1
EXHIBIT 1.1
__________ Shares
MGC COMMUNICATIONS, INC.
Common Stock
UNDERWRITING AGREEMENT
July __, 1999
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇▇, SACHS & CO.
ING BARINGS LLC
c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
MGC Communications, Inc., a Nevada corporation (the "Company") and the
stockholders of the Company listed on Schedule I hereto (collectively, the
"Selling Stockholders" and, together with the Company, the "Sellers"), confirm
their agreement with Bear, ▇▇▇▇▇▇▇ & Co. Inc. ("Bear ▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇, ▇▇▇▇▇
& Co. and ING Barings LLC (the "Underwriters"), as follows:
1. Description of Securities. The Company and the Selling Stockholders
severally propose, upon the terms and subject to the conditions set forth
herein, to issue and sell to the Underwriters an aggregate of _____________
shares (the "Firm Shares") of the Company's common stock, $0.001 par value per
share (the "Common Stock"). The Firm Shares consist of __________ million
shares to be issued and sold by the Company (the "Firm Company Shares") and
___________ outstanding shares to be sold by the Selling Stockholders. The
Company also proposes to sell to the Underwriters, upon the terms and subject
to the conditions set forth in Section 3 hereof, up to an additional _______
shares (the "Additional Shares" and together with the Firm Company Shares, the
"Company Shares"). The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares."
2. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder by the Commission
(the "Securities Act Regulations"; which together with the Exchange Act
Regulations (as defined below), are referred to herein as the "Regulations"), a
registration statement, as amended by certain amendments thereto, on Form S-3
(File No. 333-79863), including a preliminary prospectus, subject to
completion, relating to the Shares. The Company will next file with the
Commission either (i) prior to the effectiveness of such registration
statement, a further amendment thereto, including therein a
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final prospectus or (ii) after the effectiveness of such registration
statement, a final prospectus in accordance with Rules 430A and 424(b)(1) of
the Securities Act Regulations, the documents so filed in either case to
include all Rule 430A Information (as defined below) and to conform, in content
and form, to the last printer's proof thereof furnished to and approved by the
Underwriters immediately prior to such filing. If the Company files a
registration statement to register a portion of the Shares and relies on Rule
462(b) for such registration statement to become effective upon filing with the
Commission (the "Rule 462 Registration Statement"), then any reference to
"Registration Statement" herein shall be deemed to be both the registration
statement referred to above (No. 333-79863) and the Rule 462 Registration
Statement, as each such registration statement may be amended pursuant to the
Act.
As used in this Underwriting Agreement (the "Agreement"), (i) the term
"Effective Date" means the later of the date the registration statement is
declared effective by the Commission, or, if a post-effective amendment is
filed with respect thereto, the date of such post-effective amendment's
effectiveness, (ii) the term "Registration Statement" means the registration
statement, as amended at the time when it becomes effective or, if a
post-effective amendment is filed with respect thereto, as amended by such
post-effective amendment at the time of its effectiveness, including in each
case all information incorporated by reference therein, all Rule 430A
Information deemed to be included therein at the Effective Date pursuant to
Rule 430A of the Securities Act Regulations and all financial statements and
exhibits included or incorporated by reference therein, (iii) the term "Rule
430A Information" means information with respect to the Shares and the public
offering thereof permitted, pursuant to the provisions of paragraph (a) of Rule
430A of the Securities Act Regulations, to be omitted from the form of
prospectus included in the Registration Statement at the time it is declared
effective by the Commission, (iv) the term "Prospectus" means the form of final
prospectus relating to the Shares first filed with the Commission pursuant to
Rule 424(b) of the Securities Act Regulations or, if no filing pursuant to Rule
424(b) is required, the form of final prospectus included in the Registration
Statement at the Effective Date and (v) the term "preliminary prospectus" means
any preliminary prospectus (as described in Rule 430 of the Securities Act
Regulations) with respect to the Shares that omits Rule 430A Information. Any
reference herein to the Registration Statement, the Prospectus, any amendment
or supplement thereto or any preliminary prospectus shall be deemed to refer to
and include the documents incorporated by reference therein which were filed
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations of the Commission promulgated thereunder (the
"Exchange Act Regulations"), and any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration Statement or
Prospectus shall be deemed to refer to and include the filing after the
execution hereof of any document with the Commission deemed to be incorporated
by reference therein. For purposes of this Agreement the term "subsidiaries"
shall mean MGC Lease Corporation, a Nevada corporation, MGC License
Corporation, a Georgia corporation and MGC ▇▇.▇▇▇, Inc., a Nevada corporation,
and shall include those corporations, partnerships and other business entities,
whether domestic or foreign, which are, or under generally accepted accounting
principles should be, consolidated for purposes of the Company's financial
reporting.
3. Purchase and Sale of the Shares. Subject to all the terms and
conditions set forth herein (i) the Company agrees to issue and sell
_______________ Firm Shares and (ii) each Selling Stockholder agrees, severally
and not jointly, to sell the number of Firm Shares
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set forth opposite such Selling Stockholder's name on Schedule I hereto to the
Underwriters and, upon the basis of the representations, warranties, covenants
and agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from the Company and the Selling
Stockholders, at a purchase price of $_____ per Share, the number of Firm Shares
set forth opposite the name of such Underwriter on Schedule II hereto (or such
number of Firm Shares increased as set forth in Section 12 hereof).
