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EXHIBIT 10.6
MGC COMMUNICATIONS, INC.
160,000 Units Consisting of
$160,000,000 of
13% Senior Secured Notes due 2004
and
Warrants to Purchase 1,291,200 Shares of Common Stock
PURCHASE AGREEMENT
September 24, 1997
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇ ▇▇▇▇ LLC
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MGC COMMUNICATIONS, INC.
160,000 Units Consisting of
$160,000,000 of
13% Senior Secured Notes due 2004
and
Warrants to Purchase 1,291,200 Shares of Common Stock
PURCHASE AGREEMENT
September 24, 1997
New York, New York
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇ ▇▇▇▇ LLC
c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies & Gentlemen:
MGC Communications, Inc., a Nevada corporation (the "Company"),
proposes to issue and sell to Bear, ▇▇▇▇▇▇▇ & Co. Inc. and ▇▇▇▇▇▇ ▇▇▇▇ LLC
(together, the "Initial Purchasers") 160,000 units (the "Units") consisting of
$160,000,000 aggregate principal amount of 13% Senior Secured Notes due 2004
(the "Senior Notes") and Warrants (the "Warrants") to purchase an aggregate of
1,291,200 shares of common stock, $.001 par value (the "Common Stock"), of the
Company (the "Warrant Shares"), subject to the terms and conditions set forth
herein. Each Unit will consist of $1,000 principal amount of the Senior Notes
and one Warrant to purchase 8.07 shares of Common Stock. The Senior Notes will
be issued pursuant to an indenture (the "Indenture"), to be dated the Closing
Date (as defined below), between the Company and Marine Midland Bank, as trustee
(the "Trustee"). The Warrants will be issued pursuant to a warrant agreement
(the "Warrant Agreement") to be dated the Closing Date, between the Company and
Marine Midland Bank, as warrant agent (the "Warrant Agent"). The Senior Notes
and the Warrants will not trade separately until the earlier of (i) 90 days from
the date of issuance, (ii) such date as the Initial Purchasers may, in their
discretion, deem appropriate, (iii) in the event a Change in Control (as defined
in the Indenture) occurs, the date the Company mails notice thereof to holders
of Senior Notes and Warrants and (iv) the date on which the Exchange Offer (as
defined below) is consummated (such date, the "Separation Date"). The Units, the
Senior Notes and the Warrants are more fully described in the Offering
memorandum referred to below.
1. Issuance of Securities. The Company proposes to, upon
the terms and subject to the conditions set forth herein, issue and sell to the
Initial Purchasers the Units. The Senior Notes forming a part of the Units and
the Exchange Notes (as defined below) issuable in exchange therefore are
hereinafter referred to as the Notes. The Units, the Notes and the Warrants
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are collectively referred to herein as the "Securities". Capitalized terms used
but not otherwise defined herein shall have the meanings given to such terms in
the Indenture.
The proceeds to the Company from the sale to the Initial
Purchasers of the Units will be used to fund the Interest Reserve Account,
capital expenditures in connection with the Company's expansion and for working
capital.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933
(as amended, the "Act"), the Units, the Notes, the Warrants and the Warrant
Shares (and all securities issued in exchange therefor or in substitution
thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY
WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT
OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT
IS NOT A U.S. PERSON (AS DEFINED IN RULE 902 UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2) (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI")
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE AND
WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE UNITS, NOTES
AND WARRANTS (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE OR WARRANT AGENT) OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (IN THE CASE OF (b), (c), (d) OR (e), BASED
UPON AN OPINION OF COUNSEL IF THE ISSUER OR TRUSTEE, REGISTRAR
OR TRANSFER AGENT FOR THE SECURITIES SO REQUESTS), (2) TO THE
ISSUER OR (3) PURSUANT TO AN EFFECTIVE
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REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
2. Offering. The Units will be offered and sold to the
Initial Purchasers pursuant to an exemption from the registration requirements
under the Securities Act of 1933, as amended (the "Act"). The Company has
prepared a preliminary offering memorandum, dated September 4, 1997 (the
"Preliminary Offering Memorandum"), and a final offering memorandum, dated
September 24, 1997 (the "Offering Memorandum"), relating to the Company and the
Units.
The Initial Purchasers have advised the Company that the
Initial Purchasers will make offers (the "Exempt Resales") of the Units on the
terms set forth in the Offering Memorandum, as amended or supplemented, solely
to persons whom any of the Initial Purchasers reasonably believe to be
"qualified institutional buyers," as defined in Rule 144A under the Act
("QIBs"), and to non-U.S. persons outside the United States within the meaning
of Regulation S under the Act ("Regulation S Investors"). Such QIBs and
Regulation S Investors shall be referred to herein as the "Eligible Purchasers."
The Initial Purchasers will offer the Units to such QIBs and Regulation S
Investors initially at a purchase price equal to 100% of the amount thereof.
Such price may be changed at any time without notice.
Pursuant to the terms of a security agreement to be dated the
Closing Date (the "Security Agreement"), the Notes will be secured by a lien on
certain Telecommunications Equipment (as defined in the Indenture) owned or to
be owned by the Company. Pursuant to the terms of a collateral pledge agreement
to be dated the Closing Date (the "Collateral Pledge Agreement"), the Company
will deposit a portion of the proceeds from the sale of the Units to the Initial
Purchasers sufficient to provide for payment in full of the first six interest
payments on the Notes in a segregated account (the "Interest Reserve Account")
that will be used to purchase a portfolio of United States government securities
which will be pledged to secure payment of the principal of and interest on the
Notes.
Holders (including subsequent transferees) of the Notes will
have the registration rights set forth in the registration rights agreement
relating thereto (the "Registration Rights Agreement"), and holders (including
subsequent transferees) of the Warrants and Warrant Shares will have the
registration rights set forth in the registration rights agreement relating
thereto (the "Warrant Registration Rights Agreement"), to be dated the Closing
Date for so long as such Notes, Warrants or any Warrant Shares constitute
"Transfer Restricted Securities" (as defined in such agreements). Pursuant to
the Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Act (the "Exchange
Offer Registration Statement") with respect to an offer to exchange (the
"Exchange Offer") the Notes for 13% Series B Senior Secured Notes due 2004 (the
"Exchange Notes") to be offered in exchange for the Notes and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the Notes,
and to use its best efforts to cause such
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Registration Statements to be declared effective and consummate the Exchange
Offer. This Agreement, the Securities, the Warrant Shares, the Indenture, the
Security Agreement, the Collateral Pledge Agreement, the Warrant Agreement, the
Registration Rights Agreement and the Warrant Registration Rights Agreement are
hereinafter sometimes referred to collectively as the "Operative Documents."
3. Purchase, Sale and Delivery. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell to
each Initial Purchaser, and each Initial Purchaser agrees severally and not
jointly to purchase from the Company, that amount of Units set forth opposite
its name on Schedule I hereto. The purchase price for the Units shall be $1,000
per Unit.
(b) Delivery of, and payment of the purchase price for, the Units shall
be made, against payment of the purchase price, at the offices of Kronish, Lieb,
Weiner & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or
such other location as may be mutually acceptable. Such delivery and payment
shall be made at 9:00 A.M. New York time, on September 29, 1997 or at such other
time as shall be agreed upon by the Initial Purchasers and the Company. The time
and date of such delivery and payment are herein called the "Closing Date."
(c) Units sold to Regulation S Investors will initially be represented
by one or more permanent Units in global definitive, fully registered form
without interest coupons (each a "Regulation S Global Unit") registered in the
name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), for the
accounts of the Euroclear System ("Euroclear") and Cedel Bank, societe anonyme
("Cedel"), having an aggregate amount corresponding to the aggregate amount of
the Units sold to Regulation S Investors. Units sold to QIBs will be represented
by one or more permanent global Units in definitive, fully registered form
without interest coupons (each a "Restricted Global Unit", and together with the
Regulation S Global Unit, the "Global Units") registered in the name of Cede &
Co., as nominee of DTC, having an aggregate amount corresponding to the
aggregate amount of the Units sold to QIBs. Each Global Unit will be comprised
of one or more global certificates for the Notes (the "Global Notes") and one or
more global certificates for the Warrants (the "Global Warrants" and, together
with the Global Notes and Global Units, the "Global Securities"). The Global
Securities shall be delivered by the Company to the Initial Purchasers (or as
the Initial Purchasers direct), against payment by the Initial Purchasers of the
purchase price therefor, by wire transfer of immediately available funds to an
account specified by the Company or as the Company may direct in writing,
provided that the Company shall give at least two business days' prior written
notice to the Initial Purchasers of the information required to effect such wire
transfers. The Global Units, Global Notes and Global Warrants shall be made
available to the Initial Purchasers for inspection not later than 9:30 a.m., New
York City time, on the business day immediately preceding the Closing Date.
