any kind is
required by virtue of the execution and delivery of this Agreement,
the Power of Attorney and Custody Agreements or of the consummation of
the transactions contemplated hereby or thereby, other than as
previously obtained from the FCC (a) to avoid the loss of any such
license, permit, consent, concession or other authorization or any
asset, property or right pursuant to the terms thereof, or the
violation or breach of any applicable law thereto or (b) to enable the
Company or any of its subsidiaries to hold and enjoy the same after
the Closing Date (as defined herein) in the conduct of its business as
conducted prior to the Closing Date.
(w) Each of the Company and its subsidiaries is
solvent and has tangible and intangible assets having a fair value in
excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured, and has access to
adequate capital for the conduct of its business and the ability to
pay its debts from time to time incurred in connection therewith as
such debts mature. Neither the Company nor any of its subsidiaries is
contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency laws or the liquidating of all or a
substantial portion of its property, and neither the Company nor any
of its subsidiaries has any knowledge of any person contemplating the
filing of any such petition against it.
(x) Except as described in the Prospectus, there are
no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
(y) The Company has reviewed its operations and that
of its subsidiaries to evaluate the extent to which the business or
operations of the Company of
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any of its subsidiaries will be affected by the Year 2000 Problem. As
a result of such review, the Company has no reason to believe, and
does not believe, that the Year 2000 Problem will have a material
adverse effect on the general affairs, management, the current or
future consolidated financial position, business prospects,
stockholders' equity or results of operations of the Company and its
subsidiaries or result in any material loss or interference with the
Company's business or operations. In addition, the discussion of the
Year 2000 Problem in the Prospectus with respect to third parties with
which the Company or any of its subsidiaries has a material
relationship is, as of the applicable filing date, and will be, as of
the date of any amendment or supplement thereto, accurate, complete
and fair in all material respects. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not, in
the case of dates or time periods occurring after December 31, 1999,
function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000.
2. Representations and Warranties of the Selling
Shareholders. Each of the Selling Shareholders represents and warrants to and
agrees with each of the Underwriters that:
(a) This Agreement has been duly authorized,
executed and delivered by or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling
Shareholder of, and the performance by such Selling Shareholder of its
obligations under, this Agreement and the Power of Attorney and
Custody Agreement of such Selling Shareholder will not contravene any
provision of applicable law, or the organizational documents of such
Selling Shareholder, or any agreement or other instrument binding upon
such Selling Shareholder or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required
for the performance by such Selling Shareholder of its obligations
under this Agreement or the Power of Attorney and Custody Agreement of
such Selling Shareholder, except such as may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Shares.
(c) The Shares to be sold by such Selling
Shareholder pursuant to this Agreement are certificated securities in
registered form and are not held in any securities account or by or
through any securities intermediary within the meaning of the NYUCC.
Such Selling Shareholder has and will on the Closing Date have full
right, power and authority to hold, sell, transfer and deliver the
Shares to be sold by such Selling Shareholder pursuant to this
Agreement; and upon delivery to the Underwriters of such Shares and
payment of the purchase price therefor as herein contemplated, the
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Underwriters will acquire their respective interests in such Shares
(including, without limitation, all rights that such Selling
Shareholder had or has the power to transfer in such Shares) free of
any adverse claim.
(d) Certificates for all of the Shares to be sold by
such Selling Shareholder pursuant to this Agreement in suitable form
for transfer by delivery or accompanied by duly executed instruments
of transfer or assignment in blank or to the Underwriters, with
signatures guaranteed, have been placed in custody with the Custodian
(as defined under the Power of Attorney and Custody Agreement) with
irrevocable conditional instructions to deliver such Shares to the
Underwriters pursuant to this Agreement.
(e) Such Selling Shareholder has, and on the Closing
Date will have, the legal right and power, and all authorization and
approval required by law, to enter into this Agreement and the Power
of Attorney and Custody Agreement of such Selling Shareholder.
(f) The Power of Attorney and Custody Agreement of
such Selling Shareholder has been duly authorized, executed and
delivered by such Selling Shareholder and is a valid and binding
agreement of such Selling Shareholder, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and general principles of
equity.
(g) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iii) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this paragraph 2(g)
(x) do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein and (y) relate only to
information relating to such Selling Shareholder furnished in writing
by or on behalf of such Selling Shareholder expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto.
3. Agreements to Sell and Purchase. Each Seller, severally
and not jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the
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representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from such
Seller the respective numbers of Firm Shares set forth in Schedule I hereto
opposite such Underwriter's name at U.S.$[ ] a share ("PURCHASE PRICE").