The Company also agrees, subject to all the terms and conditions set forth
herein, to sell to the Underwriters, and, upon the basis of the representations,
warranties and agreements of the Company herein contained and subject to all the
terms and conditions set forth herein, the Underwriters shall have the right to
purchase from the Company, solely for the purpose of covering over-allotments in
connection with sales of the Firm Shares, at the purchase price per Share of
$_____, pursuant to an option (the "over-allotment option") which may be
exercised at any time and from time to time prior to 9:00 p.m., New York City
time, on the 30th day after the date of the Prospectus (or, if such 30th day
shall be a Saturday or Sunday or a holiday, on the next business day thereafter
when the New York Stock Exchange is open for trading), up to an aggregate of
__________ Additional Shares. Upon any exercise of the over-allotment option,
each Underwriter, severally and not jointly, agrees to purchase from the Company
the number of Additional Shares (subject to such adjustments as the Underwriters
may determine in order to avoid fractional shares) that bears the same
proportion to the aggregate number of Additional Shares to be purchased by the
Underwriters as the number of Firm Shares set forth opposite the name of such
Underwriter on Schedule II hereto (or such number of Firm Shares increased as
set forth in Section 12 hereof) bears to the aggregate number of Firm Shares.
The Sellers hereby agree, severally and not jointly, and the Company
shall, concurrently with the execution of this Agreement, deliver agreements
substantially in the form attached hereto as Exhibit D executed by each of the
directors and officers of the Company and by each stockholder listed on Schedule
III hereto, pursuant to which each such person agrees, not to offer, sell,
contract to sell, grant any option to purchase, or otherwise dispose of, any
Common Stock of the Company or any securities convertible into or exercisable or
exchangeable for such Common Stock, for a period of 90 days after the date of
the Prospectus, except to the Underwriters pursuant to this Agreement.
Notwithstanding the foregoing, during such period the Company may (i) issue
shares of its Common Stock and grant stock options pursuant to the Company's
existing Stock Option Plan (the "Stock Option Plan"), (ii) issue shares of its
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and (iii) issue shares of its Common
Stock and grant options to newly hired management level employees consistent
with past practices of the Company.
4. Offering. It is understood that the Underwriters propose to make a
public offering of their respective portions of the Shares as soon after the
Registration Statement and this Agreement have become effective as in the
Underwriters' judgment is advisable and initially to offer the Shares for sale
to the public as set forth in the Prospectus.
5. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of
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and payment for the Firm Shares shall be made at the office of Kronish ▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, at 10:00
a.m., New York City time, on __________, 1999 (the "Closing Date"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
between the Underwriters and the Company.
Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made at the office of Kronish ▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ at such
time and on such date (the "Option Closing Date"), which may be the same as the
Closing Date but shall in no event be earlier than the Closing Date nor earlier
than two nor later than ten business days after the giving of the notice
hereinafter referred to, as shall be specified in a written notice from the
Underwriters to the Company of the Underwriters' determination to purchase a
number, specified in such notice, of Additional Shares. The place of closing for
any Additional Shares and the Option Closing Date for such Shares may be varied
by agreement between the Underwriters and the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as the Underwriters shall request prior to 9:30 a.m., New York City time, on the
second business day preceding the Closing Date or the Option Closing Date, as
the case may be. Such certificates shall be made available to the Underwriters
in New York City for inspection and packaging not later than 9:30 a.m., New York
City time, on the business day next preceding the Closing Date or the Option
Closing Date, as the case may be. The certificates evidencing the Firm Shares
and any Additional Shares to be purchased hereunder shall be delivered to the
Underwriters on the Closing Date or the Option Closing Date, as the case may be,
against payment of the purchase price therefor by wire transfer of immediately
available funds to the Company's and each of the Selling Stockholders' accounts,
provided that each of the Company and the Selling Stockholders shall give at
least two business days' prior written notice to the Underwriters of the
information required to effect such wire transfers.
6. Covenants of the Company. The Company covenants and agrees with
each of the Underwriters as follows:
(a) The Company will, if the Registration Statement has not
heretofore become effective under the Act, file an amendment to the
Registration Statement or, if necessary pursuant to Rule 430A of the
Securities Act Regulations, file a post-effective amendment to the
Registration Statement, as soon as practicable after the execution and
delivery of this Agreement, and will use its best efforts to cause the
Registration Statement or such post-effective amendment to become
effective at the earliest possible time. If the Registration Statement
has become or becomes effective pursuant to Rule 430A of the Securities
Act Regulations, or filing of the Prospectus is otherwise required under
Rule 424(b) of the Securities Act Regulations, the Company will file the
Prospectus, properly completed, pursuant to Rule 424(b) of the Securities
Act Regulations within the time period therein prescribed and will
provide evidence satisfactory to the Underwriters of such timely filing.
The Company in all other respects will comply fully and in a timely
manner with the applicable provisions of
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Rule 424 and Rule 430A of the Securities Act Regulations and with Rule 462
of the Securities Act Regulations, if applicable.