4. Agreements of the Company. The Company covenants and agrees
with each of the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing,
(i) of the issuance by any state securities commission of any stop
order suspending the qualification or exemption from qualification of
any Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purpose by any state securities
commission or other regulatory authority and (ii) of the happening of
any event that, in the reasonable opinion of counsel to the Company,
makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires the
making of any additions to or changes
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in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein, in the light of the circumstances
under which they are made, not misleading. The Company shall use its
best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Securities under any
state securities or Blue Sky laws and, if at any time any state
securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption of any Securities under
any state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company, without charge, as
many copies of the Preliminary Offering Memorandum and the Offering
Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request. The Company consents to the use of
the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments and supplements thereto required pursuant hereto, by the
Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum prior to the Closing Date unless
the Initial Purchasers shall previously have been advised thereof and
shall not have objected thereto within a reasonable time after being
furnished a copy thereof. The Company shall promptly prepare, upon the
Initial Purchasers' request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that may be
necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation
of any Exempt Resale, any event shall occur as a result of which, in
the judgment of the Company or in the reasonable opinion of either
counsel to the Company or counsel to the Initial Purchasers, it becomes
necessary or advisable to amend or supplement the Preliminary Offering
Memorandum or Offering Memorandum in order to make the statements
therein, in the light of the circumstances when such Offering
Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary or advisable to amend
or supplement the Preliminary Offering Memorandum or Offering
Memorandum to comply with applicable law, (i) notify the Initial
Purchasers and (ii) forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein
as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel
to the Initial Purchasers in connection with the qualification or
registration of the Units under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may reasonably request and to
continue such qualification in effect so long as required for the
Exempt Resales; provided, however that the Company shall not be
required in connection therewith to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to service of process in suits or taxation, in each
case, other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the
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Offering Memorandum or Exempt Resales, in any jurisdiction where it is
not now so subject.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, to pay all costs, expenses, fees and taxes incident to the
performance of the obligations of the Company hereunder, including in
connection with: (i) the preparation, printing, filing and distribution
of the Preliminary Offering Memorandum and the Offering Memorandum
(including, without limitation, financial statements) and all
amendments and supplements thereto required pursuant hereto, (ii) the
preparation (including, without limitation, duplication costs) and
delivery of all preliminary and final Blue Sky memoranda prepared and
delivered in connection herewith and with the Exempt Resales, (iii) the
issuance, transfer and delivery by the Company of the Securities to the
Initial Purchasers, (iv) the qualification or registration of the
Securities for offer and sale under the securities or Blue Sky laws of
the several states (including, without limitation, the cost of printing
and mailing a preliminary and final Blue Sky Memorandum and the
reasonable fees and disbursements of counsel to the Initial Purchasers
relating thereto), (v) furnishing such copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and all amendments and
supplements thereto, as may be requested for use in connection with
Exempt Resales, (vi) the preparation of certificates for the Securities
(including, without limitation, printing and engraving thereof), (vii)
the fees, disbursements and expenses of the Company's counsel and
accountants, (viii) all expenses and listing fees in connection with
the application for quotation of the Securities in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System - PORTAL ("PORTAL"), (ix) all fees and expenses (including fees
and expenses of counsel to the Company) of the Company in connection
with the approval of the Securities by DTC for "book-entry" transfer,
(x) rating the Securities by rating agencies, (xi) the reasonable fees
and expenses of the Trustee and its counsel in connection with the
Indenture and the Notes, (xii) the reasonable fees and expenses of the
Warrant Agent and its counsel in connection with the Warrant Agreement
and the Warrants, (xiii) the performance by the Company of its other
obligations under this Agreement and the other Operative Documents and
(ix) "roadshow" travel and other expenses incurred in connection with
the marketing and sale of the Units, the Notes and the Warrants (other
than out-of-pocket expenses incurred by the Initial Purchasers for
travel, meals and lodgings), provided, however, that the expenses
incurred pursuant to clauses (ii) and (iv) above shall not exceed
$5,000 without the consent of the Company.
(g) To use the proceeds from the sale of the Units in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of
any Securities.
(i) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing Date
and to satisfy all conditions precedent on its part to the delivery of
the Units.
(j) Not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the
Act) that would be integrated with the sale of the Units in a manner
that would require the registration under the Act of the sale to the
Initial Purchasers, the QIBs or the Regulation S Investors of the
Units, the Notes or the Warrants
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or to take any other action that would result in the Exempt Resales not
being exempt from registration under the Act.
(k) For so long as any of the Securities remain
outstanding and during any period in which the Company is not subject
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to make available to any beneficial owner
of Units, Notes or Warrants in connection with any sale thereof and any
prospective purchaser of such Units, Notes or Warrants from such
beneficial owner, the information required by Rule 144A(d)(4) under the
Act.
(l) To cause the Exchange Offer to be made in the
appropriate form to permit registered Exchange Notes to be offered in
exchange for the Notes and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(m) To comply with all of its agreements set forth in the
Registration Rights Agreement and the Warrant Registration Rights
Agreement and all agreements set forth in the representation letters of
the Company to DTC relating to the approval of the Securities by DTC
for "book-entry" transfer.
(n) To use its best efforts to effect the inclusion of
the Securities in PORTAL and to obtain approval of the Securities by
DTC for "book-entry" transfer.
(o) During a period of five years following the Closing
Date, to deliver without charge to each of the Initial Purchasers,
promptly upon their becoming available, copies of (i) all reports or
other publicly available information that the Company shall mail or
otherwise make available to its stockholders and (ii) all reports,
financial statements and proxy or information statements filed by the
Company with the Commission or any national securities exchange and
such other publicly available information concerning the Company,
including without limitation, press releases.
(p) Prior to the Closing Date, to furnish to each of the
Initial Purchasers, as soon as they have been prepared in the ordinary
course by the Company, copies of any consolidated financial statements
or any unaudited interim financial statements of the Company for any
period subsequent to the periods covered by the financial statements
appearing in the Offering Memorandum.
(q) The Company will not take, directly or indirectly,
any action designed to, or that might reasonably be expected to, cause
or result in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities.
Except as permitted by the Act, the Company will not distribute any
Preliminary Offering Memorandum, Offering Memorandum or other offering
material in connection with the offering and sale of the Securities.
(r) To comply with the agreements in the Indenture, the
Security Agreement, the Collateral Pledge Agreement, the Warrant
Agreement, the Registration Rights Agreement, the Warrant Registration
Rights Agreement and any other Operative Document; and
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(s) To reserve and continue to reserve as long as any
Warrants remain outstanding, a sufficient number of shares of Common
Stock for issuance upon exercise of the Warrants.
5. Representations and Warranties. (a) The Company represents and
warrants to each of the Initial Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales.
The Preliminary Offering Memorandum and the Offering Memorandum do not,
and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties contained in this paragraph shall
not apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing
by the Initial Purchasers expressly for use therein. Any projections
and other information contained in the Preliminary Offering memorandum
and the Offering Memorandum or provided to the Initial Purchasers or
any Eligible Purchaser have been prepared in good faith and are based
upon assumptions which, in light of the circumstances under which they
were made, are reasonable. No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(ii) When the Units, the Notes and the Warrants are issued
and delivered pursuant to this Agreement, no Unit, Note or Warrant will
be of the same class (within the meaning of Rule 144A under the Act) as
securities of the Company that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
(iii) The Company (A) has been duly organized, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, (B) has all requisite corporate power
and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease
and operate its properties, and (C) is duly qualified and in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification. The Company does not
own, directly or indirectly, any capital stock of or any equity
interest in, any other person.
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid
and nonassessable and were not issued in violation of any preemptive or
similar rights. At June 30, 1997, after giving effect to the issuance
and sale of the Units pursuant hereto and to the offering of
Convertible Preferred Stock (the "Preferred Stock Offering") or the
closing of binding commitments from investors to purchase Common Stock
of the Company for $15 million if the Preferred Stock Offering has not
been consummated within 60 days of the Closing Date, the Company had an
authorized and outstanding consolidated capitalization as set forth in
the Offering Memorandum under the caption "Capitalization."
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(v) All of the outstanding shares of the Common Stock
were issued in reliance on the exemption from registration pursuant to
Section 4(2) of the Act and in compliance with the requirements thereof
and any other statute, judgment, decree, order, rule or regulation of
any court, regulatory body or administrative agency or other
governmental body, domestic or foreign, having jurisdiction over the
Company or the issuance of the Common Stock.
(vi) 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 statutes, judgments, decrees, orders, rules and
regulations of any court, regulatory body or administrative agency or
other governmental body, domestic or foreign, having jurisdiction over
the LLC, Company or the Reorganization. No person was or is entitled to
receive any shares of capital stock of the Company or other
consideration, other than shares of capital stock or other
consideration which have been distributed, as a result of the
Reorganization.
(vii) Except as disclosed in the Offering Memorandum, there
are not currently, and will not be as a result of the Offering, any
outstanding subscriptions, rights, warrants, calls, commitments of sale
or options to acquire, or instruments convertible into or exchangeable
for, any capital stock or other equity interest of the Company.