On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to sell to the Underwriters the Additional Shares, and the Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 1,927,500
Additional Shares at the Purchase Price. If the Representatives, on behalf of
the Underwriters, elect to exercise such option, the Representatives shall so
notify the Company in writing not later than 30 days after the date of this
Agreement, which notice shall specify the number of Additional Shares to be
purchased by the Underwriters and the date on which such shares are to be
purchased (which date of purchase, if other than the Closing Date (as defined
below), shall be at least two business days after such notice is delivered,
unless the Company consents otherwise). Such date may be the same as the
Closing Date but not earlier than the Closing Date nor later than ten business
days after the date of such notice. Additional Shares may be purchased as
provided in Section 5 hereof solely for the purpose of covering overallotments
made in connection with the offering of the Firm Shares. If any Additional
Shares are to be purchased, each Underwriter agrees, severally and not jointly,
to purchase the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as the Representatives may determine) that bears
the same proportion to the total number of Additional Shares to be purchased as
the number of Firm Shares set forth in Schedule I hereto opposite the name of
such Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written
consent of Xxxxxxx Xxxxx Xxxxxx Inc. and Xxxxxxx, Sachs & Co. on behalf of the
Underwriters, it will not, during the period ending 90 days after the date of
the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold
hereunder, (B) the issuance by the Company of shares of Common Stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof and as described in the Prospectus, (C) the issuance by the
Company of additional options to purchase Common Stock pursuant to the
Company's 1997 Nonqualified Stock Option Plan or 1998 Stock Incentive Plan, (D)
the issuance by the Company of shares of Common Stock pursuant to the Company's
Employee Stock Discount Purchase Plan or 1998 Stock Incentive Plan or (E)
transactions relating to shares of Common Stock or other securities acquired in
open market transactions after completion of the offering contemplated by the
Prospectus.
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4. Terms of Public Offering. The Sellers are advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement has become
effective and this Agreement has been executed as in your judgment is
advisable. The Sellers are further advised by you that the Shares are to be
offered to the public initially at U.S.$[ ] a share (the "PUBLIC OFFERING
PRICE") and to certain dealers selected by you at a price that represents a
concession not in excess of U.S.$[ ] a share under the Public Offering Price,
and that any Underwriter may allow, and such dealers may reallow, a concession,
not in excess of U.S.$[ ] a share, to any Underwriter or to certain other
dealers.
5. Payment and Delivery. Payment for the Firm Shares to be
sold by each Seller shall be made to such Seller in Federal or other funds
immediately available in New York City against delivery of such Firm Shares for
the respective accounts of the several Underwriters at 9:00 a.m., New York City
time, on April [ ], 1999, or at such other time on the same or such other date,
not later than April [ ], 1999, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "CLOSING
DATE".
Payment for any Additional Shares shall be made to the
Company in Federal or other funds immediately available in New York City
against delivery of such Additional Shares for the respective accounts of the
several Underwriters at 9:00 a.m., New York City time, on the date specified in
the notice described in Section 3 or at such other time on the same or on such
other later date, in any event not later than May [ ], 1999, as shall be
designated in writing by the Representatives. The time and date of such payment
are hereinafter referred to as the "OPTION CLOSING DATE".
Certificates for the Firm Shares and Additional Shares shall
be in definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.
6. Conditions to the Underwriters' Obligations. The
obligations of the Sellers to sell the Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Shares on
the Closing Date are subject to the condition that the Registration Statement
shall have become effective not later than [ ] (New York City time) on the
date hereof.
The several obligations of the Underwriters are subject to
the following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:
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(i) there shall not have occurred any
downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any
change, or any development involving a prospective change, in
the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries,
taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the
Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in Section
6(a)(i) above and to the effect that the representations and
warranties of the Company contained in this Agreement are true and
correct as of the Closing Date and that the Company has complied with
all of the agreements and satisfied all of the conditions on its part
to be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate
may rely upon the best of his or her knowledge as to proceedings
threatened.
(c) The Underwriters shall have received on the
Closing Date an opinion of Xxxxxxxx & Xxxxx, outside counsel for the
Company, dated the Closing Date, to the effect set forth in Exhibit B.
(d) The Underwriters shall have received on the
Closing Date an opinion of Xxxx X. Xxxxxxxxxx, General Counsel of the
Company, dated the Closing Date, to the effect set forth in Exhibit C.
(e) The Underwriters shall have received on the
Closing Date an opinion of Xxxxxxxx & Xxxxx, counsel for the Selling
Shareholders, dated the Closing Date, to the effect set forth in
Exhibit D.
(f) The Underwriters shall have received on the
Closing Date an opinion of Xxxxxxx Berlin Shereff Xxxxxxxx, LLP,
regulatory counsel for the Company, dated the Closing Date, to the
effect set forth in Exhibit E.
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The opinions of Xxxxxxxx & Xxxxx, Xxxx X. Tresnowski
and Xxxxxxx Berlin Shereff Xxxxxxxx, LLP, shall be rendered to the
Underwriters at the request of the Company or one or more of the
Selling Shareholders, as the case may be, and shall so state therein.
(g) The Underwriters shall have received on the
Closing Date an opinion of Shearman & Sterling, counsel for the
Underwriters, dated the Closing Date, in form and substance reasonably
satisfactory to you.