(b) The Company will promptly advise the Underwriters, and, if
requested by the Underwriters, confirm such advice in writing, (i) when
the Registration Statement, any Rule 462 Registration Statement or any
post-effective amendment thereto has become effective and if and when the
Prospectus is sent for filing pursuant to Rule 424(b) of the Securities
Act Regulations, (ii) of receipt by the Company or any representative or
attorney of the Company of any communications from the Commission
relating to the Company, the Registration Statement, any preliminary
prospectus, the Prospectus, any document incorporated by reference
therein, or the transactions contemplated by this Agreement, including,
without limitation, the receipt of a request by the Commission for any
amendment or supplement to the Registration Statement or Prospectus, or
any document incorporated by reference therein, or the receipt of any
comments from the Commission, (iii) of the initiation or threatening of
any proceedings for, or receipt by the Company of any notice with respect
to, the issuance by the Commission of any stop order suspending
effectiveness of the Registration Statement or any post-effective
amendment thereto or the issuance by any state securities commission or
other regulatory authority of any order suspending the qualification or
exemption from qualification of the Shares for the offering or sale in
any jurisdiction and (iv) during the period when the Prospectus is
required to be delivered under the Act, of any material change in the
Company's condition (financial or otherwise), business, prospects,
properties, assets, liabilities, net worth, results of operations, cash
flows or of the happening of any event that makes any statement of a
material fact made in the Registration Statement untrue or that requires
the making of any additions to or changes in the Registration Statement
in order to make the statements therein not misleading or that makes any
statement of a material fact made in the Prospectus untrue or that
requires the making of any additions to or changes in the Prospectus
required to be made therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company will use its best efforts to prevent the issuance
of an order by the Commission at any time suspending the effectiveness of
the Registration Statement or any post-effective amendment thereto, or by
any state securities commission or other regulatory authority suspending
the qualification or exemption from qualification of the Shares and, if
any such order is issued, to obtain its withdrawal or lifting at the
earliest possible time.
(c) The Company will furnish to the Underwriters without charge
up to four signed copies of the Registration Statement (including all
exhibits and all documents incorporated by reference therein, as filed
with the Commission) and four signed copies of all amendments thereto,
and the Company will furnish without charge to those persons designated
by each Underwriter such number of conformed copies of the Registration
Statement, of each preliminary prospectus, the Prospectus and all
amendments of and supplements to such documents, if any, as such
Underwriter may reasonably request. The Company consents to the use of
the Prospectus and any amendments or supplements thereto by any
Underwriter or any dealer, both in connection with the offering or sale
of the Shares and for such period of time thereafter
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as delivery of a Prospectus is required by the Act.
(d) The Company will not file any amendment or supplement to the
Registration Statement, or any document that upon filing is deemed to be
incorporated by reference in the Registration Statement or Prospectus or
any amendment of or supplement to the Prospectus, whether before or after
the Effective Date, unless the Underwriters shall previously have been
advised thereof and shall have not objected thereto within a reasonable
time after being furnished a copy thereof. The Company shall promptly
prepare and file with the Commission, upon the Underwriters' request, any
amendment to the Registration Statement or any supplement to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters. The Company will use its
best efforts to cause any such amendment or supplement to become
effective as promptly as possible.
(e) During the time that a prospectus relating to the Shares is
required to be delivered under the Act, the Company will (i) comply with
all requirements imposed upon it by the Act and by the Regulations, as
from time to time in force, so as to permit the continuance of sales of
or dealing in the Shares as contemplated by the provisions hereof and the
Prospectus, and (ii) will file promptly all documents required to be
filed with the Commission pursuant to Section 13 or 14 of the Exchange
Act and the Exchange Act Regulations. If at any time when a prospectus
relating to the Shares is required to be delivered under the Act any
event shall have occurred as a result of which the Registration Statement
or the Prospectus as then supplemented includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it shall
be necessary, in the judgment of the Company or in the reasonable opinion
of either counsel to the Company or counsel to the Underwriters, at any
time to amend or supplement the Registration Statement or Prospectus to
comply with the Act or the Regulations, or to file under the Exchange
Act, so as to comply therewith, any document incorporated by reference in
the Registration Statement or Prospectus or in any amendment or
supplement thereto, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or
supplement (in form and substance satisfactory to the Underwriters) so
that the statements in the Registration Statement and the Prospectus, as
so amended or supplemented, will not, in light of the circumstances
existing as of the date the Prospectus is so delivered, be misleading, or
so to effect such compliance with the Act or the Exchange Act and the
Regulations, and the Company will use its best efforts to cause any such
amendment to the Registration Statement to be declared effective as
promptly as possible.
(f) The Company will cooperate with the Underwriters and
Underwriters' counsel, at or prior to the time the Registration Statement
becomes effective, to qualify or register the Shares for offering and
sale and to determine the eligibility for investment of the Shares under
the securities laws of such jurisdictions as the Underwriters may
designate and to maintain such qualification or registration in effect
for so long as required for the distribution thereof; provided, however,
that the Company shall not be required in connection therewith to
register or qualify as a
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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
Registration Statement, in any jurisdiction where it is not now so
subject.
(g) The Company will make generally available (within the
meaning of Section 11(a) of the Act) to its security holders and to the
Underwriters as soon as practicable, but not later than 60 days after the
close of the period covered thereby, an earnings statement, covering a
period of at least twelve consecutive full calendar months commencing
after the effective date of the Registration Statement (but in no event
commencing later than 90 days after such date), that satisfies the
provisions of Section 11(a) of the Act and Rule 158 of the Securities Act
Regulations.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under the heading "How We Intend to Use the Proceeds
of this Offering" in the Prospectus.
(i) The Company will do and perform all things required or
necessary to be done and performed under this Agreement by it prior to
the Closing Date and to satisfy all conditions precedent on its part to
the delivery of the Shares.
(j) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared in the ordinary course
by the Company, copies of any unaudited interim financial statements of
the Company, for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the
Prospectus.
(k) Neither the Company nor any of its subsidiaries will 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 Shares. Except as permitted by the Act, the Company will not
distribute any Registration Statement, preliminary prospectus, Prospectus
or other offering material in connection with the offering and sale of
the Shares.
(l) The Company will use its best efforts to have the Shares
listed for quotation on the Nasdaq National Market concurrently with the
effectiveness of the Registration Statement.