(viii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, the Indenture, the Security Agreement, the Collateral Pledge
Agreement, the Warrant Agreement, the Registration Rights Agreement,
the Warrant Registration Rights Agreement and the other Operative
Documents and to consummate the transactions contemplated hereby and
thereby, including, without limitation, the corporate power and
authority to issue, sell and deliver the Securities as provided herein
and therein and the power to effect the Use of Proceeds as described in
the Offering Memorandum.
(ix) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and
binding agreement of the Company, enforceable against it in accordance
with its terms, except insofar as indemnification and contribution
provisions may be limited by applicable law or equitable principles and
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
(x) The Indenture has been duly and validly authorized by
the Company and, when duly executed and delivered by the Company, will
be the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The Offering Memorandum contains a fair
summary of the terms of the Indenture.
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(xi) The Security Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. The Offering
Memorandum contains a fair summary of the terms of the Security
Agreement required to be described in the Offering Memorandum.
(xii) The Collateral Pledge Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered
by the Company, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. The Offering
Memorandum contains a fair summary of the terms of the Collateral
Pledge Agreement required to be described in the Offering Memorandum.
(xiii) The Units have been duly and validly authorized by
the Company for issuance and sale to the Initial Purchasers pursuant to
the terms of this Agreement. The Offering Memorandum contains a fair
summary of the Units.
(xiv) The Notes have been duly and validly authorized by
the Company, and have been duly and validly authorized for issuance and
sale to the Initial Purchasers by the Company pursuant to this
Agreement and, when issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal, valid
and binding obligations of the Company, enforceable against the Company
in accordance with their terms and entitled to the benefits of the
Indenture, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
Offering Memorandum contains a fair summary of the terms of the Notes.
(xv) The Exchange Notes have been duly and validly
authorized for issuance by the Company and, when issued and
authenticated in accordance with the terms of the Exchange Offer and
the Indenture, will be the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The Offering Memorandum contains a fair
summary of the terms of the Exchange Notes.
(xvi) The Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered
by the Company, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity. The Offering
Memorandum contains a fair summary of the terms of the Registration
Rights Agreement.
(xvii) The Warrant Agreement has been duly and validly
authorized by the Company, and, when duly executed and delivered by the
Company, will be the legal, valid
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and binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity. The Offering Memorandum contains a fair summary
of the terms of the Warrant Agreement.
(xviii) The Warrants have been duly and validly authorized
for issuance and sale to the Initial Purchasers by the Company pursuant
to this Agreement and, when issued and countersigned in accordance with
the terms of the Warrant Agreement and delivered against payment
therefor in accordance with the terms hereof and thereof, will be the
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with their terms and entitled to the benefits
of the Warrant Agreement, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of
equity. The Offering Memorandum contains a fair summary of the terms of
the Warrants.
(xix) The Warrants are exercisable for Warrant Shares in
accordance with the terms of the Warrant Agreement. The Warrant Shares
have been duly authorized for issuance by the Company and, when issued
and paid for upon exercise of the Warrants in accordance with the terms
thereof, will be validly issued, fully paid and nonassessable, free of
any preemptive or similar rights. The Company has reserved sufficient
shares of Common Stock for issuance upon the exercise of the Warrants.
(xx) The Warrant Registration Rights Agreement has been
duly and validly authorized by the Company and, when duly executed and
delivered by the Company, will be the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity. The Offering Memorandum contains a fair summary
of the terms of the Warrant Registration Rights Agreement.
(xxi) The Company is not, and, after giving effect to the
Offering, will not be (A) in violation of its charter or bylaws, (B) in
default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which it is
a party or by which it is bound or to which any of its properties is
subject, or (C) in violation of any local, state or Federal law,
statute, ordinance, rule, regulation, requirement, judgment or court
decree (including, without limitation, the Communications Act and the
rules and regulations of the FCC and environmental laws, statutes,
ordinances, rules, regulations, judgments or court decrees) applicable
to the Company or any of its assets or properties (whether owned or
leased) other than, in the case of clauses (B) and (C), any default or
violation that could not reasonably be expected to (x) individually or
in the aggregate, result in a material adverse effect on the
properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Company, taken as a whole, (y)
interfere with or adversely affect the issuance or marketability of the
Units pursuant hereto or (z) in any manner draw into question the
validity of this Agreement or any other Operative Document or the
transactions described in the Offering Memorandum under the caption
"Use of Proceeds" (any of the events set forth in clauses (x), (y) or
(z), a
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"Material Adverse Effect") or (2) which is disclosed in the Offering
Memorandum. There exists no condition that, with notice, the passage of
time or otherwise, would constitute a default under any such document
or instrument, except as disclosed in the Offering Memorandum.
(xxii) None of (A) the execution, delivery or performance by
the Company of this Agreement and the other Operative Documents, (B)
the issuance and sale of the Securities and (C) consummation by the
Company of the transactions described in the Offering Memorandum under
the caption "Use of Proceeds" violate, conflict with or constitute a
breach of any of the terms or provisions of, or a default under (or an
event that with notice or the lapse of time, or both, would constitute
a default), or require consent under, or result in the imposition of a
lien or encumbrance on any properties of the Company, or an
acceleration of any indebtedness of the Company pursuant to, (i) the
charter or bylaws of the Company, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party or by which the Company or its property is
or may be bound, (iii) any statute, rule or regulation applicable to
the Company or any of its assets or properties or (iv) any judgment,
order or decree of any court or governmental agency or authority having
jurisdiction over the Company or any of its assets or properties,
except in the case of clauses (ii), (iii) and (iv) for such violations
conflicts, breaches, defaults, consents, impositions of liens or
accelerations that (x) would not singly, or in the aggregate, have a
Material Adverse Effect or (y) which are disclosed in the Offering
Memorandum. Other than as described in the Offering Memorandum, no
consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, (A) any court or
governmental agency, body or administrative agency (including, without
limitation, the FCC) or (B) any other person is required for (1) the
execution, delivery and performance by the Company of this Agreement
and the other Operative Documents, (2) the issuance and sale of the
Securities and the transactions contemplated hereby and thereby, except
(x) such as have been obtained and made (or, in the case of the
Registration Rights Agreement, will be obtained and made) under the
Act, the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") and state securities or Blue Sky laws and regulations or such as
may be required by the NASD or (y) where the failure to obtain any such
consent, approval, authorization or order of, or filing registration,
qualification, license or permit would not reasonably be expected to
result in a Material Adverse Effect.
(xxiii) There is (i) no action, suit or proceeding before or
by any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending or, to the best knowledge of the
Company, threatened or contemplated to which the Company is a party or
to which the business or property of the Company is subject, (ii) no
statute, rule, regulation or order that has been enacted, adopted or
issued by any governmental agency or that has been proposed by any
governmental body or (iii) no injunction, restraining order or order of
any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company is or may be subject or to which the
business, assets, or property of the Company is or may be subject,
that, in the case of clauses (i), (ii) and (iii) above, is required to
be disclosed in the Preliminary Offering Memorandum and the Offering
Memorandum and that is not so disclosed.
(xxiv) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Securities or
prevents or suspends the use of the Offering Memorandum; no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction
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has been issued that prevents the issuance of the Securities, prevents
or suspends the sale of the Securities in any jurisdiction referred to
in Section 4(e) hereof or that could adversely affect the consummation
of the transactions contemplated by this Agreement, the Operative
Documents or the Offering Memorandum; and every request of any
securities authority or agency of any jurisdiction for additional
information has been complied with in all material respects.
(xxv) There is (i) no significant unfair labor practice
complaint pending against the Company nor, to the best knowledge of the
Company, threatened against the Company, before the National Labor
Relations Board, any state or local labor relations board or any
foreign labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or,
to the best knowledge of the Company, threatened against the Company,
(ii) no significant strike, labor dispute, slowdown or stoppage pending
against the Company nor, to the best knowledge of the Company,
threatened against the Company and (iii) to the best knowledge of the
Company, no union representation question existing with respect to the
employees of the Company that, in the case of clauses (i), (ii) or
(iii), could reasonably be expected to result in a Material Adverse
Effect. To the best knowledge of the Company, no collective bargaining
organizing activities are taking place with respect to the Company. The
Company has not violated (A) any federal, state or local law or foreign
law relating to discrimination in hiring, promotion or pay of employees
(except as set forth in the Offering Memorandum), (B) any applicable
wage or hour laws or (C) any provision of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or the rules and
regulations thereunder, which in the case of clause (A), (B) or (C)
above could reasonably be expected to result in a Material Adverse
Effect.
(xxvi) The Company is in compliance with and has not
violated any environmental, safety or similar law or regulation
applicable to it or its business or property relating to the protection
of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental
Laws"), lacks any permit, license or other approval required of it
under applicable Environmental Laws or is violating any term or
condition of such permit, license or approval which could reasonably be
expected to, either individually or in the aggregate, have a Material
Adverse Effect. No facilities owned or leased by the Company, or to the
knowledge of the Company, any facilities of any predecessor in interest
of the Company, is listed or, to the knowledge of the Company, formally
proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability
Information System, both as promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act. ("CERCLA"), or
on any comparable state list, or listed or, to the knowledge of the
Company, formally proposed for listing, on any comparable local list,
and the Company has not received any written notification of potential
or actual liability, or any written request for information, pursuant
to CERCLA or any comparable state, local or foreign environmental law.