(h) The Underwriters shall have received, on each of
the date hereof and the Closing Date, a letter dated the date hereof
or the Closing Date, as the case may be, in form and substance
satisfactory to the Underwriters, from Xxxxxx Xxxxxxxx LLP,
independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(i) The "lockup" agreements, each substantially in
the form of Exhibit A-1 hereto, between (i) you and the fund
investors, (ii) you and the management investors (each as referred to
in the Prospectus), and (iii) you and the Company's directors,
executive officers, the Selling Shareholders and other stockholders of
the Company relating to sales and certain other dispositions of shares
of Common Stock or certain other securities, (effective in each case
for 90 days from the date of the Prospectus) delivered to you on or
before the date hereof, shall be in full force and effect on the
Closing Date. The parties to be subject to the "lock-up" agreements
are listed on Exhibit A-2 hereto.
(j) The Company shall have obtained duly executed
waivers from each of the fund investors, each of the management
investors and the holders of more than a majority of the Company's
outstanding warrants (on behalf of all such holders of outstanding
warrants), with respect to such parties' rights to require the Company
to include such person's Common Stock with the Shares registered
pursuant to the Registration Statement.
(k) The representations and warranties of each
Selling Shareholder contained in this Agreement shall be true and
correct as of the Closing Date and each Selling Shareholder shall have
complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or
before the Closing Date. The Underwriters shall have received on the
Closing Date certificates dated the Closing Date and signed by the
Selling Shareholders or by their attorneys-in-fact to the effect set
forth in this Section 6(k).
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(l) The Underwriters shall have received such other
certificates and documents as they or their counsel may reasonably
request.
(m) The several obligations of the Underwriters to
purchase Additional Shares hereunder are subject to the delivery to
the Representatives on the Option Closing Date of such documents as
they may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares
and other matters related to the Company and the issuance of the
Additional Shares.
7. Covenants. In further consideration of the agreements of
the Underwriters herein contained, the Company, except as otherwise provided
below, covenants with each Underwriter as follows:
(a) To furnish to you, without charge, six signed
copies of the Registration Statement (including exhibits thereto) and
for delivery to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto) and to furnish to
you in New York City, without charge, prior to 10:00 a.m. New York
City time on the business day next succeeding the date of this
Agreement and during the period mentioned in Section 7(c) below, as
many copies of the Prospectus and any supplements and amendments
thereto or to the Registration Statement as you may reasonably
request.
(b) Before amending or supplementing the
Registration Statement or the Prospectus, to furnish to you a copy of
each such proposed amendment or supplement and not to file any such
proposed amendment or supplement to which you reasonably object, and
to file with the Commission within the applicable period specified in
Rule 424(b) under the Securities Act any prospectus required to be
filed pursuant to such Rule.
(c) If, during such period after the first date of
the public offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the
Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments
or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with applicable law.
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(d) To use its best effort to register or qualify
the Shares for offer and sale under all applicable state securities or
"blue sky" laws of such jurisdictions as you shall reasonably request;
provided, however, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 7(d), (ii) file any general consent to service of
process or (iii) subject itself to taxation in any such jurisdiction
if it is not so subject.
(e) To make generally available to the Company's
security holders and to you as soon as practicable an earning
statement covering the twelve-month period beginning after the
effective date of the Registration Statement (as defined in Rule
158(c) of the Securities Act) that satisfies the provisions of Section
11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the
Sellers agree to pay or cause to be paid all expenses incident to the
performance of their obligations under this Agreement, including: (i)
the fees, disbursements and expenses of the Company's counsel, the
Company's accountants and counsel for the Selling Shareholders in
connection with the registration and delivery of the Shares under the
Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of
the foregoing, including all printing costs associated therewith, and
the mailing and delivering of copies thereof to the Underwriters and
dealers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon,
(iii) the cost of printing or producing any Blue Sky or legal
investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with
the qualification of the Shares for offer and sale under state
securities laws as provided in Section 7(d) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection
with the Blue Sky or legal investment memorandum, (iv) all filing fees
and the reasonable fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification
of the offering of the Shares by the National Association of
Securities Dealers, Inc. ("NASD"), (v) all costs and expenses incident
to listing the Shares to be issued by the Company on the Nasdaq
National Market, (vi) the cost of printing certificates representing
the Shares, (vii) the costs and charges of any transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants
engaged in connection with the road show presentations with the prior
approval of the Company, travel and lodging expenses of the
representatives and officers
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of the Company and any such consultants, and the cost of any aircraft
chartered in connection with the road show, and (ix) all other costs
and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 8 entitled "Indemnity and Contribution", and the last
paragraph of Section 10 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel,
transfer and income taxes payable on resale of any of the Shares by
them and any advertising expenses connected with any offers they may
make.