(m) The Company will cooperate and assist in any filings
required to be made with the National Association of Securities Dealers,
Inc. ("NASD") and in the performance of any due diligence investigation
by any broker/dealer participating in the sale of the Shares.
(n) For a period of three years from Closing Date the Company
will deliver without charge to the Underwriters, 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
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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 or its subsidiaries,
including without limitation, press releases.
(o) Except for (i) shares of Common Stock issuable upon exercise
of outstanding warrants of the Company or upon conversion of outstanding
convertible securities of the Company, (ii) shares of Common Stock issued
and options granted pursuant to the Stock Option Plan or (iii) shares of
Common Stock issued and options granted to newly hired management level
employees consistent with past practices of the Company, the Company will
not, directly or indirectly, sell, offer to sell, solicit an offer to
buy, contract to sell, grant any option to purchase or otherwise transfer
or dispose of or register or announce the sale or offering of any shares
of capital stock of the Company, or any securities that are convertible
into or exercisable or exchangeable for capital stock of the Company, for
a period of 120 days after the date of the Prospectus, without the prior
written consent of Bear ▇▇▇▇▇▇▇.
(p) The Company shall cause each officer and director and each
stockholder listed on Schedule III hereto to enter into an agreement
substantially in the form set forth in Exhibit D to the effect that he,
she or it will not, for a period of 90 days after the date of the
Prospectus, offer, sell, contract to sell, grant any option to purchase
or otherwise dispose of any shares of Common Stock (or any securities
convertible into or exercisable or exchangeable for Common Stock) or
grant any options or warrants to purchase any shares of Common Stock,
without the prior written consent of Bear ▇▇▇▇▇▇▇.
(q) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement under the heading
"Where You Can Find More Information."
(r) Prior to the Closing Date or any Option Closing Date, as the
case may be, except as may be required by law, the Company will not (i)
issue any press release or other communications relating to the sale of
the Shares, or (ii) hold any press conferences with respect to the
Company or its financial condition, results of operation, business,
properties, assets or liabilities, or the sale of the Shares, without the
prior consent of the Underwriters.
7. Representations and Warranties of the Company and the Selling
Stockholders.
(1) The Company represents and warrants to each of the Underwriters
that:
(a) When the Registration Statement becomes effective, when any
post-effective amendment to the Registration Statement becomes effective,
when the Prospectus is first filed with the Commission pursuant to Rule
424(b) of the Securities Act Regulations, when any supplement to or
amendment of the Prospectus is filed with the Commission, and at the
Closing Date and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the
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Underwriters or a dealer, the Registration Statement (which, as defined,
includes all documents incorporated by reference therein) and, if filed at
such time, the Prospectus (which, as defined, includes all documents
incorporated by reference therein) and any amendments thereof and
supplements thereto will comply in all material respects with the
applicable provisions of the Act, the Exchange Act and the Regulations,
and such Registration Statement did not and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein
not misleading; and such Prospectus or supplement thereto did not and will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. When any related preliminary prospectus was first
filed with the Commission (whether filed as part of the Registration
Statement or an amendment thereof or pursuant to Rule 424(a) of the
Regulations) and when any amendment or supplement thereto was first filed
with the Commission, such preliminary prospectus and any amendment or
supplement thereto complied in all material respects with the applicable
provisions of the Act and the Regulations and did not contain an untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. No
representation or warranty is made in this subsection (a), however, with
respect to any statements in or omissions from the Registration Statement
or the Prospectus or any related preliminary prospectus or any amendment
or supplement thereto based upon and conforming with information furnished
in writing by or on behalf of the Underwriters to the Company expressly
for use therein. The Company acknowledges for all purposes under this
Agreement (including Section 10 hereof) that the statements set forth in
the last paragraph on the cover page of the Prospectus and in the third
paragraph below the first table under the caption "Underwriting" in the
Prospectus and the last four paragraphs of the section under the caption
"Underwriting" in the Prospectus constitute the only written information
furnished to the Company by the Underwriters for use in the Prospectus or
any preliminary prospectus (or any amendments or supplements thereto).
(b) The Company and the transactions contemplated by this
Agreement meet the requirements for using Form S-3 under the Act. The
documents incorporated by reference in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any preliminary
prospectus and any further documents incorporated by reference, when they
became or become effective under the Act or were or are filed with the
Commission under the Exchange Act, as the case may be, conformed or will
conform in all material respects with the requirements of the Act or the
Exchange Act, as applicable, and the Regulations; no such document when
it was or is filed (or, if an amendment with respect to any such document
was or is filed, when such amendment was filed), contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein
not misleading. Each preliminary prospectus and Prospectus filed as part
of the Registration Statement, as part of any amendment thereto or
pursuant to Rule 424 under the Securities Act Regulations, if filed by
electronic transmission pursuant to Regulation S-T under the Securities
Act, was identical to the
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copy thereof delivered to the Underwriters for use in connection with the
offer and sales of the Shares (except as may be permitted by Regulation
S-T under the Securities Act).
(c) There are no contracts or documents of the Company or any of
its subsidiaries that are required to be filed as exhibits to the
Registration Statement or to any of the documents incorporated by
reference therein by the Act, the Exchange Act or by the Regulations that
have not been so filed.
(d) No stop order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of any
preliminary prospectus has been issued and no proceedings for that
purpose have been commenced or are pending before or, to the best
knowledge of the Company, are contemplated by the Commission. No stop
order suspending the sale of the Shares in any jurisdiction designated by
the Underwriters has been issued and no proceedings for that purpose have
been commenced or are pending or, to the best knowledge of the Company,
are contemplated.