(xxvii) The Company has (i) good and marketable title to all
of the properties and assets described in the Offering Memorandum as
owned by it, free and clear of all liens, charges, encumbrances and
restrictions, except such as are described in the Offering
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Memorandum or as would not have a Material Adverse Effect, (ii)
peaceful and undisturbed possession under all material leases to which
it is a party as lessee, (iii) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has
made all declarations and filings with, all federal, state and local
authorities (including, without limitation, the FCC), all
self-regulatory authorities and all courts and other tribunals (each an
"Authorization") necessary to engage in the business conducted by the
Company in the manner described in the Offering Memorandum, except as
described in the Offering Memorandum, and no such Authorization
contains a materially burdensome restriction that is not disclosed in
the Offering Memorandum and (iv) no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization. Except where the failure to be in full
force and effect would not have a Material Adverse Effect, all such
Authorizations are valid and in full force and effect and the Company
is in compliance in all material respects with the terms and conditions
of all such Authorizations and with the rules and regulations of the
regulatory authorities having jurisdiction with respect thereto. All
material leases to which the Company is a party are valid and binding
and no default by the Company has occurred and is continuing thereunder
and, to the best knowledge of the Company no material defaults by the
landlord are existing under any such lease that could reasonably be
expected to result in a Material Adverse Effect.
(xxviii) The Company owns, possesses or has the right to
employ all patents, patent rights, licenses (including all FCC, state,
local or other jurisdictional regulatory licenses), inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, software,
systems or procedures), trademarks, service marks and trade names,
inventions, computer programs, technical data and information
(collectively, the "Intellectual Property") presently employed by it in
connection with the businesses now operated by it or which are proposed
to be operated by it free and clear of and without violating any right,
claimed right, charge, encumbrance, pledge, security interest,
restriction or lien of any kind of any other person and the Company has
not received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing except as could
not reasonably be expected to have a Material Adverse Effect. The use
of the Intellectual Property in connection with the business and
operations of the Company does not infringe on the rights of any
person, except as could not reasonably be expected to have a Material
Adverse Effect.
(xxix) 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 agency (domestic or foreign), instrumentality of any
government (domestic or foreign) or any political party or candidate
for office (domestic or foreign) or other person who was, is or may be
in a position to help or hinder the business of the Company (or 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 civil, criminal or governmental
litigation or proceeding (domestic or foreign), (ii) if not given in
the past, might have had a material adverse effect on the assets,
business or operations of the Company or (iii) if not continued in the
future, might have a Material Adverse Effect.
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(xxx) All material tax returns required to be filed by the
Company in all jurisdictions have been so filed. All taxes, including
withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities or that are due and
payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently
payable without penalty or interest. To the knowledge of the Company,
there are no material proposed additional tax assessments against the
Company, the assets or property of the Company.
(xxxi) The Company is not (i) an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act"), or (ii) a "holding company" or a "subsidiary company" or an
"affiliate" of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(xxxii) Except as disclosed in the Offering Memorandum, there
are no holders of securities of the Company who, by reason of the
execution by the Company of this Agreement or any other Operative
Document to which it is a party or the consummation by the Company of
the transactions contemplated hereby or thereby, have the right to
request or demand that the Company register under the Act or analogous
foreign laws and regulations securities held by them.
(xxxiii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that: (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect
thereto.
(xxxiv) The Company maintains insurance covering its
properties, operations, personnel and businesses. Such insurance
insures against such losses and risks as are adequate in accordance
with customary industry practice to protect the Company and its
business. The Company has not received notice from any insurer or agent
of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance.
All such insurance is outstanding and duly in force on the date hereof,
subject only to changes made in the ordinary course of business,
consistent with past practice, which do not, singly or in the
aggregate, materially alter the coverage thereunder or the risks
covered thereby.
(xxxv) The Company has not (i) taken, directly or
indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Units, the Notes or the Warrants or (ii) since the date of the
Preliminary Offering Memorandum (A) sold, bid for, purchased or paid
any person any compensation for soliciting purchases of, the Units, the
Notes or the Warrants or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.
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(xxxvi) No registration under the Act of the Units the Notes
or the Warrants is required for the sale of the Units to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming
(i) that the purchasers who buy the Units in the Exempt Resales are
either QIBs or Regulation S Investors and (ii) the accuracy of the
Initial Purchasers' representations regarding the absence of general
solicitation in connection with the sale of Units to the Initial
Purchasers and the Exempt Resales contained herein. No form of general
solicitation or general advertising was used by the Company or any of
its representatives (other than the Initial Purchasers, as to which the
Company makes no representation or warranty) in connection with the
offer and sale of any of the Securities in connection with Exempt
Resales, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Securities have
been issued and sold by the Company within the six-month period
immediately prior to the date hereof except warrants issued in
connection with the Common Stock Commitment.
(xxxvii) No employee pension benefit plan (within the meaning
of Section 3(2) of ERISA, but excluding any "multiemployer plan" within
the meaning of Section 3(37) of ERISA) established or maintained by the
Company or to which the Company has made contributions, which is
subject to Part 3 or Subtitle B of Title I of ERISA, or Section 412 of
the Internal Revenue Code of 1986 (the "Code"), had an accumulated
funding deficiency (as such term is defined in Section 302 of ERISA or
Section 412 of the Code), whether or not waived, as of the last day of
the most recent plan year of such plan heretofore ended for which an
excise tax is due (or would be due if such deficiency were not waived).
The Company has made all contributions required to be made by it to any
"multiemployer pension plan" (within the meaning of Section 3(37) of
ERISA). Neither the Company nor any Related Person (as such term is
defined below) has incurred, or is expecting to incur, any withdrawal
liability (determined under Section 4201 of ERISA) with respect to any
plan covered by Title IV of ERISA and in respect of which the Company
or a Related Person is an "employer" as defined in Section 3(5) of
ERISA, and to the best of the Company's knowledge, there has not been
any "reportable event" (within the meaning of Section 4043 of ERISA and
regulations thereunder, other than an event for which the 30-day notice
requirement has been waived), or any other event or condition which
presents a material risk of the termination of any such plan,
including, but not limited to, a termination by action of the Pension
Benefit Guaranty Corporation, which termination would create a material
liability of the Company or a Related Person to the Pension Benefit
Guaranty Corporation. "Related Person" shall mean any trade or business
(whether or not incorporated) which is under common control (as defined
in Section 414(b) and (c) of the Code) with the Company within the
meaning of Section 4001(b) of ERISA. As of the last day of the most
recent plan year heretofore ended of each employee benefit plan
described in the preceding sentence (other than a "multiemployer
plan"), the present value of all accrued benefits under each such
employee benefit plan (calculated on the basis of the actuarial
assumptions specified in the most recent actuarial valuation for each
such plan) did not exceed the fair market value of the assets of such
plan allocable to such benefit by more than $1,000,000. Neither any
employee pension benefit plan (excluding any "multiemployer plan"
within the meaning of Section 3(37) of ERISA) established or maintained
by the Company or to which the Company has made contributions, nor any
trust created thereunder, nor any trustee or administrator thereof
(including the Company), has engaged in any non-exempt prohibited
transaction (as described in Section 406 of ERISA or
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in Section 4975 of the Code) that could subject the Company either
directly or indirectly through an obligation to indemnify to any
material tax or material penalty on prohibited transactions imposed
under said Section 4975 of the Code or under ERISA. The execution and
delivery of this Agreement, the other Operative Documents and the sale
of the Units to be purchased by the QIBs and the Regulation S Investors
will not involve any prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code. Each employee benefit
plan described in the preceding sentence is in compliance in all
material respects with all applicable provisions of ERISA and the Code,
except for plan amendments required or permitted by such statutes as to
which applicable grace periods for making such amendments have not
expired, and the Company has made, accrued or provided for all
contributions heretofore required to be made by the Company and the
Company has complied in all material respects with the continuation
coverage requirements of Title X of the Consolidated Omnibus Budget Act
of 1985, as amended. The Company has no material "expected
post-retirement benefit obligation" (within the meaning of Financial
Accounting Standards Board Statement No. 106). The consummation of the
transactions contemplated by this Agreement (including, without
limitation, the Use of Proceeds) will not result in any material
payment (including, without limitation, severance, golden parachute or
otherwise) becoming due from the Company to any employee of the Company
as a consequence of such transaction.
(xxxviii) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement
thereto, as of its date, contains the information specified in, and
meets the requirements of, Rule 144A(d)(4) under the Act.
