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Exhibit 10.12
SECURITIES PURCHASE AGREEMENT
AMONG
MGC COMMUNICATIONS, INC.
AND
THE PURCHASERS LISTED ON
SCHEDULE I HERETO
Dated as of January 8, 1998
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TABLE OF CONTENTS
1. Sale and Purchase of Shares...................................................................1
1.1 Sale and Purchase of Shares.........................................................1
2. Purchase Price................................................................................1
2.1 Amount of Purchase Price............................................................1
2.2 Payment of the Purchase Price.......................................................1
3. Closing; Termination of Agreement.............................................................1
3.1 Closing Date........................................................................1
4. Representations and Warranties of the Company.................................................1
4.1 Organization and Good Standing......................................................2
4.2 Authorization of Agreement; Enforceability..........................................2
4.3 Subsidiaries........................................................................2
4.4 Consents of Third Parties...........................................................2
4.5 Authorization of Preferred Shares and Reserved Shares...............................3
4.6 Financial Statements................................................................3
4.7 No Undisclosed Liabilities..........................................................3
4.8 Absence of Certain Developments.....................................................3
4.9 Taxes...............................................................................5
4.10 Real Property......................................................................6
4.11 Tangible Personal Property.........................................................6
4.12 Intangible Property................................................................7
4.13 Material Contracts.................................................................9
4.14 Employee Benefits..................................................................9
4.15 Employees..........................................................................11
4.16 Litigation.........................................................................11
4.17 Compliance with Laws; Permits......................................................11
4.18 Environmental Matters..............................................................11
4.19 Investment Company Act.............................................................12
4.20 Transactions with Affiliates.......................................................12
4.21 Disclosure; Survival...............................................................12
4.22 Financial Advisors.................................................................13
4.23 Insurance..........................................................................13
4.24 Dissolution of Previous Entities...................................................13
4.26 Improper Actions...................................................................13
5. Representations and Warranties of the Purchasers..............................................13
5.1 Organization and Good Standing......................................................13
5.2 Authorization of Agreement..........................................................14
5.3 Purchaser Representation............................................................14
5.4 Investment Intention................................................................14
5.5 Financial Advisors..................................................................14
5.6 Reliance............................................................................14
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6. Further Agreements of the Parties.............................................................14
6.1 Covenants...........................................................................14
6.2 Use of Proceeds.....................................................................14
6.3 Access to Information...............................................................15
6.4 Confidentiality.....................................................................15
6.5 Other Actions.......................................................................15
6.6 Indemnity...........................................................................15
6.7 U.S. Real Property Holding Corporation..............................................16
6.8 Financial Statements, Reports, Etc. ................................................16
7. Documents to be Delivered at the Closing......................................................17
7.1 Documents to be Delivered by the Company............................................17
7.2 Delivery of Purchase Price..........................................................17
8. Miscellaneous.................................................................................18
8.1 Certain Definitions.................................................................18
8.2 Tax Treatment of Preferred Stock....................................................21
8.3 Expenses............................................................................21
8.4 Specific Performance................................................................21
8.5 Further Assurances..................................................................22
8.6 Submission to Jurisdiction; Consent to Service of Process...........................22
8.7 Entire Agreement; Amendments and Waivers............................................22
8.8 Governing Law.......................................................................22
8.9 Table of Contents; Headings; Interpretive Matters...................................22
8.10 Notices............................................................................22
8.11 Severability.......................................................................23
8.12 Binding Effect; Assignment.........................................................23
8.13 Counterparts.......................................................................24
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of January 8, 1998
(this "Agreement"), among MGC Communications, Inc., a Nevada corporation (the
"Company"), and the Purchasers listed on Schedule I (the "Purchasers").
W I T N E S S E T H :
WHEREAS, the Company desires to issue to each Purchaser, and
each Purchaser desires to purchase from the Company, the Shares (as such term is
defined below) in such amounts as set forth next to such Purchaser on Schedule
1, and
WHEREAS, certain terms used in this Agreement are defined in
Section 8.1 hereof,
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
1. SALE AND PURCHASE OF SHARES.
1.1 Sale and Purchase of Shares. Subject to the terms and
conditions of this Agreement, on the Closing Date (as defined in Section 3.1
hereof) the Company shall sell, assign, transfer, convey and deliver to each
Purchaser, and each Purchaser shall purchase from the Company the number of
shares of Series A Convertible Preferred Stock, par value $.001 per share (the
"Series A Preferred Stock") listed next to such Purchaser on Schedule I (the
"Shares"), for the Purchase Price (as defined in Section 2.1 below) and upon the
terms and conditions hereinafter set forth.
2. PURCHASE PRICE.
2.1 Amount of Purchase Price. The purchase price for the
Shares shall be as indicated on Schedule I (the "Purchase Price"). The Purchase
Price shall be payable as provided in Section 2.2 hereof
2.2 Payment of the Purchase Price.. At the Closing, the
Purchasers shall pay the Purchase Price by wire transfer of clearinghouse funds
or by such other method as may be reasonably acceptable to the Company and the
Purchasers to such account of the Company as shall have been designated in
advance to the Purchasers by the Company.
3. CLOSING; TERMINATION OF AGREEMENT.
3.1 Closing Date. The closing of the sale and purchase of the
Shares provided for in Section 1.1 (the "Closing") shall take place at 9:00 a.m.
at the offices of Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C. in Atlanta,
Georgia (or at such other place as the parties hereto may mutually agree) on the
date hereof, or on such other date as the parties hereto may mutually agree. The
date on which the Closing is held is referred to in this Agreement as the
"Closing Date." At the Closing, the parties shall execute and deliver the
documents referred to in Section 7 hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Purchaser that:
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4.1 Organization and Good Standing. (a) The Company is duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted and as it is
proposed to be conducted. The Company is duly qualified or authorized to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction in which the conduct of its business or the ownership of its
properties or assets requires such qualification or authorization, except for
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have or result in a material adverse effect on the
business, properties, results of operations, prospects or conditions (financial
or otherwise) of the Company.
(b) The authorized capital stock of the Company is as set
forth on Schedule 4.1 (b). Except as disclosed on Schedule 4.1 (b), there is no
existing option, warrant, call, right, commitment or other agreement of any
character to which the Company is a party requiring, and there are no securities
of the Company outstanding which upon conversion or exchange would require, the
issuance, sale or transfer of any additional shares of capital stock or other
equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of the Company. Except as disclosed on
Schedule 4. l(b), the Company is not a party to, nor aware of, any voting trust
or other voting agreement with respect to any of the securities the Company or
to any agreement relating to the issuance, sale, redemption, transfer or other
disposition of the capital stock of the Company.
4.2 Authorization of Agreement; Enforceability. The Company
has all requisite corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by the Company in connection
with the consummation of the transactions contemplated by this Agreement (the
"Transaction Documents"), and to perform fully its obligations hereunder and
thereunder. The execution, delivery and performance by the Company of this
Agreement and the Transaction Documents have been duly authorized by all
necessary corporate action on the part of the Company and its shareholders. This
Agreement and each of the Transaction Documents have been duly and validly
executed and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by each Purchaser) this Agreement and each of the
Transaction Documents constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4.3 Subsidiaries. The Company has no Subsidiaries.