(e) Each of the Company and its subsidiaries (A) has been duly
organized and is validly existing as a corporation in good standing under
the laws of its respective 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 Registration Statement
and the Prospectus 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 except, with respect to this clause (C), where the failure
to be so qualified or in good standing does not and 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
and its subsidiaries, taken as a whole, (y) interfere with or adversely
affect the issuance or marketability of the Shares pursuant hereto or (z)
in any manner draw into question the validity of this Agreement (any of
the events set forth in clauses (x), (y) or (z), a "Material Adverse
Effect"). All of the issued and outstanding shares of capital stock of,
or other ownership interests in, each subsidiary have been duly
authorized and validly issued, and are fully paid and non-assessable and
were not issued in violation of or subject to any preemptive or similar
rights and are owned by the Company directly, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or other
restriction on transferability or voting. Except for the capital stock of
the subsidiaries owned by the Company, neither the Company nor any of its
subsidiaries owns or holds any interest in any corporation partnership,
trust or association, joint venture or other entity.
(f) The authorized capital stock of the Company immediately
prior to the Closing Date will consist of the following: (i) 60,000,000
shares of Common Stock, of which [17,505,050] shares will be issued and
outstanding immediately prior to the Closing Date (other than Common
Stock issued upon exercise of options or warrants currently outstanding
or conversion of the Series B Preferred Stock (as defined below))
11
and (ii) 50,000,000 shares of preferred stock, of which 5,278,000 have
been designated as Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), and of which 5,277,779 shares of the Series B Preferred
Stock will be issued and outstanding immediately prior to the Closing Date
(except to the extent any shares of Series B Preferred Stock are converted
into Common Stock). All of the outstanding shares of capital stock of the
Company and each subsidiary have been duly authorized, validly issued, and
are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights. Except as set forth in the Prospectus, there
are no outstanding subscriptions, rights, warrants, calls, commitments of
sale or options to acquire (other than options issued during the period
commencing on the date hereof and ending on the Closing Date or the Option
Closing Date, as the case may be, pursuant to the Stock Option Plan in
accordance with the third paragraph of Section 3 of this Agreement), or
instruments convertible or exchangeable or exercisable for, any capital
stock or other equity interest in the Company or its subsidiaries. The
Shares have been duly authorized and, when the Company Shares are issued
and delivered to the Underwriters against payment therefor in accordance
with the terms hereof, the Shares will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights. The authorized
capital stock of the Company conforms in all respects to the description
thereof in the Registration Statement and the Prospectus. All of the
Company's subsidiaries are listed in Section 2 hereof. The authorized
capital stock of (i) MGC Lease Corporation consists of 5,000 shares of
common stock, $.10 par value per share, all of which are issued to, and
owned of record and beneficially by, the Company, (ii) MGC ▇▇.▇▇▇, Inc.
consists of 10,000 shares of common stock, $.01 par value per share, of
which 100 are issued and outstanding, all of which are issued to, and
owned of record and beneficially by, the Company, and (iii) MGC License
Corporation consists of 10,000 shares of common stock, $.01 par value per
share, of which 100 shares are issued and outstanding, all of which are
issued to, and owned of record and beneficially by, the Company.
(g) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement, and
to consummate the transactions contemplated hereby, including, without
limitation, the corporate power and authority to issue, sell and deliver
the Company Shares as provided herein.
(h) 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.
(i) None of the Company or any of the subsidiaries is (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,
12
requirement, judgment or court decree (including, without limitation, the
Communications Act of 1934, as amended by the Telecommunications Act of
1996 and the rules and regulations of the Federal Communications
Commission (the "FCC") and environmental laws, statutes, ordinances,
rules, regulations, judgments or court decrees) applicable to the Company
or any subsidiary or any of their 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 have a Material Adverse
Effect. There exists no condition that, with notice, the passage of time
or otherwise, would constitute a default under any such document or
instrument.
(j) None of (A) the execution, delivery or performance by the
Company of this Agreement; (B) the issuance of the Company Shares; and
(C) the sale of the Shares will 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 any subsidiary, or an
acceleration of any indebtedness of the Company or any subsidiary
pursuant to, (i) the charter or bylaws of the Company or any subsidiary,
(ii) any bond, debenture, note, indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any subsidiary is a
party or by which any of them or their property is or may be bound, (iii)
any statute, rule or regulation applicable to the Company or any
subsidiary or any of their respective assets or properties or (iv) any
judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company or the subsidiaries or any
of their assets or properties, except that the Company has not received
written approval from the Georgia Public Service Commission as to the
sale of the Shares and except in the case of clauses (ii), (iii) and (iv)
for such violations conflicts, breaches, defaults, consents, impositions
of liens or accelerations that would not singly, or in the aggregate,
have a Material Adverse Effect. Other than as described in the
Prospectus, 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, (2)
the issuance of the Company Shares, and (3) the sale of the Shares and
the consummation of the transactions contemplated hereby or by the
Prospectus, except (x) such as have been obtained and made under the 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.
(k) Except as set forth in the Prospectus, there is (i) no
action, suit, investigation 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 or any subsidiary,
threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property of
the Company or any of its subsidiaries is or may be subject, (ii) no
statute, rule, regulation or order that has been enacted, adopted or
issued by any governmental agency or that
13
has been proposed by any governmental body and (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 or any
subsidiary is or may be subject or to which the business, assets, or
property of the Company or any subsidiary are or may be subject, that, in
the case of clauses (i), (ii) and (iii) above, (x) is required to be
disclosed in the Registration Statement or the Prospectus, (y) could
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect or (z) might interfere with, adversely affect or
in any manner question the validity of the issuance and sale of the Shares
or any of the other transactions contemplated by this Agreement and the
Registration Statement.