(xxxix) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and up to the Closing
Date, except as set forth in the Offering Memorandum, (i) the Company
has not incurred any liabilities or obligations, direct or contingent,
which are material, individually or in the aggregate, to the Company
taken as a whole, nor entered into any transaction not in the ordinary
course of business, (ii) there has not been, singly or in the
aggregate, any change or development which could reasonably be expected
to result in a Material Adverse Effect and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(xl) None of the execution, delivery and performance of
this Agreement, the issuance and sale of the Securities, the
application of the proceeds from the issuance and sale of the
Securities and the consummation of the transactions contemplated
thereby as set forth in the Offering Memorandum, will violate
Regulations G, T, U or X promulgated by the Board of Governors of the
Federal Reserve System or analogous foreign laws and regulations.
(xli) To the best knowledge of the Company, the
accountants who have certified or will certify the financial statements
included or to be included as part of the Offering Memorandum are
independent accountants. The historical financial statements of the
Company comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under
the Act and present fairly in all material respects
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the financial position and results of operations of the Company at the
respective dates and for the respective periods indicated. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods presented. The pro forma financial statements included in
the Offering Memorandum have been prepared on a basis consistent with
such historical statements, except for the pro forma adjustments
specified therein, and give effect to assumptions made on a reasonable
basis and present fairly in all material respects the historical and
proposed transactions contemplated by this Agreement, the other
Operative Documents; and such pro forma financial statements comply as
to form in all material respects with the requirements applicable to
pro forma financial statements included in registration statements on
Form S-1 under the Act. The other financial and statistical information
and data included in the Offering Memorandum, historical and pro forma,
are accurately presented in all material respects and prepared on a
basis consistent with the financial statements, historical and pro
forma, included in the Offering Memorandum and the books and records of
the Company, as applicable.
(xlii) The Company does not intend to, nor does it believe
that it will, incur debts beyond its ability to pay such debts as they
mature. The present fair saleable value of the assets of the Company on
a consolidated basis exceeds the amount that will be required to be
paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Company on a consolidated
basis as they become absolute and matured. The assets of the Company on
a consolidated basis do not constitute unreasonably small capital to
carry out the business of the Company, taken as a whole, as conducted
or as proposed to be conducted. Upon the issuance of the Units, the
present fair saleable value of the assets of the Company on a
consolidated basis will exceed the amount that will be required to be
paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Company on a consolidated
basis as they become absolute and matured. Upon the issuance of the
Units, the assets of the Company on a consolidated basis will not
constitute unreasonably small capital to carry out its businesses as
now conducted, including the capital needs of the Company on a
consolidated basis, taking into account the projected capital
requirements and capital availability.
(xliii) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between the Company and any
other person that would give rise to a valid claim against the Company
or either of the Initial Purchasers for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase
and sale of the Securities.
(xliv) The Company has or will have good and valid rights in
and title to the Collateral (as defined in the Security Agreement) that
it will ▇▇▇▇▇ ▇ ▇▇▇▇ in pursuant to the Security Agreement and has full
power and authority to grant to the Collateral Agent (as defined in the
Security Agreement) the Security Interest (as defined in the Security
Agreement) pursuant to the Security Agreement and to execute, deliver
and perform its obligations in accordance with the terms of the
Security Agreement, without the consent or approval of other persons
other than any consent or approval which has already been obtained.
(xlv) Prior to the Closing Date fully executed Uniform
Commercial Code financing statements or other appropriate filings,
recordings or registrations containing a description of the Collateral
will have been filed with the Secretary of State or other appropriate
office
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of each State of the United States in which Collateral is located and
in such other governmental, municipal or other office as specified in
the Security Agreement.
(xlvi) As of the Closing Date, the Security Interest granted
by the Company pursuant to the terms of the Security Agreement will
constitute a legal and valid Lien in all the Collateral. The Security
Interest will be perfected only to the extent that the filings referred
to in Section 5(a)(xlv) are sufficient to perfect such Security
Interest. The Security Interest is prior to any other Lien on any of
the Collateral as of the Closing Date.
(xlvii) As of the Closing Date, the Collateral will be owned
by the Company free and clear of any Lien. The Grantor has not filed or
consented to the filing of any financing statement or analogous
document under the Uniform Commercial Code or any other applicable laws
covering any Collateral and which financing statement or analogous
document will still be in effect on the Closing Date, except for the
Liens and financing statements expressly created or permitted by the
Security Agreement or the Indenture.
(xlvii) Each certificate signed by any officer of the Company
and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by the
Company to the Initial Purchasers as to the matters covered thereby.
The Company acknowledges that each of the Initial
Purchasers and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 8 hereof, counsel to the Company and counsel to
the Initial Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
(b) Each of the Initial Purchasers severally and not jointly
represents, warrants and covenants to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge
and experience in financial and business matters as are necessary in
order to evaluate the merits and risks of an investment in the Units.
(ii) Such Initial Purchaser (A) is not acquiring the Units with a view
to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the
Units only to QIBs in reliance on the exemption from the registration
requirements of the Act provided by Rule 144A and to Regulation S
Investors in an offshore transaction exempt from the registration
requirements of the Act.
(iii) No form of general solicitation or general
advertising has been or will be used by either of the Initial
Purchasers or any of their representatives in connection with the offer
and sale of any of the Units, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general
solicitation or general advertising.
(iv) Each of the Initial Purchasers agrees that, in
connection with the Exempt Resales, it will solicit offers to buy the
Units only from, and will offer to sell the Units only
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21
to, QIBs and Regulation S Investors. The Initial Purchasers further
agree (A) that they will offer to sell the Units only to, and will
solicit offers to buy the Units only from (1) QIB's who in purchasing
such Units will be deemed to have represented and agreed that they are
purchasing the Units for their own accounts or accounts with respect to
which they exercise sole investment discretion and that they or such
accounts are QIBs and (2) Regulation S Investors in offers and sales
that occur outside the United States to persons other than U.S. persons
who in purchasing such Units will be deemed to have represented that
they are acquiring the Units in an offshore transaction within the
meaning of Regulation S under the Act and (B) that, in the case of such
QIBs and Regulation S Investors, acknowledges and agrees that such
Units will not have been registered under the Act and may be resold,
pledged or otherwise transferred only (x)(I) to a person who the seller
reasonably believes is a QIB in a transaction meeting the requirements
of Rule 144A, (II) in a transaction meeting the requirements of Rule
144, (III) outside the United States to a person that is not a U.S.
Person (as defined in Rule 902 under the Act) in a transaction meeting
the requirements of Rule 904 under the Act, (IV) to an institutional
"Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Act) that, prior to such transfer, furnishes to
the Trustee and Warrant Agent a signed letter containing certain
representations and agreements relating to the Units, Notes and
Warrants (the form of such letter can be obtained from the Trustee or
Warrant Agent), or (V) in accordance with another exemption from the
registration requirements of the Act (in the case of II, III, IV or V,
based upon an opinion of counsel if the Company or Trustee, Registrar
or Transfer Agent for the Securities so requests), (y) to the Company
or (z) pursuant to an effective registration statement under the Act
and, in each case, in accordance with any applicable securities laws of
any state of the United States and (C) that the holder will, and each
subsequent holder is required to, notify any purchaser of the security
evidenced thereby of the resale restrictions set forth in (B) above.
(v) Each of the Initial Purchasers understands that the
Company and, for purposes of the opinions to be delivered to the
Initial Purchasers pursuant to Section 8 hereof, counsel to the Company
and counsel to the Initial Purchasers will rely upon the accuracy and
truth of the foregoing representations and hereby consents to such
reliance.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless
(i) each of the Initial Purchasers, (ii) each person, if any, who
controls either of the Initial Purchasers within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act and (iii) the
respective officers, directors, partners, employees, representatives
and agents of any of the Initial Purchasers or any controlling person
to the fullest extent lawful, from and against any and all losses,
liabilities, claims, damages and expenses whatsoever (including but not
limited to attorneys' fees and any and all expenses whatsoever incurred
in investigating, preparing or defending against any investigation or
litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation), joint
or several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum, or in any supplement
thereto or amendment thereof, or arise out
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22
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company will not
be liable in any such case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of the Initial Purchasers expressly for use therein. This
indemnity agreement will be in addition to any liability which the
Company may otherwise have, including, under this Agreement.