4.4 Consents of Third Parties. None of the execution and
delivery by the Company of this Agreement and the Transaction Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Company with any of the provisions hereof or thereof will (a) conflict
with, or result in the breach of, any provision of the articles of incorporation
or by-laws of the Company; (b) conflict with, violate, result in the breach or
termination of, or constitute a default or give rise to any right of termination
or acceleration or right to increase the obligations or otherwise modify the
terms thereof under any Contract, Permit or Order to which the Company is a
party or by which the Company or any of its properties or assets is bound; (c)
constitute a violation of any Law applicable to the Company, or (d) result in
the creation of any Lien upon the properties or assets of the Company, other
than, in the case of clauses
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(b), (c) and (d), any such conflict, violation, breach, termination,
acceleration or other event which, individually or in the aggregate, could not
reasonably be expected to cause a Material Adverse Change. Other than those
which have been obtained or made, no consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of the Company in connection with
the execution and delivery of this Agreement or the Transaction Documents, or
the compliance by the Company with any of the provisions hereof or thereof
4.5 Authorization of Preferred Shares. The issuance, sale, and
delivery of the Shares have been duly authorized by all requisite action of the
Company, and, when issued, sold, and delivered in accordance with this
Agreement, the Shares, and the Common Stock delivered upon conversion of the
Shares will be validly issued and outstanding, fully paid, and nonassessable,
with no personal liability attaching to the ownership thereof, and, except as
may be set forth in the Stockholders Agreement, not subject to preemptive or any
other similar rights of the shareholders of the Company or others.
4.6 Financial Statements. The Company has provided prior to
the Closing Date (a) copies of the unaudited consolidated balance sheets of the
Company as of September 30, 1997 and the related unaudited consolidated
statements of income and cash flows for the quarter then ended (the "Unaudited
Financial Statements") and (b) the audited consolidated balance sheets of the
Company as of December 31, 1996 and the related consolidated statements of
income and cash flows for such year ended (such statements, including the
related notes and schedules thereto, and the Unaudited Financial Statements, are
referred to herein as the "Financial Statements"). Each of the Financial
Statements was prepared in good faith by the Company, is complete and correct in
all material respects, has been prepared in accordance with GAAP and in
conformity with the practices consistently applied by the Company and presents
fairly the consolidated financial position, results of operations and cash flows
of the Company as of the dates and for the periods indicated, except, with
respect to the Unaudited Financial Statements, for the absence of footnotes and
year end adjustments.
4.7 No Undisclosed Liabilities. Except as set forth on
Schedule 4.7, the Company has no liabilities (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), except (a) obligations under Contracts described in Schedule 4.13
or under Contracts that are not required to be disclosed thereon as a result of
dollar thresholds therein; (b) liabilities provided for in the Unaudited
Financial Statements; (c) liabilities (other than accounts payable) incurred
since the Unaudited Financial Statements, in the ordinary course of business,
the sum of which is, in the aggregate, no greater than $500,000; and (d)
accounts payable in excess of those shown on the Unaudited Financial Statements,
incurred in the ordinary course of business, the sum of which is, in the
aggregate, not greater than $500,000. Unless specifically disclosed as a breach
on Schedule 4.7, disclosure of a Contract on Schedule 4.13 shall not be
indicative of a breach of any provision of such Contract.
4.8 Absence of Certain Developments.
(a) Except as set forth in Schedule 4.8(a) the general nature
of the business of the Company (the "Business") is described in the Offering
Memorandum with respect to the Company's issuance of $160,000,000 of 13% Senior
Secured Notes due 2004 (and related warrants) dated September 24, 1997 (to the
extent not superseded by the Prospectus contained in the Registration Statement
on Form S-4 filed with the Securities and Exchange Commission on October 28,
1997 (the "Registration Statement")) and the Registration Statement
(collectively, the "Offering Memorandum"), which previously has been delivered
to the Purchasers.
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(b) Except as set forth in Schedule 4.8(b) and since the date
of the Unaudited Financial Statements:
(i) there has not been any Material Adverse Change nor
has any event occurred which could reasonably be expected to result in any
Material Adverse Change; or
(ii) there has not been any damage, destruction or loss,
whether or not covered by insurance, with respect to the property and assets of
the Company having a replacement cost of more than $100,000 for any single loss
or $500,000 for all such losses;
(iii) there has not been any declaration, setting a record
date, setting aside or authorizing the payment of, any dividend or other
distribution in respect of any shares of capital stock of the Company or any
repurchase, redemption or other acquisition by the Company, of any of the
outstanding shares of capital stock or other securities of, or other ownership
interest in, the Company;
(iv) except for grants of 78,600 shares under the
Company's stock option plan, there has not been any transfer, issue, sale or
other disposition by the Company of any shares of capital stock or other
securities of the Company or any grant of options, warrants, calls or other
rights to purchase or otherwise acquire shares of such capital stock or such
other securities;
(v) except with respect to the hiring of new Employees
in the ordinary course of business whose annual compensation in the aggregate is
not greater than $500,000 (exclusive of benefits), the Company has not awarded
or paid any bonuses to Employees of the Company nor has the Company entered into
any employment, deferred compensation, severance or similar agreements (nor
amended any such agreement) or agreed to increase the compensation payable or to
become payable by it to any of the Company's directors, officers, Employees,
agents or Representatives or agreed to increase the coverage or benefits
available under any severance pay, termination pay, vacation pay, company
awards, salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with such directors,
officers, Employees, agents or Representatives, other than in the ordinary
course of business consistent with past practice which increases in the
aggregate do not exceed $100,000 in annual cost to the Company, and other than
as may have been required by law or insurers;
(vi) the Company has not made any loans, advances or
capital contributions to, or investments in, any Person or paid any fees or
expenses to any Affiliate of the Company, other than for reimbursement of
expenses in the ordinary course of business consistent with past practices;
(vii) except for Liens with respect to the Senior Notes,
the Company has not mortgaged, pledged or subjected to any Lien any of its
assets, or acquired any assets or sold, assigned, transferred, conveyed, leased
or otherwise disposed of any assets, except for assets acquired or sold,
assigned, transferred, conveyed, leased or otherwise disposed of in the ordinary
course of business consistent with past practice;
(viii) the Company has not discharged or satisfied any
Lien, or paid any obligation or liability (fixed or contingent), except in the
ordinary course of business consistent with past practice and which, in the
aggregate, would not be material to the Company;
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(ix) the Company has not canceled or compromised any
debt or claim or amended, canceled, terminated, relinquished, waived or released
any Contract or right except in the ordinary course of business consistent with
past practice and which, in the aggregate, would not be material to the Company;
(x) the Company has not transferred or granted any
rights under any contracts, leases, licenses, agreements or Intangible Property
(as defined in Section 4.12 hereof) used by the Company in its business which
reasonably could be expected to result in a Material Adverse Change; and
(xi) the Company has not made any binding commitment to
make any capital expenditures or capital additions or betterments in excess of
$500,000 in the aggregate.
4.9 Taxes.
(a) The amount, if any, shown on the Unaudited Financial
Statements, as provision for Taxes is sufficient for payment of all accrued and
unpaid federal, state, county, local and foreign Taxes for the period then ended
and all prior periods.