(l) There is (i) no significant unfair labor practice complaint
pending against the Company or any subsidiary nor, to the best knowledge
of the Company, threatened against any of them, 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 any subsidiary or, to the
best knowledge of the Company, threatened against any of them, (ii) no
significant strike, labor dispute, slowdown or stoppage pending against
the Company or any subsidiary nor, to the best knowledge of the Company,
threatened against the Company or any subsidiary and (iii) to the best
knowledge of the Company, no union representation question existing with
respect to the employees of the Company or any subsidiary 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 or any subsidiary. None of the Company or any
subsidiary has violated (A) any federal, state or local law or foreign
law relating to discrimination in hiring, promotion or pay of employees
(except as set forth in the Registration Statement), (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.
(m) No employee pension benefit plan (within the meaning of
Section 3(2) of ERISA, but excluding any "multiemployer plan" within the
meaning of Section 3(37) of ERISA) established or maintained by the
Company or any subsidiary or to which the Company or any subsidiary has
made contributions, which is subject to Part 3 or Subtitle B of Title I
of ERISA, or Section 412 of the Internal Revenue Code of 1986 (the
"Code"), had an accumulated funding deficiency (as such term is defined
in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, as of the last day of the most recent plan year of such plan
heretofore ended for which an excise tax is due (or would be due if such
deficiency were not waived). Each of the Company and the subsidiaries has
made all contributions required to be made by it to any "multiemployer
pension plan" (within the meaning of Section 3(37) of ERISA). Neither the
Company nor any subsidiary nor any Related Person (as such term is
defined below) has incurred, or is expecting to incur, any withdrawal
liability (determined under Section 4201 of ERISA) with respect to any
plan covered by Title
14
IV of ERISA and in respect of which the Company or any subsidiary or a
Related Person is an "employer" as defined in Section 3(5) of ERISA, and
to the 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 any subsidiary or a Related Person to the Pension Benefit
Guaranty Corporation. "Related Person" shall mean any trade or business
(whether or not incorporated) which is under common control (as defined in
Section 414(b) and (c) of the Code) with the Company within the meaning of
Section 4001(b) of ERISA. As of the last day of the most recent plan year
heretofore ended of each employee benefit plan described in the preceding
sentence (other than a "multiemployer plan"), the present value of all
accrued benefits under each such employee benefit plan (calculated on the
basis of the actuarial assumptions specified in the most recent actuarial
valuation for each such plan) did not exceed the fair market value of the
assets of such plan allocable to such benefits by more than $1,000,000.
Neither any employee pension benefit plan (excluding any "multiemployer
plan" within the meaning of Section 3(37) of ERISA) established or
maintained by the Company or any subsidiary or to which the Company or any
subsidiary has made contributions, nor any trust created thereunder, nor
any trustee or administrator thereof (including the Company), has engaged
in any non-exempt prohibited transaction (as described in Section 406 of
ERISA or in Section 4975 of the Code) that could subject the Company or
any subsidiary either directly or indirectly through an obligation to
indemnify to any material tax or material penalty on prohibited
transactions imposed under said Section 4975 of the Code or under ERISA.
Each employee benefit plan described in the preceding sentence is in
compliance in all material respects with all applicable provisions of
ERISA and the Code, except for plan amendments required or permitted by
such statutes as to which applicable grace periods for making such
amendments have not expired, and each of the Company and the subsidiaries
has made, accrued or provided for all contributions heretofore required to
be made by the Company and the subsidiaries and each of the Company and
the subsidiaries has complied in all material respects with the
continuation coverage requirements of Title X of the Consolidated Omnibus
Budget Act of 1985, as amended. The execution and delivery of this
Agreement and the sale of the Shares will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Code. Neither the Company nor any subsidiary has any material
"expected post-retirement benefit obligation" (within the meaning of
Financial Accounting Standards Board Statement No. 106). The consummation
of the transactions contemplated by this Agreement (including, without
limitation, the provisions of the Prospectus described under the heading
"How We Intend to Use the Proceeds of this Offering") will not result in
any material payment (including, without limitation, severance, golden
parachute or other) becoming due from the Company to any employee of the
Company or any of its subsidiaries as a consequence of such transaction.
(n) None of the Company or any subsidiary has violated any
15
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 any subsidiary, or to the best knowledge of the
Company, any facilities of any predecessor in interest of the Company or
any subsidiary, is listed or, to the best 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 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.
(o) Each of the Company and the subsidiaries has (i) good and
marketable title to all of the properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the
Registration Statement or as would not have a Material Adverse Effect,
(ii) peaceful and undisturbed possession under all material leases to
which any of them 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 any of them in the
manner described in the Prospectus, except as described in the Prospectus
or where failure to hold such Authorizations would not, individually or
in the aggregate, have a Material Adverse Effect 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 each
of the Company and the subsidiaries 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 or any subsidiary is a party are valid and binding and no default
by the Company or any subsidiary has occurred and is continuing
thereunder and, to the best knowledge of the Company and the subsidiaries
no material defaults by the landlord are existing under any such lease
that could reasonably be expected to result in a Material Adverse Effect.