(b) Each Initial Purchaser, severally and not
jointly, agrees to indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever (including but not
limited to attorneys' fees and any and all expenses whatsoever incurred
in investigating, preparing or defending against any investigation or
litigation, commenced or threatened, or any claim whatsoever and any
and all amounts paid in settlement of any claim or litigation), joint
or several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
either Initial Purchaser expressly for use therein; provided, however,
that in no case shall either Initial Purchaser be liable or responsible
for any amount in excess of the discounts and commissions received by
such Initial Purchaser, as set forth on the cover page of the Offering
Memorandum. This indemnity will be in addition to any liability which
either Initial Purchaser may otherwise have, including under this
Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
each party against whom indemnification is to be sought in writing of
the commencement thereof (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section 6 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified
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party. Notwithstanding the foregoing, the indemnified party or parties
shall have the right to employ its or their own counsel in any such
case (and where the Initial Purchasers are the indemnified parties,
Bear, ▇▇▇▇▇▇▇ & Co. Inc. shall have the right to select such counsel
for the Initial Purchasers), but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i)
the employment of such counsel shall have been authorized in writing by
the indemnifying parties in connection with the defense of such action,
(ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after
notice of commencement of the action, or (iii) such indemnified party
or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties),
in any of which events such fees and expenses of counsel shall be borne
by the indemnifying parties; provided, however, that the indemnifying
party under subsection (a) or (b) above, shall only be liable for the
legal expenses of one counsel (in addition to any local counsel) for
all indemnified parties in each jurisdiction in which any claim or
action is brought. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written
consent; provided, however, that such consent was not unreasonably
withheld.
7. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 6 is for any
reason held to be unavailable from the Company or is insufficient to hold
harmless a party indemnified thereunder, the Company and the Initial Purchasers
shall contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated by such indemnification provision (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company, any contribution received by
the Company from persons, other than the Initial Purchasers, who may also be
liable for contribution, including persons who control the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to which
the Company and one or both of the Initial Purchasers may be subject, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Initial Purchasers from the offering of the Units or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party not having received notice as
provided in Section 6, in such proportion as is appropriate to reflect not only
the relative benefits referred to above but also the relative fault of the
Company and the Initial Purchasers in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Initial Purchasers shall be deemed to
be in the same proportion as (x) the total proceeds from the offering of Units
(net of discounts but before deducting expenses) received by the Company and (y)
the discounts received by the Initial Purchasers, respectively, in each case as
set forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and of the Initial Purchasers shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 7, (i) in no case
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shall either of the Initial Purchasers be required to contribute any amount in
excess of the amount by which the discount applicable to the Units purchased by
such Initial Purchaser pursuant to this Agreement exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of any untrue or alleged untrue statement or omission or alleged omission
and (ii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, (A) each person, if any, who controls either of the Initial
Purchasers within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and (B) the respective officers, directors, partners, employees,
representatives and agents of any of the Initial Purchasers or any controlling
person shall have the same rights to contribution as such Initial Purchaser, and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 7. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its prior written consent; provided, however, that such written consent
was not unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The
several obligations of the Initial Purchasers to purchase and pay for the Units,
if any, as provided herein, shall be subject to the satisfaction of the
following conditions:
(a) All of the representations and warranties of the
Company contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date with the same force and effect as
if made on and as of the date hereof and the Closing Date,
respectively. The Company shall have performed or complied with all of
the agreements herein contained and required to be performed or
complied with by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and
copies distributed to the Initial Purchasers not later than 10:00 a.m.,
New York City time, on the day following the date of this Agreement or
at such later date and time as to which the Initial Purchasers may
agree, and no stop order suspending the qualification or exemption from
qualification of the Units, the Notes or the Warrants in any
jurisdiction referred to in Section 4(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be
pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of the Units, the Notes or the Warrants; no action, suit or
proceeding shall have been commenced and be pending against or
affecting or, to the best knowledge of the Company, threatened against,
the Company before any court or
23
25
arbitrator or any governmental body, agency or official that (1) could
reasonably be expected to result in a Material Adverse Effect or (2)
has not been disclosed in the Offering Memorandum; and no stop order
shall have been issued preventing the use of the Offering Memorandum,
or any amendment or supplement thereto, or which could reasonably be
expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in
the Offering Memorandum, (i) there shall not have been any material
adverse change, or any development that is reasonably likely to result
in a material adverse change, in the capital stock or the long-term
debt, or material increase in the short-term debt, of the Company from
that set forth in the Offering Memorandum, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the
Company on any class of its capital stock, (iii) the Company shall not
have incurred any liabilities or obligations, direct or contingent,
that are material, individually or in the aggregate, to the Company,
taken as a whole, and that are required to be disclosed on a balance
sheet or notes thereto in accordance with generally accepted accounting
principles and are not disclosed on the latest balance sheet or notes
thereto included in the Offering Memorandum. Since the date hereof and
since the dates as of which information is given in the Offering
Memorandum, there shall not have occurred any Material Adverse Effect.
(e) The Initial Purchasers shall have received a
certificate, dated the Closing Date, signed on behalf of the Company by
(i) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President and Chief Executive Officer and (ii)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President-Administration, in form and substance
reasonably satisfactory to the Initial Purchasers, confirming, as of
the Closing Date, the matters set forth in paragraphs (a), (b), (c) and
(d) of this Section 8 and that, as of the Closing Date, the obligations
of the Company to be performed hereunder on or prior thereto have been
duly performed in all material respects.
(f) The Initial Purchasers shall have received on the
Closing Date an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers, of ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. counsel
for the Company, to the effect set forth in Exhibit A hereto.
(g) The Initial Purchasers shall have received on the
Closing Date an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers, of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, special regulatory counsel to
the Company, to the effect set forth in Exhibit B hereto.
(h) The Initial Purchasers shall have received an opinion,
dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchasers, of Kronish, Lieb, Weiner & ▇▇▇▇▇▇▇ LLP,
counsel to the Initial Purchasers, covering such matters as are
customarily covered in such opinions.
(i) At the time this Agreement is executed and at the
Closing Date the Initial Purchasers shall have received from KPMG Peat
Marwick, LLP, independent public accountants for the Company, dated as
of the date of this Agreement and as of the Closing Date, customary
comfort letters addressed to the Initial Purchasers and in form and
substance satisfactory to the Initial Purchasers and counsel to the
Initial Purchasers with respect to the financial statements and certain
financial information of the Company contained in the Offering
Memorandum.
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26
(j) Kronish, Lieb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP shall have been
furnished with such documents, in addition to those set forth above, as
they may reasonably require for the purpose of enabling them to review
or pass upon the matters referred to in this Section 8 and in order to
evidence the accuracy, completeness or satisfaction in all material
respects of any of the representations, warranties or conditions herein
contained.
(k) Prior to the Closing Date, the Company shall have
furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
(l) The Company and the Trustee shall have entered into
the Indenture and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(m) The Company and the Trustee shall have entered into
the Security Agreement and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(n) The Company and the Trustee shall have entered into
the Collateral Pledge Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(o) The Company shall have entered into the Registration
Rights Agreement and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(p) The Company shall have entered into the Warrant
Agreement and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(q) The Company shall have entered into the Warrant
Registration Rights Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(r) The Company shall have (i) consummated the Preferred
Stock Offering or (ii) received binding commitments from investors to
purchase common stock of the Company for $15 million if the Preferred
Stock Offering has not been consummated within 60 days of the Closing
Date and the funds necessary to consummate such commitment shall have
been deposited into escrow and the warrants to be issued as a
commitment fee to the parties depositing such funds into escrow shall
have been issued.
(s) The Company shall have filed Uniform Commercial Code
financing statements (UCC-1s) or other appropriate filings, recordings
or registrations and taken such other actions as are necessary to
perfect the Security Interest (as defined in the Security Agreement).
All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by the Company will be in compliance
with the provisions hereof only if they are reasonably satisfactory in form and
substance to the Initial Purchasers. The Company will furnish
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27
the Initial Purchasers with such conformed copies of such opinions,
certificates, letters and other documents as it shall reasonably request.
9. Initial Purchasers' Information. The Company and the
Initial Purchasers severally acknowledge that the statements with respect to the
offering of the Units set forth in the last paragraph of the cover page and the
third paragraph and the fourth sentence of the fifth paragraph under the caption
"Plan of Distribution" in such Offering Memorandum constitute the only
information furnished in writing by the Initial Purchasers expressly for use in
the Offering Memorandum.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Initial
Purchasers and the Company contained in this Agreement, including the agreements
contained in Sections 4(f) and 11(d), the indemnity agreements contained in
Section 6 and the contribution agreements contained in Section 7, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Initial Purchasers any controlling person thereof or by or
on behalf of the Company or any controlling person thereof, and shall survive
delivery of and payment for the Units to and by the Initial Purchasers. The
representations contained in Section 5 and the agreements contained in Sections
4(f), 6, 7 and 11(d) shall survive the termination of this Agreement, including
any termination pursuant to Section 11.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution
and delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to
terminate this Agreement at any time prior to the Closing Date by
notice to the Company from the Initial Purchasers, without liability
(other than with respect to Sections 6 and 7) on the Initial
Purchasers' part to the Company if, on or prior to such date, (i) the
Company shall have failed, refused or been unable to perform in any
material respect any agreement on its part to be performed hereunder,
(ii) any other condition to the obligations of the Initial Purchasers
hereunder as provided in Section 8 is not fulfilled when and as
required in any material respect, (iii) in the reasonable judgment of
the Initial Purchasers any material adverse change shall have occurred
since the respective dates as of which information is given in the
Offering Memorandum in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects, net worth,
results of operations or cash flows of the Company taken as a whole,
other than as set forth in the Offering Memorandum, or (iv)(A) any
domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the Initial Purchasers will in the
immediate future materially disrupt, the market for the Company's
securities or for securities in general; or (B) trading in securities
generally on the New York or American Stock Exchanges shall have been
suspended or materially limited, or minimum or maximum prices for
trading shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange, or by such
exchange or other regulatory body or governmental authority having
jurisdiction; or (C) a banking moratorium shall have been declared by
Federal or state authorities, or a moratorium in foreign exchange
trading by major international banks or persons shall have been
declared; or (D) there is an outbreak or escalation of armed
hostilities involving the United States on or after the date hereof, or
if there has been a declaration by the United States of a national
emergency or war, the effect of which shall be, in the Initial
Purchasers' judgment, to make it inadvisable or impracticable to
proceed with the offering or delivery
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28
of the Units on the terms and in the manner contemplated in the
Offering Memorandum; or (E) there shall have been such a material
adverse change in general economic, political or financial conditions
or if the effect of international conditions on the financial markets
in the United States shall be such as, in the Initial Purchasers'
judgment, makes it inadvisable or impracticable to proceed with the
delivery of the Units as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, telephonic facsimile, or telegraph,
confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any
of the provisions hereof, or if the sale of the Units provided for
herein is not consummated because any condition to the obligations of
the Initial Purchasers set forth herein is not satisfied or because of
any refusal, inability or failure on the part of the Company to perform
any agreement herein or comply with any provision hereof, the Company
will, subject to demand by the Initial Purchasers, reimburse the
Initial Purchasers for all out-of-pocket expenses (including the
reasonable fees and expenses of Initial Purchasers' counsel), incurred
by the Initial Purchasers in connection herewith.