(b) The Company has filed all Tax Returns (federal, state,
county, local and foreign) required to be filed by it and all such returns are
true and correct in all material respects. All Taxes shown to be due and payable
on such returns, any assessments imposed, and to the Company's knowledge all
other Taxes due and payable by the Company on or before the Closing have been
paid or will be paid prior to the time they become delinquent, other than those
being contested in good faith and listed on Schedule 4.9(b).
(c) Federal Income Tax Returns of the Company have not been
audited by the Internal Revenue Service, and no controversy with respect to
Taxes of any type is pending or, to the best of the Company's knowledge,
threatened.
(d) Neither the Company nor any of its stockholders has ever
filed (i) an election pursuant to Section of the Code that the Company be taxed
as an S Corporation or (ii) consent pursuant to Section 341 (f) of the Code
relating to collapsible corporations.
(e) Except as set forth on Schedule 4.9(e) , the Company's net
operating losses, if any, for federal income tax purposes, as set forth in the
Financial Statements, are not subject to any limitations imposed by Section 382
of the Code, and consummation of the transactions contemplated by this Agreement
or by any other agreement, understanding or commitment, contingent or otherwise,
to which the Company is a party or by which it is otherwise bound will not have
the effect of limiting the Company's ability to use such net operating losses in
full to offset such taxable income.
(f) The Company has not waived any statute of limitation in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(g) The Company is not a party to any Income Tax allocation or
sharing agreement.
(h) The Company is not and has never been a member of an
Affiliated Group filing a consolidated Federal Income Tax Return (other than a
group the common parent of which was the Company).
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(i) The Company is not a "United States real property holding
corporation" within the meaning of Section 847(c)(2) of the Internal Revenue
Code of 1986, as amended.
4.10 Real Property.
(a) The Company does not own any real property other than as set
forth on Schedule 4. 10(a).
(b) Except as set forth on Schedule 4. 1 0(b), the Company has good,
legal, and marketable title to all of its assets, including all properties and
assets free and clear of all Liens, except those assets disposed of since the
date of the Unaudited Financial Statement in the ordinary course of business and
except for Liens incurred with respect to the Senior Notes and Liens incurred in
the ordinary course of business which would not impair the Company's use of such
property in any material way.
(c) Schedule 4.10(c) sets forth a complete list of all real property
and interests in real property leased by the Company (each a "Real Property
Lease", and collectively, the Real Property Leases) as lessee or lessor. The
Company has good and marketable title to the leasehold estates in all Real
Property Leases in each case free and clear of all Liens, except for Liens
incurred with respect to the Senior Notes and Liens incurred in the ordinary
course of business which would not impair the Company's use of such property in
any material way. The Company has no reason to believe that such title would not
be insurable subject to customary exceptions.
(d) Each of the Real Property Leases is valid and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity), and there is no material default under any Real Property Lease by the
Company or, to the best knowledge of the Company, by any other party thereto,
and no event has occurred that with the lapse of time or the giving of notice or
both would constitute a material default thereunder. The Company has made
available to each Purchaser true, correct and complete copies of the Real
Property Leases, together with all amendments, modifications, supplements or
side letters affecting the obligations of any party thereunder.
(e) No previous or current party to any Real Property Lease has given
notice of or made a claim with respect to any breach or default thereunder. With
respect to those Real Property Leases that were assigned or subleased to the
Company by a third party, all necessary consents to such assignments or
subleases have been obtained.
4.11 Tangible Personal Property.
(a) Schedule 4.11(a) sets forth all leases of personal property
("Personal Property Leases") involving annual payments in excess of $50,000
relating to personal property used in the business of the Company or to which
the Company is a party or by which the Company or any of its respective
properties or assets is bound. The Company has made available to each Purchaser
true, correct and complete copies of the Personal Property Leases, together with
all amendments, modifications, supplements or side letters affecting the
obligations of any party thereunder.
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(b) (i) Each of the Personal Property Leases is in full force and
effect and is valid, binding and enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and there is no
material default under any Personal Property Lease by the Company or, to the
best knowledge of the Company, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a material default thereunder; and
(ii) No previous or current party to any such Personal Property
Lease has given notice of or made a claim with respect to any breach or default
thereunder.
(c) With respect to those Personal Property Leases that were assigned
or subleased to the Company by a third party, all necessary consents to such
assignments or subleases have been obtained.
(d) The Company has good, legal and marketable title to all of the
material items of tangible personal property used by it (except as sold or
disposed of subsequent to the date hereof in the ordinary course of business
consistent with past practice), free and clear of any and all Liens, except for
Liens incurred with respect to the Senior Notes and Liens incurred in the
ordinary course of business which would not impair the Company's use of such
property in any material way. All such items of tangible personal property
which, individually or in the aggregate, are material to the operation of the
business of the Company are suitable for the purposes used for the operation of
the business of the Company.
4.12 Intangible Property.
(a) "Proprietary Rights" shall mean any and all of the following
which have been or are used and/or owned by, and/or issued or licensed to the
Company, along with all income, royalties, damages and payments due or payable
at the Closing or thereafter, including, without limitation, damages and
payments for past, present or future infringements or misappropriations thereof,
the right to xxx and recover for past infringements or misappropriations thereof
and any and all corresponding rights that, now or hereafter, may be secured
throughout the world: patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to practice)
and any reissue, continuation, continuation-in-part, division, revision,
extension or reexamination thereof, utility model registrations and
applications; design registrations and applications; trademarks, service marks,
trade dress, logos, trade names and corporate names together with all goodwill
associated therewith, copyrights registered or unregistered and copyrightable
works; mask works; and all registrations, applications, and renewals for any of
the foregoing; trade secrets and confidential information (including without
limitation, ideas, formulae, compositions, know-how, manufacturing and
production processes and techniques, research and developmental information,
drawings, specifications, designs, plans, proposals, technical data, financial,
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business and marketing plans, and customer and supplier lists and related
information); computer software and software systems (including, without
limitation, data, databases, object code, source code, macrocyte and firmware
and related documentation); other proprietary and intellectual property rights;
licenses or other agreements including but not limited to those assigning,
waiving or relating to rights of publicity, moral rights or neighboring rights
to or from third parties; and all copies and tangible embodiments of the
foregoing (in whatever form or medium), in each case including, without
limitation, the items set forth on the Schedule 4.12(b) attached hereto.
(b) Schedule 4.12(b) sets forth a complete and correct list of (i)
all patents, trademark and serviceman registrations, copyright registrations and
other registered Proprietary Rights as well as all pending applications
therefor; (ii) all corporate names, trade names and unregistered trademarks used
by the Company (to the extent not reflected on other schedules attached hereto)
as their own marks; (iii) all material unregistered copyrightable works
authorized by the Company, mask works, and material computer software owned or
licensed by the Company (other than commercial software products generally
available to consumers); and (iv) all material licenses or similar agreements to
which the Company is or just prior to closing was a party either as licensee or
licensor for the Proprietary Rights, in each case identifying the subject
Proprietary Rights.