(p) Each of the Company and the subsidiaries 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
16
names, inventions, computer programs, technical data and information
(collectively, the "Intellectual Property") presently employed by it or
its subsidiaries in connection with the businesses now operated by it or
which are proposed to be operated by it or its subsidiaries free and clear
of and without violating any right, claimed right, charge, encumbrance,
pledge, security interest, restriction or lien of any kind of any other
person and none of the Company or any subsidiary has received any notice
of infringement of or conflict with asserted rights of others with respect
to any of the foregoing except as could not reasonably be expected to have
a Material Adverse Effect. The use of the Intellectual Property in
connection with the business and operations of the Company and the
subsidiaries does not infringe on the rights of any person, except as
could not reasonably be expected to have a Material Adverse Effect.
(q) None of the Company or any subsidiary, or to the best
knowledge of the Company, any of their respective officers, directors,
partners, employees, agents or affiliates or any other person acting on
behalf of the Company or any subsidiary has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than
legal price concessions to customers in the ordinary course of business)
to any customer, supplier, employee or agent of a customer or supplier,
official or employee of any governmental agency (domestic or foreign),
instrumentality of any government (domestic or foreign) or any political
party or candidate for office (domestic or foreign) or other person who
was, is or may be in a position to help or hinder the business of the
Company or any subsidiary (or assist the Company or any subsidiary in
connection with any actual or proposed transaction) which (i) might
subject the Company or any subsidiary, or any other individual or entity
to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign), (ii) if not given in the
past, might have had a Material Adverse Effect or (iii) if not continued
in the future, might have a Material Adverse Effect.
(r) All material tax returns required to be filed by the Company
and each of the subsidiaries 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 best knowledge of
the Company, there are no material proposed additional tax assessments
against the Company, any subsidiary or the assets or property of the
Company or any subsidiary.
(s) None of the Company or the subsidiaries is (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.
(t) Except for the Shares sold by the Selling Stockholders, no
holders of any securities of the Company or of any subsidiary or their
respective affiliates or of any options, warrants or other convertible or
exchangeable securities of the Company or any subsidiary or their
respective affiliates are entitled to include any such securities
17
in or to have such securities registered under the Registration Statement.
(u) Each of the Company and the subsidiaries 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.
(v) Each of the Company and the subsidiaries 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
the subsidiaries and their respective businesses. None of the Company or
any subsidiary has 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.
(w) None of the Company or any of its subsidiaries has 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 Shares. Except as permitted by the Act, the Company has not
distributed any Registration Statement, preliminary prospectus,
Prospectus or other offering material in connection with the offering and
sale of the Shares.
(x) Subsequent to the respective dates as of which information
is given in the Registration Statement and up to the Closing Date, except
as set forth in the Registration Statement, there has not been and there
shall not be any material adverse change in the business, prospects,
properties, assets, liabilities, operations, condition (financial or
otherwise), results of operations or cash flows of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions
in the ordinary course of business, and since the date of the latest
balance sheet included in the Registration Statement, neither the Company
nor any of its subsidiaries has incurred or undertaken any liabilities or
obligations, direct or contingent, which are material to the Company and
its subsidiaries, taken as a whole, except for liabilities or obligations
which were incurred or undertaken in the ordinary course of business or
are reflected in the Registration Statement and the Prospectus.
Subsequent to the dates as of which information is given in the
Registration Statement and the Prospectus, except as disclosed therein,
there has not been any decrease in the capital stock of the Company, any
increase in long-term indebtedness or any material increase in short-term
indebtedness of the Company or any of its subsidiaries or any payment or
declaration to pay any dividends or any other distribution with respect
to the capital stock of the
18
Company.
(y) To the best knowledge of the Company, KPMG LLC and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, whose reports are included or incorporated by reference in
the Registration Statement, are or have been independent certified public
accountants with regard to the Company as required by the Act and the
Securities Act Regulations.
(z) The consolidated financial statements of the Company and
its subsidiaries and the related notes and schedules included in the
Registration Statement and the Prospectus comply in all material respects
with the requirements of the Act and the Securities Act Regulations,
including, without limitation, Regulation S-X, and present fairly the
financial position of the Company and its subsidiaries as of the dates
indicated and the results of operations and cash flows of the Company and
its subsidiaries for the periods therein specified. Such consolidated
financial statements (including the related notes and schedules) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods therein specified,
subject in the case of interim statements to normal year-end audit
adjustments. Since the date of the latest of such consolidated financial
statements, except as disclosed in the Prospectus, there has been no
material adverse change in the financial position, results of operations
or business of the Company and its subsidiaries, taken as a whole.
(aa) The financial information of the Company and its
subsidiaries set forth in the Prospectus under the captions "Prospectus
Summary -- Summary Consolidated Financial and Operating Data,"
"Dilution," "Capitalization," "Selected Consolidated Financial and
Operating Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" has been fairly stated in all
material respects in relation to the relevant financial statements of the
Company and its subsidiaries and from which such information has been
derived.
(bb) The as adjusted financial information and the related notes
thereto included in the Registration Statement have been prepared in
accordance with the Commission's rules and guidelines with respect to as
adjusted financial statements, have been properly compiled on the as
adjusted basis described therein and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(cc) 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 any of the
Underwriters for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Company Shares.
(dd) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the
Underwriters as to the matters
19
covered thereby.
(ee) Each of the Shares and this Agreement, as or when executed
and delivered, will conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus.
(ff) The Company has complied with all of its obligations to the
Selling Stockholders as set forth in (i) the Warrant Registration Rights
Agreement, dated as of September 29, 1997, by and among the Company, Bear
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ LLC (the "Warrant Agreement"), (ii) the
Stockholders Agreement, dated as of November 26, 1997, by and among the
Company and the persons listed therein (the "Series A Agreement"), (iii)
the Series B Preferred Stock Registration Rights Agreement, dated as of
May 4, 1999, by and among the Company and the persons listed therein (the
"Series B Agreement"), and (iv) the Agreement and Plan of Merger, dated
as of March 15, 1999, by and among the Company, ▇▇.▇▇▇, Inc., MGC ▇▇.▇▇▇,
Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Merger Agreement").