12. Notice. All communications hereunder, except as may
be otherwise specifically provided herein, shall be in writing and, if sent to
the Initial Purchasers shall be mailed, delivered, or telexed, telegraphed or
telecopied and confirmed in writing to Bear, ▇▇▇▇▇▇▇ & Co. Inc. and ▇▇▇▇▇▇ ▇▇▇▇
LLC, c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Corporate Finance Department, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇; and if
sent to the Company, shall be mailed, delivered or telexed, telegraphed or
telecopied and confirmed in writing to MGC Communications, Inc., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel, telecopy
number: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Ellis, Funk, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
P.C., One Securities Centre, Suite ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, telecopy number: (404) 233- 2188.
13. Parties. This Agreement shall inure solely to the
benefit of, and shall be binding upon, the Initial Purchasers and the Company
and the controlling persons and agents referred to in Sections 6 and 7, and
their respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Units from the Initial Purchasers.
14. Construction. This Agreement shall be construed in
accordance with the internal laws of the State of New York. TIME IS OF THE
ESSENCE IN THIS AGREEMENT.
15. Captions. The captions included in this Agreement are
included solely for convenience of reference and are not to be considered a part
of this Agreement.
16. Counterparts. This Agreement may be executed in
various counterparts which together shall constitute one and the same
instrument.
[Signature page to follow]
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If the foregoing correctly sets forth the
understanding among the Initial Purchasers and the Company, please so indicate
in the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very truly yours,
MGC COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
BEAR ▇▇▇▇▇▇▇ & CO. INC.
By:
---------------------------------
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇ LLC
By:
---------------------------------
Name:
Title:
30
Schedule I
Number of
Units to
Initial Purchaser be Purchased
----------------- ------------
Bear, ▇▇▇▇▇▇▇ & Co. Inc. 104,000
▇▇▇▇▇▇ ▇▇▇▇ LLC 56,000
Total:
-------
160,000
31
EXHIBIT A
Form of Opinion of ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
1. The Company is duly organized and validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power
and authority to carry on its business as it is being conducted and as
described in the Offering Memorandum and to own, lease and operate its
properties, and is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification. To the best knowledge of such counsel, the Company
does not own, directly or indirectly, any capital stock of or any
equity interest in, any other person.
2. All of the outstanding shares of capital
stock of the Company have been duly authorized, validly issued, and are
fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights. The authorized, issued and outstanding
capital stock of the Company conforms in all respects to the
description thereof set forth in the Offering Memorandum.
3. There are not, to such counsel's knowledge,
currently, and will not be following the Offering, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options
to acquire, or instruments convertible into or exchangeable for, any
capital stock or other equity interest of the Company, except as
described in the Offering Memorandum.
4. When the Units are issued and delivered
pursuant to this Agreement, no Unit, Note or Warrant will be of the
same class (within the meaning of Rule 144A under the Act) as
securities of the Company that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
5. All of the outstanding shares of the
Company's common stock, $.001 par value, were issued in reliance on the
exemption from registration pursuant to Section 4(2) of the Securities
Act and in compliance with the requirements thereof and any other
statute, judgment, decree, order, rule or regulation of any court,
regulatory body or administrative agency or other governmental body,
domestic or foreign, having jurisdiction over the Company or the
issuance of the common stock. The Reorganization was consummated in
compliance with all applicable statutes, judgments, decrees, orders,
rules and regulations of any court, regulatory body or administrative
agency or other governmental body, domestic or foreign, having
jurisdiction over the LLC, Company or the Reorganization. No person was
or is entitled to receive any shares of capital stock of the Company or
other consideration, other than shares of capital stock or other
consideration which have been distributed, as a result of the
Reorganization.
32
6. The Company has all requisite corporate
power and authority to execute, deliver and perform its obligations
under this Agreement, the Indenture, the Security Agreement, the
Collateral Pledge Agreement, the Registration Rights Agreement, the
Warrant Agreement, the Warrant Registration Rights Agreement and the
other Operative Documents, as applicable, and to consummate the
transactions contemplated thereby, including, without limitation, the
corporate power and authority to issue, sell and deliver the
Securities.
7. This Agreement has been duly and validly
authorized, executed and delivered by the Company and is the legally
valid and binding agreement of the Company.
8. Each of the Indenture, the Security
Agreement, the Collateral Pledge Agreement, the Registration Rights
Agreement, the Warrant Agreement, the Warrant Registration Rights
Agreement and the Pledge Agreement has been duly and validly
authorized, executed and delivered by the Company and assuming due
execution by the other parties thereto, is the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except that such counsel need express no
opinion as to the validity or enforceability of rights of indemnity or
contribution, or both and except as such enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity, and in the case of the Security
Agreement, except that certain remedial provisions of the Security
Agreement are or may be unenforceable in whole or in part under the
laws of the State of New York, but the inclusion of such provisions
does not affect the validity of the Security Agreement as a whole and
the Security Agreement contains adequate provisions for the realization
of the principal benefits afforded thereby.
9. The Notes have been duly and validly
authorized for issuance and sale to the Initial Purchasers by the
Company pursuant to this Agreement and, when issued and authenticated
in accordance with the terms of the Indenture and delivered against
payment therefor in accordance with the terms of this Agreement and the
Indenture, will be the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, except that such counsel
need express no opinion as to the validity or enforceability of rights
of indemnity or contribution, or both, and except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
10. The Exchange Notes have been duly and
validly authorized for issuance by the Company and, when issued and
authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms of this
Agreement and the Indenture, will be the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture, except that such counsel need express no opinion as to the
validity or enforceability of rights of indemnity or contribution, or
both, and except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally and subject to general
principles of equity.
33
11. The Warrants have been duly and validly
authorized for issuance and sale to the Initial Purchasers by the
Company pursuant to this Agreement and, when issued and countersigned
in accordance with the terms of the Warrant Agreement and delivered
against payment therefor in accordance with the terms hereof and
thereof, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Warrant Agreement, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
12. The Warrants are exercisable into Warrant
Shares in accordance with the terms of the Warrant Agreement. The
Warrant Shares have been duly authorized for issuance by the Company
and, when issued and paid for upon exercise of the Warrants in
accordance with the terms thereof, will be validly issued, fully paid
(assuming that at the time of such exercise the exercise price of the
Warrants exceeds the par value of the Warrant Shares) and
nonassessable, free of any preemptive or similar rights imposed by law
or granted by the Company. The Company has reserved sufficient shares
of Common Stock for issuance upon exercise of the Warrant (assuming the
exercise of the Warrants on the date hereof).
13. The Offering Memorandum contains a fair
summary of the terms of each of the Units, the Notes, the Indenture,
the Security Agreement, the Collateral Pledge Agreement, the Warrants,
the Warrant Agreement, the Registration Rights Agreement and the
Warrant Registration Rights Agreement required to be described in the
Offering Memorandum.
14. No registration under the Act of the Units
is required for the sale of the Units to the Initial Purchasers as
contemplated by this Agreement or for the Exempt Resales assuming (i)
that the Initial Purchasers are Qualified Institutional Buyers, as
defined in Rule 144A under the Act ("QIB"), (ii) that the purchasers
who buy the Units in the Exempt Resales are either QIBs or Regulation S
Investors, (iii) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in
connection with the sale of Units to the Initial Purchasers and the
Exempt Resales contained in this Agreement, (iv) the accuracy of the
Company's representations in Sections 5(a)(ii), (xxxv), (xxxvi) (other
than with respect to the first sentence) and (xxxviii) of this
Agreement and (v) with respect to Regulation S Investors, the accuracy
of the representations made by each Regulation S Investor, who in
purchasing Units will be deemed to have represented that it is
acquiring the Units in an offshore transaction within the meaning of
Regulation S under the Act.