The provisions of this Section shall not supersede
or otherwise affect any agreement that the Sellers may otherwise have
for the allocation of such expenses among themselves.
(g) The Company will not, without the prior consent
of Xxxxxxx Xxxxx Barney Inc. and Xxxxxxx, Xxxxx & Co., release any
securityholder listed on Exhibit A-2 hereto from the terms of any
"lockup" arrangements between the Company and such securityholder.
(h) The Company will conduct its affairs and operate
its business so as not to be deemed an "investment company" required
to be registered under the Investment Company Act of 1940, as amended.
8. Indemnity and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein; provided, however, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Shares, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written
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confirmation of the sale of the Shares to such person, and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
b) Each Selling Shareholder agrees, severally and
not jointly, to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but (x) only with
reference to information relating to such Selling Shareholder furnished in
writing by or on behalf of such Selling Shareholder expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto and (y) only to the extent of the gross
proceeds received by such Selling Shareholder from the offering of the Shares;
provided, however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or liabilities
purchased Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such losses, claims, damages or liabilities, unless
such failure is the result of noncompliance by the Company with Section 6(a)
hereof.
(c) Each Selling Shareholder agrees, severally and
not jointly, to indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,but only with reference
to information relating to such Selling Shareholder furnished in writing by or
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on behalf of such Selling Shareholder expressly for use in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendments or
supplements thereto.
(d) Each Underwriter agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its
officers who sign the Registration Statement, the Selling Shareholders and each
person, if any, who controls the Company or any Selling Shareholder within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company and
the Selling Shareholders to such Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(e) In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to Section 8(a), 8(b), 8(c) or 8(d),
such person (the "INDEMNIFIED PARTY") shall promptly notify the person against
whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Xxxxxxx Xxxxx
Xxxxxx Inc. and Xxxxxxx, Sachs & Co., in the case of parties indemnified
pursuant to Section 8(a) and (b), by the persons named as attorneys-in-fact for
the Selling Shareholders under the Power of Attorney and Custody Agreements, in
the case of parties indemnified pursuant to Section 8(c) and by the Company, in
the case of parties indemnified pursuant to Section 8(d). The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if
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(i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement (i) includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding, provided that such unconditional release may
be subject to a parallel release of a claimant or plaintiff by such indemnified
party from all liability in respect of claims or counterclaims asserted by such
indemnified party, and (ii) does not include a statement as to, or an admission
of, fault, culpability or a failure to act by or on behalf of any indemnified
party.
(f) To the extent the indemnification provided for
in Section 8(a), 8(b), 8(c) or 8(d) is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the Underwriters on the other hand from the offering of the Shares or (ii)
if the allocation provided by clause 8(f)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(f)(i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
indemnifying party or parties on the one hand and the Underwriters on the other
hand in connection with the offering of the Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the indemnifying party or parties and
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Shares. The relative fault of the
indemnifying party or parties on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the indemnifying party or parties or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 8 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint. In no
event shall the liability of the Selling Shareholder under Section 8(f) exceed
the amount that such Selling Shareholder would have been required to pay under
Section 8(b) had such indemnification been held to be available thereunder.
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(g) The Sellers and the Underwriters agree that it
would not be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in Section 8(e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 8 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(h) The indemnity and contribution provisions
contained in this Section 8 and the representations, warranties and other
statements of the Company and the Selling Shareholders contained in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter, any Selling
Shareholder or any person controlling any Selling Shareholder, or by or on
behalf of the Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Shares.
9. Termination. This Agreement shall be subject to
termination by notice given by you to the Company, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 9(a)(i) through 9(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
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10. Effectiveness; Defaulting Underwriters. This Agreement
shall become effective upon the execution and delivery hereof by the parties
hereto.
If, on the Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of the Shares to be purchased on such date,
the other Underwriters shall be obligated severally in the proportions that the
number of Firm Shares set forth opposite their respective names in Schedule I
bears to the aggregate number of Firm Shares set forth opposite the names of
all such nondefaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 10 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you, the Company and the Selling Shareholders for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
nondefaulting Underwriter, the Company or the Selling Shareholders. In any such
case either you or the relevant Sellers shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus
or in any other documents or arrangements may be effected. If, on the Option
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Additional Shares to be purchased, the non-defaulting Underwriters shall have
the option to (i) terminate their obligation hereunder to purchase Additional
Shares or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase in the
absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of any Seller to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason any Seller shall be unable to perform its obligations under
this Agreement, the Sellers will reimburse the Underwriters or such
Underwriters as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Underwriters in connection with
this Agreement or the offering contemplated hereunder.
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11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
13. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
14. Notice. All notices and other communications under this
Agreement shall be in writing, and, if sent to the Underwriters, be mailed,
delivered or sent by facsimile transmission to:
Xxxxxxx Xxxxx Xxxxxx
c/o Xxxxxxx Xxxxx Barney Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel's Office
Facsimile Number: (000) 000-0000
or, if sent to the Company, will be mailed, delivered or sent by facsimile
transmission to the Company at:
Allegiance Telecom, Inc.