(c) Except as set forth on Schedule 4.12(c), (i) the Company owns and
possess all right, title and interest, free and clear of all Liens, in and to,
and to the best knowledge of the Company has a valid and enforceable right to,
each of the Proprietary Rights as described on Schedule 4.12(b), and no claim by
any third party contesting the validity, enforceability, use or ownership of any
of the Proprietary Rights has been made, is currently outstanding or, to the
best knowledge of the Company, is threatened, except for those which could not
reasonably be expected, individually or in the aggregate, to cause a Material
Adverse Change; (ii) the Proprietary Rights comprise all material intellectual
property rights which are currently being used by the Company or which are
necessary for the operation business as currently conducted by the Company, and
as currently proposed to be conducted; (iii) no loss or expiration of any
Proprietary Right or related group of Proprietary Rights is, to the Company's
knowledge, threatened, or is pending or reasonably foreseeable, except for those
which could not reasonably be expected, individually or in the aggregate, to
cause a Material Adverse Change; (iv) the Company has not received any notices
of, nor is the Company aware of any facts which indicate a likelihood of any
infringement or misappropriation by, or conflict with, any third party with
respect to any of the Proprietary Rights including, without limitation, any
demand or request by the Company that such third party license any of the
Proprietary Rights from the Company or to the Company; (v) to the best of the
Company's knowledge, the Company has not infringed, misappropriated or otherwise
conflicted with any rights, including intellectual property rights, of any third
parties, and the Company is not aware of any infringement, misappropriation or
conflict by the Company of any third-party patent, trademark, copyright or other
intellectual property right, or of any such infringement, misappropriation or
conflict which shall occur as a result of the continued operation of the
business by the Company, as currently conducted or as currently proposed to be
conducted, and there is no demand or request from a third party that the Company
take a license under any intellectual property right; and (vi) none of the
Proprietary Rights owned by or licensed to the Company are, to the best
knowledge of the Company, being infringed, misappropriated or conflicted by any
third party.
(d) All of the Proprietary Rights are owned by, or properly assigned
or licensed to, the Company or use thereof is otherwise authorized, except to
the extent that the failure to be so owned,
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assigned, licensed or otherwise authorized could not reasonably be expected to,
individually or in the aggregate, cause a Material Adverse Change. The Company
has not disclosed, or is aware of any disclosure by any other Person of any of
its trade secrets or confidential information to any third party other than
pursuant to a written confidentiality agreement or disclosure to the Company's
shareholders.
4.13 Material Contracts.
(a) Except as set forth on Schedule 4.13(a), neither the Company nor
any of its respective properties or assets is a party to or bound by any (i)
Contract not made in the ordinary course of business, or involving a commitment
or payment in excess of $500,000 or otherwise material to the business of the
Company; (ii) employment, consulting, noncompetition, severance, "golden
parachute" or indemnification Contract involving, individually or in the
aggregate, annual payments of more than $250,000 (including, without limitation,
in each case any Contract to which the Company is a party involving Employees of
the Company); (iii) Contract among shareholders or granting a right of first
refusal or for a partnership or a joint venture or for the acquisition, sale or
lease of any assets (except in the ordinary course of business) or capital stock
of the Company or any other Person or involving a sharing of profits; (iv)
mortgage, pledge, conditional sales contract, security agreement, factoring
agreement or other similar Contract with respect to any real or tangible
personal property of the Company; (v) loan agreement, credit agreement,
promissory note, guarantee, subordination agreement, letter of credit or any
other similar type of Contract; (vi) Contract with any Governmental Body; (vii)
Contract with respect to the discharge, storage or removal of Hazardous
Materials; or (viii) binding commitment or agreement to enter into any of the
foregoing. The Company has delivered or otherwise made available to each
Purchaser true, correct and complete copies of the Contracts listed on Schedule
4.13(a) (except as noted thereon), together with all amendments, modifications,
supplements or side letters affecting the obligations of any party thereunder.
(b) (i) Each of the Contracts listed on Schedule 4.13(a) is valid
and enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no material default under any
Contract listed on Schedule 4.13(a) by the Company or, to the best knowledge of
the Company, by any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a material
default thereunder.
(ii) No previous or current party to any Contract has given
notice to the Company of or made a claim with respect to any breach or default
thereunder and the Company is not aware of any notice of or claim to any such
breach or default.
(c) With respect to the Contracts listed on Schedule 4.13(a) that
were assigned to the Company by a third party, all necessary consents to such
assignment have been obtained.
4.14 Employee Benefits.
(a) The Company has not made contributions to any pension, defined
benefit, or defined contribution plans for its Employees which are subject to
ERISA.
(b) Set forth on Schedule 4.14(b) is a true and complete list of
each Company
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Benefit Plan and each Employee Agreement providing for annual compensation in
excess of $100,000. Except as set forth on Schedule 4.14(b), the Company does
not have any plan or commitment, whether legally binding or not, to establish
any new Company Benefit Plan, to enter into any Employee Agreement or to modify
or to terminate any Company Benefit Plan or Employee Agreement (except to the
extent required by law or to conform any such Company Benefit Plan or Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to the Purchasers, or as required by this Agreement), nor has any
intention to do any of the foregoing been communicated to Employees.
(c) Except as set forth on Schedule 4.14(c), (i) the Company does not
maintain or contribute to any Company Benefit Plan which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any Employee upon his retirement or termination of
employment, except as may be required by Section 4980B of the code; and (ii) the
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
that such Employee(s) would be provided with life insurance, medical, severance
or other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by Section 4980B of the Code.
(d) The Company (i) is in compliance with all applicable federal,
state and local laws, rules and regulations (domestic and foreign) respecting
employment, employment practices, labor, terms and conditions of employment and
wages and hours, in each case, with respect to Employees, except where the
failure to be in such compliance could not reasonably be expected, individually
or in the aggregate, to cause a Material Adverse Change; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees; (iii) is not liable for any arrears of wages or
any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits for Employees.
(e) No work stoppage or labor strike against the Company by Employees
is pending or, to the best knowledge of the Company, threatened. The Company (i)
is not involved in or, to the best knowledge of the Company, threatened with any
significant labor dispute, grievance, or litigation relating to labor matters
involving any Employees, including, without limitation, violation of any
federal, state or local labor, safety or employment laws (domestic of foreign),
charges of significant unfair labor practices or discrimination complaints; (ii)
has not engaged in any unfair labor practices within the meaning of the National
Labor Relations Act or the Railway Labor Act which would cause a Material
Adverse Change ; or (iii) is not presently, nor has been in the past a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no such agreement or contract is currently being, negotiated by
the Company or any of its affiliates. No Employees are currently represented by
any labor union for purposes of collective bargaining and, to the best knowledge
of the Company, no activities the purpose of which is to achieve such
representation of all or some of such Employees are ongoing or threatened.
(f) Except as set forth on Schedule 4.14(f), no benefits shall
accrue, become payable vest or accelerate as a result of the Transaction under
any Company Benefit Plan or Employee Agreement, including, but not limited to,
the vesting of benefits under any "employee benefit plan" within the meaning of
Section 3(3) of ERISA, the acceleration of stock or stock related awards, or the
payment of any amount under any Employee Agreement or Company Benefit Plan.
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4.15 Employees.
Except as set forth on Schedule 4.15, to the best knowledge of the
Company, no key executive Employee and no group of Employees or independent
contractors of the Company has any plans to terminate his, her or its employment
or relationship as an Employee or independent contractor with the Company.