15. The Offering Memorandum, as of its date
(except for the financial statements, including the notes thereto, and
supporting schedules and other financial, statistical and accounting
data, including the Projected Financial Information, included therein
or omitted therefrom, as to which no opinion need be expressed), and
each amendment or supplement thereto, as of its date, contains all the
information specified in, and meets the requirements of, Rule
144A(d)(4) under the Act.
34
16. Prior to the effectiveness of the Exchange
Registration Statement or the Shelf Registration Statement, the
Indenture is not required to be qualified under the Trust Indenture
Act.
17. None of (A) the execution, delivery or
performance by the Company of this Agreement and the other Operative
Documents or (B) the issuance and sale of the Securities violates,
conflicts with or constitutes a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default), or require consent
under, or result in the imposition of a lien or encumbrance on any
properties of the Company, or an acceleration of any indebtedness of
the Company pursuant to, (i) the charter or bylaws of the Company, (ii)
any bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument known to such counsel to which the Company is a
party or by which it or its property is or may be bound, (iii) any
local, state, federal or administrative statute, rule or regulation
applicable to the Company or any of its assets or properties, or (iv)
any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company or any of its assets or
properties known to such counsel, except in the case of clauses (ii),
(iii) and (iv) for such violations, conflicts, breaches, defaults,
consents, impositions of liens or accelerations that (x) would not,
singly or in the aggregate, have a Material Adverse Effect or (y) are
disclosed in the Offering Memorandum. Assuming compliance with
applicable state securities and Blue Sky laws, as to which such counsel
need express no opinion, and except for the filing of a registration
statement under the Act and qualification of the Indenture under the
Trust Indenture Act of 1939, as amended, in connection with the
Registration Rights Agreement, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of
or with, any court or governmental agency, body or administrative
agency is required for the execution, delivery and performance by the
Company of this Agreement, the Operative Documents or the issuance and
sale of the Securities, except (i) such as have been obtained and made
or have been disclosed in the Offering Memorandum and (ii) where the
failure to obtain such consents or waivers would not, singly or in the
aggregate, have a Material Adverse Effect. To such counsel's knowledge,
after reasonable inquiry, no consents or waivers from any other person
are required for the execution, delivery and performance by the Company
of this Agreement, the Operative Documents or the issuance and sale of
the Securities, other than such consents and waivers as have been
obtained.
18. The Company is not (i) an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii)
a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
19. Except as set forth in this Agreement, the
Registration Rights Agreement or the Warrant Registration Rights
Agreement, to the best of such counsel's knowledge, there are no
holders of securities of the Company who, by reason of the execution by
the Company of this Agreement or any other Operative Document to which
it is a party or the consummation by the Company of the transactions
contemplated thereby, have the right to request or demand that the
Company register under the Act securities held by them.
35
20. None of the execution, delivery and
performance of this Agreement, the issuance and sale of the Units, the
application of the proceeds from the issuance and sale of the Units and
the consummation of the transactions contemplated thereby as set forth
in the Offering Memorandum, will violate Regulations G, T, U or X
promulgated by the Board of Governors of the Federal Reserve System.
21. To such counsel's knowledge, after
reasonable inquiry, there is (i) no action, suit, investigation or
proceeding (other than proceedings with respect to pending license
applications) before or by any court, arbitrator or governmental
agency, body or official, domestic or foreign, now pending, or
threatened or contemplated to which the Company is or may be a party or
to which the business or property of the Company is or may be subject
or (ii) no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction to which the Company
is or may be subject or to which the business, assets or property of
the Company are or may be subject has been issued, except in the case
of clauses (i) and (ii), those which (a) would not singly or in the
aggregate have a Material Adverse Effect upon the Company or (b) which
are disclosed in the Offering Memorandum and except that such counsel
shall not be required to express any opinion as to the matters
addressed in the opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP.
22. To such counsel's knowledge, there is no
statute, rule, regulation or order that has been enacted, adopted or
issued by any governmental agency or that has been proposed by any
governmental body to which the Company is or may be subject or to which
the business, assets or property of the Company are or may be subject,
except those which (a) would not singly or in the aggregate have a
Material Adverse Effect upon the Company or (b) which are disclosed in
the Offering Memorandum and except that such counsel shall not be
required to express any opinion as to the matters addressed in the
opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP.
23. The statements contained in the Offering
Memorandum under the caption "Certain Federal Income Tax Consequences"
are a fair and accurate summary of the matters discussed herein.
24. The Security Interest granted by the Company
pursuant to the terms of the Security Agreement constitutes a perfected
Lien in all the Collateral now owned by the Company.
Such counsel has participated in conferences with
officers and other representatives of the Company, representatives of
the independent certified public accountants of the Company and the
Initial Purchasers and its representatives at which the contents of the
Preliminary Offering Memorandum and the Offering Memorandum and related
matters were discussed and, although such counsel has not undertaken to
investigate or verify independently, and need not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Preliminary Offering Memorandum or the
Offering Memorandum (except as indicated above), on the basis of the
foregoing, no facts have come to such counsel's attention which led
such counsel to believe that the Preliminary Offering Memorandum or the
Offering
36
Memorandum, as of its date or the Closing Date, contained an untrue
statement of a material fact or omitted to state any fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading
(except as to financial statements and related notes, the financial
statement schedules and other financial and statistical data, including
the Projected Financial Information, included therein).
Such counsel are members of the Bar of the State of
Georgia, and such counsel does not herein express an opinion as to any
matters governed by any laws other than the laws of the State of
Georgia, the laws of the State of Nevada governing corporations and the
Federal laws of the United States of America. In rendering this
opinion, such counsel has relied on Kronish, Lieb, Weiner & ▇▇▇▇▇▇▇ LLP
as to the laws of the State of New York. In rendering such counsel's
opinion in paragraph 23 with respect to the perfection of the Security
Interest pursuant to the terms of the Security Agreement under the laws
of the States of California, Georgia and Illinois, such counsel has
relied exclusively on such counsel's review of Uniform Commercial Code
Sections ________, as adopted in such States, as reported by [name of
publisher of compilation].
37
Exhibit B
Form of Opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP
1. All of the licenses, permits and
authorizations required by the FCC for the provision of
telecommunications services by the Company, as such counsel understands
those services to be provided currently based upon the attached
certificate and the Offering Memorandum, have been issued to and are
validly held by the Company. All of the licenses, permits and
authorizations required by any "state commissions" as defined in
Section 3 of the Communications Act of 1934, as amended (the "State
Telecommunications Agencies") for the provision of telecommunications
services by the Company, as such counsel understands those services to
be provided currently based upon the attached certificate and the
Offering Memorandum, have been issued to and, to the best knowledge of
such counsel, are validly held by the Company, except where the failure
to obtain or hold such license, permit or authority would not have a
Material Adverse Effect. All such licenses, permits and authorizations
are in full force and effect.
2. The Company is not the subject of any
proceeding (including a rule making proceeding), pending complaint or
investigation, or, to the best of such counsel's knowledge, any
threatened complaint or investigation, before the FCC, or, to the best
of such counsel's knowledge after oral inquiry, of any proceeding
(including a rule making proceeding), pending complaint or
investigation, or any threatened complaint or investigation, before the
State Telecommunications Agencies based, in each case, on any alleged
violation of any statutes governing the FCC or the State
Telecommunications Agencies and the rules and regulations promulgated
thereunder (the "Telecommunications Laws") by the Company in connection
with its provision of or failure to provide telecommunications services
of a character required to be disclosed in the Offering Memorandum
which is not disclosed in the Offering Memorandum.
3. The statements in the Offering Memorandum
under the headings of "Summary of Offering Memorandum - The Company -
Recent Regulatory Developments," "Risk Factors - Regulatory Approval of
the Offering," "Risk Factors- Regulation," and "Business - Government
Regulation" regarding the Telecommunications Laws of the FCC or the
State Telecommunications Agencies fairly and accurately summarize the
matters therein described.
4. The Company has the consents, approvals,
authorizations, licenses, certificates, permits, or orders of the FCC
or the State Telecommunications Agencies, if any is required, for the
consummation of the transactions contemplated in the Offering
Memorandum, except where the failure to obtain the consents, approvals,
authorizations, licenses, certificates, permits or orders would not
have a Material Adverse Effect.
5. Neither the execution and delivery of the
Operative Documents nor the sale of the Securities contemplated thereby
will conflict with or result in a violation of any order or regulation
of the FCC or the State Telecommunications
38
Agencies applicable to the Company, except where the conflict with or
the violation of which would not have a Material Adverse Effect.