0 Xxxxxxxxx Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxxx
Senior Vice President, General
Counsel and Secretary
Facsimile Number: (000) 000-0000
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Very truly yours,
ALLEGIANCE TELECOM, INC.
By:
-------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Senior Vice President,
General Counsel and Secretary
The Selling Shareholders named in
Schedule II hereto, acting severally
By:
-------------------------------------
Attorney-in-Fact
Accepted as of the date hereof:
XXXXXXX XXXXX BARNEY INC.
XXXXXXX, XXXXX & CO.
XXXXXXXXX, XXXXXX & XXXXXXXX SECURITIES CORPORATION
XXXXXX XXXXXXX & CO. INCORPORATED
WARBURG DILLON READ LLC
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule I hereto.
By: Xxxxxxx Xxxxx Xxxxxx Inc.
By:
-------------------------------
Name:
Title:
25
SCHEDULE I
UNDERWRITERS
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Xxxxxxx Xxxxx Barney Inc.
Xxxxxxx, Xxxxx & Co.
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
Xxxxxx Xxxxxxx & Co. Incorporated
Warburg Dillon Read LLC
----------
Total Firm Shares.................................................................... 12,850,000
==========
26
SCHEDULE II
SELLING SHAREHOLDERS
NUMBER OF
SELLING SHAREHOLDER SHARES SOLD
Madison Dearborn Capital Partners II, L.P. 2,000,000
Frontenac VII Limited Partnership 809,524
Frontenac Masters VII Limited Partnership 40,476
---------
Total............................................................................... 2,850,000
=========
27
EXHIBIT A-1
[FORM OF LOCK-UP LETTER]
____________, 1999
Xxxxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxx & Co.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation
Xxxxxx Xxxxxxx & Co. Incorporated
Warburg Dillon Read LLC
c/o Xxxxxxx Xxxxx Xxxxxx Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
The undersigned understands that Xxxxxxx Xxxxx Barney Inc. and
Xxxxxxx, Xxxxx & Co. (together, the "Representatives") propose to enter into an
Underwriting Agreement (the "UNDERWRITING AGREEMENT") with Allegiance Telecom,
Inc., a Delaware corporation (the "COMPANY"), and certain selling shareholders
providing for the public offering (the "PUBLIC OFFERING") by the several
Underwriters, including the Representatives (the "UNDERWRITERS"), of shares
(the "SHARES") of the Common Stock, par value $.01 per share of the Company
(the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of the
Representatives on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 90 days after the date of the final
prospectus relating to the Public Offering (the "PROSPECTUS"), (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (a) transactions relating to shares of Common Stock or other
securities acquired in open market
28
transactions after the completion of the Public Offering, (b) any transfer for
estate planning purposes of shares of Common Stock (i) to a trust or
partnership for the benefit of such transferor or such transferor's parents,
siblings, spouse, descendants (whether or not adopted) or stepchildren
(collectively, the "Family Group") or (ii) by gift, will or intestate
succession to such transferor's Family Group or (c) transfers of not more than
an aggregate of 20% of the undersigned's shares of Common Stock for the purpose
of making a charitable contribution to a not-for-profit organization; provided,
that, with respect to any transfers pursuant to clauses (b) or (c), as a
condition precedent to such transfer, the transferee of any such transfer, or
the trustee or legal guardian on behalf of any such transferee, duly executes
and delivers this Agreement. In addition, the undersigned agrees that, without
the prior written consent of the Representatives on behalf of the Underwriters,
it will not, during the period commencing on the date hereof and ending 90 days
after the date of the Prospectus, make any demand for or exercise any right
with respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock that would
result in a registration statement relating to such Common Stock or security
being filed prior to the date 90 days after the date of the Prospectus.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Sellers and the Underwriters.
Very truly yours,
-----------------------------------------
(Name)
-----------------------------------------
(Address)
A-1-2
29
EXHIBIT A-2
LIST OF PARTIES SUBJECT TO LOCK-UP LETTER
(1) FUND INVESTORS AND SELLING SHAREHOLDERS
x Xxxxxx Xxxxxxx Capital Partners III, L.P.
o MSCP III 892 Investors, X.X.
x Xxxxxx Xxxxxxx Capital Investors, L.P.
o Madison Dearborn Capital Partners II, L.P.
o Battery Ventures IV, L.P.