4.16 Litigation.
There are no Legal Proceedings pending or, to the best knowledge of
the Company, threatened that question the validity of this Agreement or the
Transaction Documents or any action taken or to be taken by the Company in
connection with the consummation of the transactions contemplated hereby or
thereby. Schedule 4.16 sets forth a true, correct and complete list of all Legal
Proceedings pending or, to the best knowledge of the Company, threatened against
or affecting the Company or any of its properties or assets (including Company
Benefit Plans) of the Company, at law or in equity, and, to the best knowledge
of the Company, there is no reasonable basis for any other such Legal
Proceeding. There is no outstanding or, to the best knowledge of the Company,
threatened Order of any Governmental Body against, affecting or naming the
Company or affecting any of its properties or assets.
4.17 Compliance with Laws; Permits.
(a) The Company is and at all times has been in compliance with all
Laws and Orders promulgated by any Governmental Body applicable to the Company
or to the conduct of the business or operations of the Company or the use of its
properties (including any leased properties) and assets, except where the
failure to be in such compliance could not reasonably be expected, individually
or in the aggregate, to cause a Material Adverse Change. The Company has not
received or knows of the issuance of, any notices of violation or alleged
violation of any such Law or Order by any Governmental Body.
(b) The Company has or is in the process of obtaining all Permits
necessary for the conduct of its business as currently conducted, except where
the failure to obtain a Permit could not reasonably be expected, individually or
in the aggregate, to cause a Material Adverse Change. Schedule 4.17(b) lists all
material Permits of the Company obtained (or for which applications have been
made for) from all Governmental Bodies, indicating, in each case, the expiration
date thereof, which are required by the nature of the operations of the Company
to permit the operation thereof in the manner in which they are currently
conducted. Such Permits have been issued pursuant to valid applications by the
Company to the appropriate Governmental Bodies made in compliance with all
applicable Laws, and the Company has substantially complied with all conditions
of such Permits applicable to it. No material default or violation, or event
that with the lapse of time or giving of notice or both would become a material
default or violation, has occurred in the due observance of any such Permit. All
such Permits are in full force and effect without further consent or approval of
any Person. The Company has not received any notice from any source to the
effect that there is lacking any such Permit required in connection with the
current operations of the Company. The Company has made all required filings
with Governmental Bodies, except where the failure to make such filings could
not reasonably be expected, individually or in the aggregate, to cause a
Material Adverse Change.
4.18 Environmental Matters. (a) Except as set forth on Schedule 4.18,
the operations
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of the Company have been and, as of the Closing Date, will be in compliance with
all Environmental Laws, except where the failure to be in such compliance could
not reasonably be expected, individually or in the aggregate, to cause a
Material Adverse Change; (b) the Company has obtained, currently maintains and,
as of the Closing Date, will have all Environmental Permits necessary for its
operations, other than such Environmental Permits the lack of which could not
reasonably be expected, individually or in the aggregate, to cause a Material
Adverse Change; all such Environmental Permits are and, as of the Closing Date,
will be, in good standing; there are no Legal Proceedings pending or, to the
best knowledge of the Company, threatened to revoke any such Environmental
Permit; the Company is, and as of the Closing Date will be, in compliance with
such Environmental Pen-nits; and the Company has not received any notice from
any source, or has otherwise obtained knowledge, to the effect that there is
lacking any Environmental Permit required in connection with the current use or
operation of any Real Property Lease; (c) the Company and all of its past and
current Facilities and operations are not subject to any outstanding written
Order or Contract, including Environmental Liens, with any Governmental Body or
Person, or to the best knowledge of the Company subject to any federal, state,
local or foreign investigation respecting (1) Environmental Laws, (2) any
Remedial Action or (3) any Environmental Claim arising from the Release or
threatened Release of a Hazardous Material; (d) the Company is not subject to
any Legal Proceeding alleging the violation of any Environmental Law or
Environmental Permit; (e) the Company has not received (nor, to the best
knowledge of the Company, has there been issued) any written communication,
whether from a Governmental Body, citizens' group, Employee or any other Person,
that alleges that the Company is not in compliance with any Environmental Law or
Environmental Permit; (f) the Company has not caused or permitted any Hazardous
Materials to remain or be disposed of, either on or under real property legally
or beneficially owned or operated by the Company or on any real property not
permitted to accept, store or dispose of such Hazardous Materials; (g) the
Company does not have any liabilities with respect to Hazardous Materials, and
no facts or circumstances exist which, in the aggregate, could give rise to
liabilities with respect to Hazardous Materials; (h) none of the operations of
the Company involves the generation, transportation, treatment, storage or
disposal of hazardous waste or subject waste, as defined under 40 C.F.R. Parts
260-270 (in effect as of the date of this Agreement); and (i) there is not now
on or in any property of the Company (1) any underground storage tanks or
surface tanks, dikes or impoundments; (2) any asbestos-containing materials or
(3) any polychlorinated biphenyls, that, in any such case described in this
clause (i), could reasonably be expected, individually or in the aggregate, to
cause a Material Adverse Change.
4.19 Investment Company Act. The Company is not, nor is it directly
or indirectly controlled by or acting on behalf of any Person that is, an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
4.20 Transactions with Affiliates. Except as set forth on Schedule
4.20, the Company has not made any payment to, or received any payment from, or
made or received any investment in, or entered into any transaction with, any
Affiliate, including without limitation, the purchase, sale or exchange of
property or the rendering of any service, where the amounts involved is material
to the business of the Company.
4.21 Disclosure; Survival. This Agreement, the Financial Statements,
schedules provided in connection with this Agreement and the Offering
Memorandum, taken as a whole, do not contain any untrue statement of material
fact, fairly represent the business, properties, assets, and condition,
financial or otherwise, of the Company in all material respects, and do not fail
to state a material fact necessary in order to make the statements contained
therein and herein, when taken as a whole, not misleading. There is no fact
which has not been disclosed to the Purchasers of which the
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Company is aware and which materially adversely affects or could reasonably be
anticipated to materially adversely effect the business, financial condition,
operating results, earnings, assets, customary, supplier, Employee or sales
representative relations or business prospects of the Company. All
representations, warranties, covenants and agreements set forth in this
Agreement or in any writing or certificate delivered in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and shall not be affected
by any examination made for or on behalf of any Purchaser, the knowledge of any
Purchaser, or the acceptance by any Purchaser of any certificate or opinion.
4.22 Financial Advisors. Except as disclosed on Schedule 4.22, no
agent, broker, investment banker, finder, financial advisor or other person
acting on behalf of the Company or under its authority is or will be entitled to
any broker's or finder's fee or any other commission or similar fee, directly or
indirectly, in connection with the transactions contemplated by this Agreement
or any Transaction Document and no Person is entitled to any fee or commission
or like payment in respect thereof based in any way on agreements, arrangements
or understandings made by or on behalf of the Company.
4.23 Insurance. Schedule 4.23 lists all insurance policies carried by
the Company covering its properties and business. Such insurance insures against
such losses and risks as are adequate in accordance with customary industry
practice to protect the Company and its business. The Company is not in material
default with respect to its obligations under any insurance policy maintained by
it.
4.24 Dissolution of Previous Entities. The dissolution of MGC
Communications, LLC, a Georgia limited liability company, formerly known as
NevTEL, LLC (the "LLC"), and the distribution of the shares of Common Stock of
the Company held by the LLC (the "Reorganization") was consummated in compliance
with all applicable Laws. No person was or is entitled to receive any shares of
capital stock or other consideration which have been distributed as a result of
the Reorganization.