o Battery Investment Partners IV, LLC
o Frontenac VII Limited Partnership
o Frontenac Masters VII Limited Partnership
(2) OTHERS (DIRECTORS, EXECUTIVE OFFICERS AND FOUNDER EMPLOYEES)
NAME POSITION
x Xxxxxxxx, Xxxxxxx Director Information Systems
o Xxxx, Xxxxxx X. Director Switch Engineer
o Xxxxx, X.X. Regional Vice President Southeastern Region
o Xxxxxx, Xx Vice President NOCC & Tech Services
o Xxxxxxxx, Xxxx X. Senior Vice President Sales and Marketing
o Xxxxxxx, Xxxx Director
o Xxxxx, Xxxxxx Vice President Customer Care and Billing Services
x Xxxxxxxx, Xxx Director
o Crowne, Xxxx Senior Vice President & Chief Engineer
o Xxxxxxx, Xxxxxx Vice President Public Relations
o Xxxxxxxxxx, Xxxx Director
30
NAME POSITION
x Xxxxxxxx, Xxxx Director
o Xxxxxxx, Xxxx Director
o Xxxxxxxx, Xxxx Director
o Xxxxxxxx, Xxxxxx X. Vice President Operations, S.W. Region
o Xxxxxxx, Xxxxx X. Chairman & Chief Executive Officer
x Xxxxxxx, Xxxxx Senior Vice President & CIO Customer Care
x Xxxxx, Xxxx Director
o Xxxxx, Xxxxx Director Business Planning
o Xxx, Xxx Vice President Business Analysis
o Xxxxx, Xxxxxxxx X. Senior Vice President Human Resource, Real Estate &
Administration
o Xxxxx, Xxxx Central Office Tech
o Xxxx, Xxxxx Senior Vice President Development & Regulatory
o Xxxx, Xxxxxx Executive Vice President Corporate Development
o Xxxxxxxxxx, Xxxxx Vice President National Accounts
o Xxxxxxxx, Xxxxx Vice President Training
o Xxxxxxx, Xxxxx Vice President Controller/Treasurer
o XxXxxxxxxx, Xxxxxx Vice President Regulatory & Interconnection
o Xxxxxxx, Xxxxxxx Regional Vice President, Central Division
x Xxxxx, Xxx Director
o Xxxxx, Xxxxxxx Vice President OSS Management
x Xxxxxxxxx, Xxxxx Sales Director National Data Accounts
o Tresnowski, Xxxx Xxxxxx Vice President, General Counsel and Secretary
o Xxxxxxxx, Xxxx Director Transmission Engineer
o Xxxx, Xxx President & Chief Operating Officer
A-2-2
31
EXHIBIT B
Opinion of Xxxxxxxx & Xxxxx
[Attach draft opinion of Xxxxxxxx & Xxxxx to be delivered pursuant to
Section 6(c) of the Underwriting Agreement to the effect that:]
1. The Underwriting Agreement and each of the Power of Attorney and
Custody Agreements have been duly authorized, executed and delivered
by the Company; each Power of Attorney and Custody Agreement is a
valid and binding agreement of the Company, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally and general
principles of equity.
2. Upon the delivery to DTC or its agent of the Shares registered in the
name designated by DTC (including, without limitation, Cede & Co.),
and upon the crediting of the Shares to the securities accounts of the
several Underwriters with DTC, DTC will be a "protected purchaser" of
the Shares (as defined in Section 8-303 of the NYUCC) and will acquire
its interest in the Shares free of any adverse claim (assuming that
DTC is without notice of any adverse claim).
3. Upon the payment of the purchase price for the Shares and the
crediting of the Shares to the securities accounts of the several
Underwriters with DTC, each of the Underwriters will acquire a
security entitlement (within the meaning of Section 8-501 of the
NYUCC) in respect of the Shares to be purchased by it, and no action
(whether framed in conversion, replevin, constructive trust, equitable
lien, or other theory) based on an adverse claim may be asserted
against the Underwriters with respect to such security entitlement
(assuming that the Underwriters are without notice of the adverse
claim).
4. The Company is not required to obtain any consent, approval,
authorization or order of, or qualify with, any governmental body,
court or agency for the performance by the Company of its obligations
under the Underwriting Agreement or the Power of Attorney and Custody
Agreements, except for any such consent, approval, authorization or
order which may be required under the so-called "Blue Sky" or
securities laws of any states (as to which we express no opinion or
advice) in connection with the offer and sale of the Shares by the
Underwriters.
5. The Company is not, and after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described
in the Prospectus will not be, an "investment company" as defined in
the Investment Company Act of 1940, as amended.
6. The statements in the Prospectus under the captions "Certain
Relationships and Related Transactions," "Description of Certain
Indebtedness," "Description of Capital Stock" and "Underwriters," and
the statements in Item 14 and Item 15 of the Registration Statement,
in each case insofar as such statements constitute summaries of the
legal matters, documents and proceedings referred to therein, in all
material respects fairly present the
32
information with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein.
7. The authorized capital stock of the Company conforms in all material
respects to the description thereof set forth in the Prospectus under
the caption "Description of Capital Stock."
8. We (A) are of the opinion that the Registration Statement and
Prospectus (except for financial statements and schedules and other
financial data included therein as to which such counsel need not
express any opinion) comply as to form in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder, (B) have no reason to believe that (except for
financial statements and schedules and other financial data as to
which such counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and (C) have no reason to believe that (except for
financial statements and schedules and other financial data as to
which such counsel need not express any belief) the Prospectus
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
With respect to (8) above, Xxxxxxxx and Xxxxx may state that their
opinion and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and review and discussion of the contents thereof, but are without independent
check or verification, except as specified.
B-2
33
EXHIBIT C
Opinion of Xxxx X. Xxxxxxxxxx
[Attach draft opinion of Xxxx X. Xxxxxxxxxx to be delivered pursuant to Section
6(d) of the Underwriting Agreement to the effect that:]
1. Each of the Company and each subsidiary of the Company listed on
Schedule A attached hereto (each, a "Subsidiary") is a corporation
validly existing and in good standing under the laws of Delaware, has
the corporate power and authority to own its property and to conduct
its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction set
forth opposite its name on such Schedule A.
2. All of the issued shares of capital stock of each Subsidiary have been
duly and validly authorized and issued and are fully paid and
non-assessable.
3. The shares of Common Stock (including the Shares to be sold by the
Selling Shareholders) outstanding prior to the issuance of the Shares
to be sold by the Company have been duly authorized and are validly
issued, fully paid and nonassessable.
4. The Shares to be sold by the Company have been duly authorized and,
when issued and delivered in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and
nonassessable, and the issuance of such Shares will not be subject to
any preemptive or similar rights.
5. The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Underwriting Agreement and
the Power of Attorney and Custody Agreements will not (i) violate the
Company's Certificate of Incorporation or Bylaws or (ii) constitute a
violation by the Company of any applicable provision of any law,
statute or regulation (except that we express no opinion in this
paragraph as to compliance with any disclosure requirement or any
prohibition against fraud or misrepresentation or as to whether
performance of any indemnification or contribution provisions would be
permitted) or (iii) breach, or result in a default under, any existing
obligation of the Company under any of the agreements listed on
Schedule B hereto (provided that we express no opinion as to
compliance with any financial test or cross default provision that may
be contained in any such agreement, if any).
6. To our knowledge, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, pending or threatened against, the Company or any
Subsidiary that is required to be described in the Registration
Statement or the Prospectus that is not so described nor are there any
statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not
described or filed as required.
34
7. All of the issued shares of capital stock of each Subsidiary are owned
directly of record by the Company, free and clear of all perfected
liens, encumbrances, equities or claims, except for such liens,
encumbrances, equities or claims as are disclosed in the Prospectus,
and to the best of our knowledge, such shares are owned beneficially
by the Company.
C-2
35
EXHIBIT D
Opinion of Xxxxxxxx & Xxxxx
[Attach draft opinion of Xxxxxxxx & Xxxxx to be delivered
pursuant to Section 6(e) of the Underwriting Agreement to the effect that:]
1. The Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of each of the Selling Shareholders.
2. The execution and delivery by each Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations under, this
Agreement and the Power of Attorney and Custody Agreement of such Selling
Shareholder will not contravene any provision of applicable law, or the
organizational documents of such Selling Shareholder, or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon such
Selling Shareholder or, to the best of such counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over such Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for the
performance by such Selling Shareholder of its obligations under the
Underwriting Agreement or the Power of Attorney and Custody Agreement of such
Selling Shareholder, except such as may be required by the securities or Blue
Sky laws of the various states in connection with offer and sale of the Shares.
3. Each Selling Shareholder has full right, power and
authority to sell, transfer and deliver such Shares pursuant to the
Underwriting Agreement. Assuming that (i) the Shares to be sold by each Selling
Shareholder are registered securities in certificated form and not held in any
securities account or by or through a securities intermediary within the
meaning of the NYUCC (ii) the certificate or certificates representing the
Shares to be sold by such Selling Shareholder pursuant to the Underwriting
Agreement have been effectively endorsed in blank in accordance with the NYUCC,
and (iii) Transfer Agent in its capacity as Custodian for the Underwriter is
not acting as a securities intermediary then, by delivery of such certificate
or certificates to the Underwriters, and upon payment therefor by the
Underwriters pursuant to the Underwriting Agreement, each Underwriter will be a
"protected purchaser" of the Shares to be purchased by it (within the meanings
of Section 8-501 and 8-303 of the NYUCC) and will acquire its interest in such
Shares (including, without limitation, all rights that such Selling Shareholder
had or has the power to transfer in such Shares) free of any adverse claim
(assuming that the Underwriters are without notice of any adverse claim).
4. The Power of Attorney and Custody Agreement of each
Selling Shareholder has been duly authorized, executed and delivered by such
Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and general principles of equity.