4.25 Improper Actions. The Company, or to the best knowledge of the
Company, any of its officers, directors, partners, employees, agents or
affiliates or any other person acting on behalf of the Company has not, directly
or indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, official or
employee of any Governmental Body), Governmental Body or any political party or
candidate for office (domestic or foreign) or other person who was, is or may be
in a position to help or hinder the business of the Company (or assist the
Company in connection with any actual or proposed transaction) which (i) might
subject the Company, or any other individual or entity to any damage or penalty
in any Legal Proceeding, (ii) if not given in the past, might have caused a
Material Adverse Change or (iii) if not continued in the future, might cause a
Material Adverse Change.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company, severally, for itself only, that:
5.1 Organization and Good Standing. Each Purchaser which is an entity
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation or incorporation, as applicable.
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5.2 Authorization of Agreement. (a) Each Purchaser which is an entity
has full corporate or partnership power and authority to execute and deliver
this Agreement and each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by each such Purchaser in
connection with the consummation of the transactions contemplated hereby and
thereby (the "Purchaser Documents"), and to perform fully its obligations
hereunder and thereunder. The execution, delivery and performance by such
Purchaser of this Agreement and each Purchaser Document has been duly authorized
by all necessary corporate or partnership action on behalf of such Purchaser.
(b) This Agreement and each Purchaser Document has been duly executed
and delivered by each Purchaser and (assuming the due authorization, execution
and delivery by the other parties hereto and thereto) this Agreement and each
Purchaser Document constitute the legal, valid and binding obligations of each
Purchaser, enforceable against such Purchaser in accordance with their
respective terms.
5.3 Purchaser Representation. Each Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Shares. Each Purchaser has been
given the opportunity to examine all documents provided by, conduct due
diligence and ask questions of, and to receive answer from, the Company and
their respective representatives concerning the terms and conditions of an
investment in the Shares.
5.4 Investment Intention. Each Purchaser is acquiring the Shares for
its own account, for investment purposes only and not with a view to the
distribution (as such term is used in Section 2(11) of the Securities Act)
thereof in violation of the Securities Act, and that it is an "accredited
investor" within the meaning of Rule 501 of Regulation D of the Securities and
Exchange Commission. Each Purchaser understands that the Shares have not been
registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available. The principal place of business or domicile of each Purchaser is
located in the jurisdiction where notices are to be sent to such Purchaser as
set forth on Schedule 1.
5.5 Financial Advisors. No agent, broker, investment banker, finder,
financial advisor or other person acting on behalf of each Purchaser or under
its authority is or will be entitled to any broker's or finder's fee or any
other commission or similar fee, directly or indirectly, in connection with the
transactions contemplated by this Agreement or any Transaction Document and no
Person is entitled to any fee or commission or like payment in respect thereof
based in any way on agreements, arrangements or understandings made by or on
behalf of each Purchaser.
5.6 Reliance. In making its decision to acquire the Shares, no
Purchaser has relied on any information provided by the Company or its
representatives other than the Offering Memorandum and the representations and
warranties contained herein and in the other documents executed in connection
herewith.
6. FURTHER AGREEMENTS OF THE PARTIES.
6.1 Covenants. For so long as the Shares are convertible, the Company
shall reserve that number of shares of Common Stock issuable upon conversion of
the Shares, which shares shall not be subject to any preemptive or other similar
rights (collectively, the "Reserved Shares").
6.2 Use of Proceeds. The Company shall use all of the proceeds from
the sale of the
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Shares under this Agreement in accordance with the "Use of Proceeds" section of
the Offering Memorandum.
6.3 Access to Information. Until the consummation of a Public
Offering, the Purchasers shall be entitled, at their expense, upon reasonable
notice, to make such reasonable investigation of the properties, businesses and
operations of the Company and such examination of the books, records and
financial condition of the Company as they reasonably request and to make
extracts and copies of such books and records. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances without material interference with the Company's normal
business operations, and the Company and its respective employees shall
cooperate fully therein. No investigation by the Purchasers prior to or after
the date of this Agreement shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Company contained in this Agreement
or the Transaction Documents. In order that the Purchasers may have full
opportunity to make such physical, business, accounting and legal review,
examination of the affairs of the Company investigation as may be reasonably
requested, the Company shall cause its Representative to cooperate fully with
the Representatives of the Purchaser in connection with such review and
examination; provided that the Company shall not incur any material expense
related thereto. Each Purchaser shall use its reasonable best efforts to
maintain the confidentiality of information obtained as a result of the exercise
of its rights granted under this Section 6.3.
6.4 Confidentiality. Except as may be required by applicable law,
neither the Company nor the Purchasers or any of their respective Affiliates
shall at any time divulge, disclose, disseminate, announce or release any
information to any person concerning this Agreement, the Transaction Documents
or the transactions contemplated hereby or thereby without first obtaining the
prior written consent of the other party hereto; provided, however, each
Purchaser shall be entitled to disclose information with respect to its
investment in the Company on any reports such Purchaser furnishes to its
investors or as otherwise required by Law and the Company may disclose the terms
of this Agreement in connection with an issuance of debt or equity securities.
6.5 Other Actions. The Company and the Purchasers agree to execute
and deliver such other documents and take such other actions, as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the Transaction Documents.
6.6 Indemnity (a) The Company agrees to indemnify, defend and hold
harmless each Purchaser (and its partners (and each officer and director
thereof), directors, officers, members, shareholders, Employees, affiliates,
agents and permitted assigns) from and against any and all losses, liabilities,
damages, deficiencies, costs or expenses (including interest, penalties, and
reasonable attorneys' fees, disbursements and related charges) (collectively,
"Losses") based upon, arising out of or otherwise in respect of any inaccuracy
in or breach of any representations, warranties, covenants or agreements of the
Company contained in this Agreement or the Transaction Documents.
(b) Each Purchaser agrees, severally, for itself only, to indemnify,
defend and hold harmless the Company (and its partners (and each officer and
director thereof), directors, officers, members, shareholders, Employees,
affiliates, agents and permitted assigns) from and against any and all Losses
based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representations, warranties, covenants or agreements of each
Purchaser contained in this Agreement or the Transaction Documents.
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6.7 U.S. Real Property Holding Corporation. The Company covenants
that it will operate in a manner such that it will not become a "United States
real property holding corporation" as such term is defined in Section 897(c)(2)
of the Internal Revenue Code of 1986, as amended ("USRPHC"), and the regulations
thereunder. The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
1.897-2(h), or any supplementary or successor provision thereto. Within 30 days
of a request from a Purchaser, the Company will inform the requesting party, in
the manner set forth in Reg. 1.897-2(h) or any supplementary or successor
provision thereto, whether that party's interest in the Company constitutes a
United States real property interest (within the meaning of Internal Revenue
Code Section 897(c)(1) and the regulations thereunder) and whether the Company
has provided to the Internal Revenue Service all required notices as to its
USRPHC status.
6.8 Financial Statements, Reports, Etc. The Company shall furnish to
each Purchaser which, together with its Affiliates, purchases and continues to
own at least 285,714 Shares:
(a) as soon as available, and in any event within 90 days after the
end of each fiscal year of the Company, (i) a consolidated audited financial
statement of the Company as of the end of such fiscal year; (ii) the related
consolidated statements of income, stockholders' equity and cash flows for the
fiscal year then ended, prepared in accordance with GAAP and certified by a firm
of independent public accountants of recognized national standing selected by
the board of directors of the Company and acceptable to a majority of the
Purchasers (the "Annual Financial Statement"); and (iii) any related management
letters from such accounting firm. The Audited Financial statements shall be
accompanied by a management report describing the state of the Company's
business at year end.
(b) as soon as available, and in any event within 30 days after the
end of each month in each fiscal year a consolidated balance sheet of the
Company, and the related consolidated statement of income (with statements of
stockholders' equity and cash flows to be provided quarterly), unaudited but
prepared in accordance with GAAP (except that such unaudited financial statement
do not contain all of the required footnotes and are subject to normal,
recurring non-material year-end adjustments) and certified by the chief
financial officer of the Company (the "Monthly Balance Sheet"). The Monthly
Balance Sheet should be prepared as of the end of such month with consolidated
statements of income, stockholders' equity and cash flows for such month and for
the period from the beginning of the fiscal year to the end of such month, in
each case with comparative statements for the prior fiscal year and the most
recent 12-month budget delivered by the Company pursuant to Section 6.8(c)
hereof;
(c) as soon as available and in any event no later than 30 days prior
to the start of each fiscal year an annual business plan and consolidated
capital and operating expense budget, cash flow projections and income and loss
projections for the Company, in respect of such fiscal year, as approved by the
board of directors of the Company and all itemized in reasonable detail and
prepare on a quarterly basis, and, promptly after preparation, any revisions to
any of the foregoing;
(d) any document relating to the affairs of the Company delivered to
the shareholders of the Company; or
(e) prompt notice, and in any event within five days after notice has
been received by the Company, of any material litigation or an adverse claims,
dispute or any other developments which could reasonably be expected to be
material to operations, assets, or properties of the Company
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provided, however, that the rights provided in this Section 6.8 to a Purchaser
shall terminate with respect to such Purchaser (a) upon the earlier of a Public
Offering or (b) when such Purchaser (or its Affiliates) owns less than fifty
percent of the Shares, (including the Common Stock issuable thereto) purchased
by such Purchaser at the Closing; and provided further that the rights provided
in this Section 6.8 shall only be transferable to a transferee that acquires and
continues to own at least 50% of the Shares acquired by the Purchaser hereunder.
7. DOCUMENTS TO BE DELIVERED AT THE CLOSING.
7.1 Documents to be Delivered by the Company. At the Closing, the
Company shall deliver, or cause to be delivered, to each Purchaser the
following:
(a) Certificates representing the Shares issued hereunder;
(b) an opinion of Xxxxx Funk, Goldberg, Xxxxxxxx & Dokson, P.C. in
form and substance satisfactory to the Purchasers;
(c) a supplement to the Stockholders Agreement under which the
Purchasers will become parties thereto;
(d) (i) certificate of good standing with respect to the Company
issued by the secretary of state of Nevada; (ii) copy, certified by the
secretary or assistant secretary of the Company, as being a true and complete
copy as of the Closing Date, of the by-laws of the Company; and (iii) copy,
certified by the Secretary of State of Nevada, of the certificate of
incorporation of the Company;
(e) (i) copy of resolutions of the board of directors of the Company,
authorizing the execution, delivery and performance of this Agreement and the
Transaction Documents, the issuance of the Series A Preferred Stock and the
reservation of the Reserved Shares; (ii) and a certificate of the secretary or
assistant secretary of the Company, dated the Closing Date certifying that such
resolutions were duly adopted and are in full force and effect and attesting to
the true signatures and to the incumbency of the officers of the Company,
executing this Agreement and the Transaction Documents; and
(f) a certificate, certified by the President or any Vice-President
of the Company, stating that the respective representations and warranties of
the Company contained in this Agreement are true and correct in all material
respects on and as of the Closing Date.
(g) such other documents as the Purchasers shall reasonably request.
7.2 Delivery of Purchase Price. At the Closing, each Purchaser shall
deliver its Purchase Price by wire transfer to an account of which the Company
shall notify the Purchasers prior to the Closing Date.
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8. MISCELLANEOUS.
8.1 Certain Definitions
"Affiliate" of any Person means any Person that directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise).
"Benefit Plan " means each plan, program, policy, payroll practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock related awards, fringe
benefits or other employee benefits of any kind, whether formal or informal,
funded or unfunded, written or oral and whether or not legally binding,
including, without limitation, each "Employee benefit plan," within the meaning
of Section 3(3) of ERISA and each "multi-employer plan" within the meaning of
Section 3(37) or 4001(a)(3) of ERISA.
"Code " means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Common Stock" means the Company's common stock, par value $.001 per
share.
"Communications Act" means the Communications Act of 1934, as
amended, and the rules and regulations and practices of the FCC.
"Company Benefit Plan " means each Benefit Plan (other than an
Employee Agreement) which is now or previously has been sponsored, maintained,
contributed to, or required to be contributed to, or with respect to which any
withdrawal liability (within the meaning of Section 4201 of ERISA) has been
incurred, by the Company for the benefit of any Employee, and pursuant to which
the Company has or may have any liability, contingent or otherwise.
"Contract " means any contract, agreement, indenture, note, bond,
loan, instrument, lease, conditional sale contract, mortgage, license,
franchise, insurance policy, commitment or other arrangement or agreement,
whether written or oral.
"Employee" means each current, former, or retired employee, office
consultant, independent contractor, agent or director of the Company.
"Employee Agreement" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar agreement or contract
between the Company, and any Employee pursuant to which the Company has or may
have any liability contingent or otherwise.
"Environmental Claim " means any accusation, allegation, notice of
violation, action, claim, Lien, demand, abatement or other Order or direction
(conditional or otherwise) by any Governmental Body or any Person for personal
injury (including sickness, disease or death), tangible or intangible property
damage, damage to the environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or restrictions
resulting from or based upon (i)
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the existence, or the continuation of the existence, of a Release (including,
without limitation, sudden or non-sudden accidental or non-accidental Releases)
of, or exposure to, any Hazardous Material or other substance, chemical,
material, pollutant, contaminant, odor, audible noise, or other Release in, into
or onto the environment (including, without limitation, the air, soil, surface
water or groundwater) at, in, by, from or related to the Facilities or any
activities conducted thereon; (ii) the environmental aspects of the
transportation, storage, treatment or disposal of Hazardous Materials in
connection with the operation of the Facilities; or (iii) the violation, or
alleged violation, of any Environmental Laws, Orders or Permits of or from any
Governmental Body relating to environmental matters connected with the
Facilities.
"Environmental Law" means any Law concerning Releases into any part
of the natural environment, or activities that might result in damage to the
natural environment, or any Law that is concerned in whole or in part with the
natural environment and with protecting or improving the quality of the natural
environment and protecting public and Employee health and safety and includes,
but is not limited to, the Comprehensive Environmental Response, Compensation,
and Liability Act ("CERCLA") (42 U.S.C. ss. 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act
(33 U.S.C. ss. 1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401 et seq.),
the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.) and the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.) ("OSHA"), as such
laws have been amended or supplemented, and the regulations promulgated pursuant
thereto, and any and all analogous state or local statutes, and the regulations
promulgated pursuant thereto, and any and all treaties, conventions and
environmental public and employee health and safety statutes and regulations or
analogous requirements of non-United States jurisdictions in which the Company
conducts any business.