5. We (A) are of the opinion that the Registration Statement
and Prospectus (except for financial statements and schedules and other
financial data included therein as to which such counsel need not express any
opinion) comply as to form in all material respects with the Securities Act and
the applicable rules and regulations of the Commission thereunder,
36
(B) have no reason to believe that (except for financial statements and
schedules and other financial data as to which such counsel need not express
any belief) the Registration Statement and the prospectus included therein at
the time the Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(C) have no reason to believe that (except for financial statements and
schedules and other financial data as to which such counsel need not express
any belief) the Prospectus when issued contained or as of the date such opinion
is delivered contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
With respect to item 5 above, Xxxxxxxx & Xxxxx may state that
their opinion and belief are based upon their participation in the preparation
of the Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification, except as specified.
D-2
37
EXHIBIT E
Opinion of Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
[Attach draft opinion of Xxxxxxx Berlin Shereff Xxxxxxxx, LLP to be delivered
pursuant to Section 6(f) of the Underwriting Agreement to the effect that:]
(A) (1) the execution and delivery of the Underwriting
Agreement and the Power of Attorney and Custody Agreements by the
Company and the consummation of the transactions contemplated thereby
do not violate (i) the Communications Act, (ii) any Federal
Communications Law applicable to the Company and/or Subsidiaries,
(iii) any State Communications Law applicable to the Company and/or
Subsidiaries, and (iv) to the best of our knowledge, any decree from
any court; and (2) no authorization of the FCC or any PUC that has not
already been received from, or prior filing that has not already been
made with, such agency is necessary for the execution and delivery of
the Underwriting Agreement or the Power of Attorney and Custody
Agreements by the Company and the consummation of the transactions
contemplated thereby in accordance with the terms thereof, except
where the failure to obtain such authorization or make such filling
would not have a material adverse effect on the prospects, condition,
financial or otherwise, or on the earnings, business or operations of
the Company and its Subsidiaries, taken as a whole;
(B) to the best of our knowledge and relying on the factual
representations in the Certificate: (1) each of the Company and its
Subsidiaries has made all reports and filings, and paid all fees,
required by the FCC and the PUCs, and has all certificates, orders,
permits, licenses, authorizations, consents, and approvals of and
from, and has made all filings and registrations, with the FCC and the
PUCs necessary to own, lease, license and use its properties and
assets and to conduct its business in the manner described in the
Prospectus; and (2) none of the Company or any of its Subsidiaries has
received any notice of proceedings relating to the violation,
revocation or modification of any such certificates, orders, permits,
licenses, authorizations, consents, or approvals, or the qualification
or rejection of any such filing or registration, the effect of which,
singly or in the aggregate, would have a material adverse effect on
the prospects, condition, financial or otherwise, or on the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole;
(C) to the best of our knowledge, neither the Company nor any
of its subsidiaries is in violation of, or in default under, any
provision of Federal Communications Law or State Communications Law,
the effect of which, singly or in the aggregate, would have a material
adverse effect on the prospects, condition, financial or otherwise, or
on the earnings, business or operations of the Company and its
Subsidiaries, taken as a whole;
(D) to the best of our knowledge after due inquiry and
relying on the factual representations of the Certificate: (i) no
adverse judgment, decree or order of the FCC or any PUC has been
issued against the Company or any of its Subsidiaries and (ii) no
litigation, proceeding (other than certification applications
initiated by the Company or its
38
Subsidiaries), inquiry or investigation has been commenced or
threatened against the Company or any of its Subsidiaries before or by
the FCC or any PUC which, if decided adversely to the Company's
interest, would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole; and
(E) the statements in the Prospectus under the captions "Risk
Factors -- If We Do Not Interconnect with Our Primary Competitors, the
Incumbent Local Exchange Carriers, Our Business Will Be Adversely
Affected," "Risk Factors -- Our Principal Competitors for Local
Services, the Incumbent Local Exchange Carriers, and Potential
Additional Competitors, Have Advantages that May Adversely Affect Our
Ability to Compete with Them," "Risk Factors -- Our Need to Comply
with Extensive Government Regulation Can Increase Our Costs And Slow
Our Growth," "Risk Factors -- Deregulation of the Telecommunications
Industry Involves Uncertainties, and the Resolution of These
Uncertainties Could Adversely Affect Our Business", "Risk Factors
-- The Regulation of Interconnection with Incumbent Local Exchange
Carriers Involves Uncertainties, and the Resolution of These
Uncertainties Could Adversely Affect Our Business", "Risk Factors --
We Could Lose Revenue if Calls to Internet Service Providers Are
Treated As Long Distance Interstate Calls", "Risk Factors -- The
Regulation of Access Charges Involves Uncertainties, and the
Resolution of These Uncertainties Could Adversely Affect Our
Business", "Business -- Overview," "Business -- Market Opportunity,"
"Business -- Implementation of Services," "Business -- Regulation" and
"Business -- Competition," exclusive of cross references therein to
other sections of the Prospectus, to the extent that they discuss
international and U.S. federal, state, and local statutes, regulations
and proceedings with respect to telecommunications regulatory matters,
fairly summarize the matters referred to therein.
E-2