"Environmental Matters" means any matter arising out of or relating
to the production, storage, transportation, disposal or Release of any Hazardous
Material or otherwise arising out of or relating to safety, health or the
environment which could give rise to liability or require the expenditure of
money to address, and shall include, without limitation, the costs of
investigating and remedying any of the foregoing matters, any fines and
penalties arising in connection therewith, and any claim in respect thereof for
damages or injunctive relief for alleged personal injury, property damage or
damage to natural resources under common law or other Environmental Law.
"Environmental Permit" means any Permit, variance, registration, or
permission required under any applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any regulations promulgated or proposed thereunder.
"Facility" means real property owned, leased or operated by the
Company.
"FCC" means the Federal Communication Commission and any successor
thereto.
"GAAP" means generally accepted accounting principles, as in effect
in the United States.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof, or
any court or arbitrator (public or private).
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"Hazardous Materials " means any substance, material or waste which
is regulated by any local, state or federal Governmental Body in the
jurisdiction in which the Company conducts business, or the United States,
including, without limitation, any material or substance which is defined as a
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste," "subject waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, including but not limited to, petroleum products, asbestos,
radon and polychlorinated biphenyls.
"Law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement or
guideline (including, without limitation, the Communications Act and the rules
and regulations of the FCC.
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"Lien" means any lien, pledge, hypothecation, levy, mortgage, deed of
trust, security interest, claim, lease, charge, option, right of first refusal,
easement, or other real estate declaration, covenant, condition, restriction or
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Material Adverse Change" means any material adverse change in the
business, properties, results of operations, prospects or condition (financial
or otherwise) of the Company.
"material default" me ans a default which could reasonably be
expected to result in a Material Adverse Change.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates by any Governmental Body (including, with respect to the
FCC).
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"Public Offering" means a firm commitment underwritten public
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect or any comparable
statement under any similar federal statute then in force or effect.
"Release " means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the indoor or outdoor environment, or into or out of any property
owned, operated or leased by the Company, including the movement of any
Hazardous Material or other substance through or in the air, soil, surface
water, groundwater, or property.
"Remedial Action" means all actions, including, without limitation,
any capital expenditures, required or voluntarily undertaken to (i) clean up,
remove, treat, or in any other way
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address any Hazardous Material or other substance in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material or other substance so it does not
migrate or endanger or threaten to endanger public health or welfare of the
indoor or outdoor environment; iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (iv) bring any Facility
into compliance with all Environmental Laws and Environmental Permits.
"Representatives " of a Person means its officers, Employees, agents,
legal advisors and accountants.
"Senior Notes" means the Company's 13% Senior Secured Notes due 2004.
"Stockholders Agreement" means the Stockholders' Agreement dated as
of the date hereof, by and among the Company and the shareholders listed on the
signature pages thereto.
"Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Internal Revenue Code of 1986, as amended (the "Code")), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return " means any return declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
8.2 Tax Treatment of Preferred Stock. The Company agrees that the
Series A Preferred Stock is stock which participates in corporate growth to a
significant extent within the meaning of Treasury Regulation ss.1.305-5(a), and
hence will not be treated as preferred stock for purposes of Internal Revenue
Code ss.305 and the regulations thereunder. Accordingly, the Company has
determined that there will not be constructive distributions under Treasury
Regulation ss.1.305-5(b) with respect to the Series A Preferred Stock.
8.3 Expenses. Each Purchaser shall pay its own fees and expenses
associated with this transaction, including legal expenses and out-of pocket
expenses. The Company shall pay all stamp and other taxes which may be payable
in respect of the execution and delivery of this Agreement, the Transaction
Documents, or the issuance, delivery or acquisition of the Shares and all blue
sky expenses.
8.4 Specific Performance. The Company acknowledges and agrees that
the breach of this Agreement would cause irreparable damage to the Purchasers
and that the Purchasers will not have an adequate remedy at law. Therefore, the
obligations of the Company under this Agreement, including, without limitation,
the Company's obligation to sell the Shares to the Purchasers, shall be
enforceable by a decree of specific performance issued by any court of competent
jurisdiction, and appropriate injunctive relief may be applied for and granted
in connection therewith. Such remedies shall, however, be cumulative and not
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
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8.5 Further Assurances. The Company and the Purchasers each
agree to execute and deliver such other documents or agreements as may be
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
8.6 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of any federal or state court located within the County of Xxxx,
State of Illinois over any dispute arising out of or relating to this Agreement
or any of the transactions contemplated hereby and each party hereby irrevocably
agrees that all claims in respect of such dispute or any suit, action or
proceeding related thereto may be heard and determined in such courts. The
parties hereby irrevocably waive, to the fullest extent permitted by applicable
law, any objection which they may now or hereafter have to the laying of venue
of any such dispute brought in such court or any defense of inconvenient forum
for the maintenance of such dispute. Each of the parties hereto agrees that a
judgment in any such dispute may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
mailing of a copy thereof in accordance with the provisions of Section 8.9.
8.7 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto) represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the parties hereto. No action taken
pursuant to this Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the principles of conflict of laws thereunder which would specify the
application of the law of another jurisdiction.
8.9 Table of Contents; Headings; Interpretive Matters. The table of
contents and section headings of this Agreement are for reference purposes only
and are to be given no effect in the construction or interpretation of this
Agreement. No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
8.10 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, telecopied or mailed by certified mail,
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return receipt requested, to the parties at the following addresses (or to such
other address as a party may have specified by notice given to the other party
pursuant to this provision):
If to the Company, to:
MGC Communications, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn:
Fax: (000)000-0000
With a copy (which shall by itself not constitute notice) to:
Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
If to the Purchasers, to the address listed in Schedule 1.
All notices are effective upon receipt or upon refusal if properly
delivered.
8.11 Severability. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.
8.12 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns (as permitted in accordance with the terms of this Agreement).
Nothing in this Agreement shall create or be deemed to create any third-party
beneficiary rights in any person or entity not a party to this Agreement except
as provided below. No assignment of this Agreement or of any rights or
obligations hereunder may be made by the Company or the Purchaser (by operation
of law or otherwise) without the prior written consent of the other parties
hereto and any attempted assignment without the required consents shall be void;
provided, however, that the Purchasers may assign this Agreement and any or all
rights and obligations hereunder, in whole or in part, to any Affiliate of the
Purchasers, but any such assignment shall not relieve the Purchasers of their
respective obligations hereunder. In addition, and whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of any
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Purchaser as a purchaser or holder of Shares (or any securities pursuant to
which such Shares may be converted or exercised into) are also for the benefit
of and enforceable by, any subsequent holder of such securities. Upon any
permitted assignment, the references in this Agreement to the Purchasers shall
also apply to any such assignee unless the context otherwise requires.
8.13 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
SECURITIES PURCHASE AGREEMENT SIGNATURE PAGES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
MGC COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
PURCHASERS:
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