(gg) Each holder of five percent or more of the total issued and
outstanding capital stock of the Company (assuming conversion of all
outstanding shares of the Series B Preferred Stock) is listed on Schedule
III to this Agreement.
(2) Each Selling Stockholder severally represents and warrants to the
Underwriters and the Company that:
(a) Such Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder pursuant to this Agreement and
has, and on the Closing Date will have, good and clear title to such
Shares, free of all restrictions on transfer, liens, encumbrances,
security interests and claims whatsoever.
(b) Upon delivery of and payment for such Shares pursuant to
this Agreement, good and clear title to such Shares will pass to the
Underwriters, free of all restrictions on transfer, liens, encumbrances,
security interests and claims whatsoever.
(c) Such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in this Section 7
are not true and correct, is familiar with the Registration Statement and
has no knowledge of any material fact, condition or information not
disclosed in the Prospectus or any supplement thereto which has adversely
affected or may adversely affect the business of the Company or any of
its subsidiaries; and the sale of Shares by such Selling Stockholder
pursuant hereto is not prompted by any information concerning the Company
or any of its subsidiaries which is not set forth in the Prospectus or
any supplement thereto.
(d) If such Selling Stockholder is a corporation, such Selling
Stockholder has been duly incorporated and is an existing corporation in
good standing under the laws of its jurisdiction of incorporation.
20
(e) Such Selling Stockholder has, and on the Closing Date will
have, full legal right, power and authority to enter into this Agreement
and the Custody Agreement (the "Custody Agreement") between the Selling
Stockholders and MGC Communications, Inc., as Custodian (the "Custodian")
and to sell, assign, transfer and deliver such Shares in the manner
provided herein and therein, and this Agreement and the Custody Agreement
have been duly authorized, executed and delivered by such Selling
Stockholder and each of this Agreement and the Custody Agreement is a
valid and binding agreement of such Selling Stockholder enforceable in
accordance with its terms, except insofar as indemnification and
contribution provisions may be limited by applicable law or equitable
principles and subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
Certificates in negotiable form representing the Shares to be sold by the
Selling Stockholders as provided herein have been placed in custody under
the terms of the Custody Agreement for delivery pursuant to the terms
hereof.
(f) The power of attorney signed by such Selling Stockholder
appointing ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. Sunbury, or either of them, as its
attorney-in-fact to the extent set forth therein with regard to the
transactions contemplated hereby and by the Registration Statement and
the Custody Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Stockholder and is a valid and binding
instrument of such Selling Stockholder enforceable in accordance with its
terms and, pursuant to such power of attorney, such Selling Stockholder
has authorized ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. Sunbury, or either of them, to
execute and deliver on its behalf this Agreement and any other document
necessary or desirable in connection with the transactions contemplated
hereby and to deliver the Shares to be sold by such Selling Stockholder
pursuant to this Agreement.
(g) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which 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 Shares pursuant to the distribution contemplated by this Agreement,
and other than as permitted by the Act, the Selling Stockholder has not
distributed and will not distribute any prospectus or other offering
material in connection with the offering and sale of the Shares.
(h) The execution, delivery and performance of this Agreement
by such Selling Stockholder, compliance by such Selling Stockholder with
all the provisions hereof and the consummation of the transactions
contemplated hereby will not require any consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body (except as such may be required under the Act,
state securities laws or Blue Sky laws) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, organizational documents of such Selling Stockholder, if not an
individual, or any agreement, indenture or other instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder or
property of such Selling Stockholder is bound, or violate or conflict
with any laws, administrative regulation or ruling or court decree
21
applicable to such Selling Stockholder or property of such Selling
Stockholder.
(i) Such parts of the Registration Statement, comprised of the
table and notes thereto under the caption "Selling Stockholders" which
specifically relate to such Selling Stockholder do not, and will not on
the Closing Date, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of circumstances under which they
were made, not misleading.
(j) At any time during the period described in paragraph 6(e)
hereof, if there is any change in the information referred to in the
above paragraph, the Selling Stockholders will immediately notify Bear
▇▇▇▇▇▇▇ of such change.
(k) Each certificate signed by or on behalf of any Selling
Stockholder and delivered to the Underwriters or counsel for the
Underwriters shall be deemed to be a representation and warranty by such
Selling Stockholder to the Underwriters as to the matters covered
thereby.
The Company and the Selling Stockholders acknowledge that each of
the Underwriters and, for purposes of the opinions to be delivered to the
Underwriters pursuant to Section 10 hereof, counsel to the Company, counsel to
each Selling Stockholder and counsel to the Underwriters, will rely upon the
accuracy and truth of the foregoing representations and hereby consents to such
reliance.
8. Payment of Expenses. Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay and be responsible for all costs,
expenses, fees and taxes related to the following matters: (i) preparing,
printing, duplicating, filing and distributing the Registration Statement, as
originally filed and all amendments thereto (including, without limitation,
financial statements and all exhibits thereto), each preliminary prospectus,
the Prospectus and any amendments thereof or supplements thereto, the
underwriting documents (including this Agreement) and all other documents
related to the public offering of the Shares (including those supplied to the
Underwriters in quantities as hereinabove stated); (ii) the preparation
(including, without limitation, duplication costs) and delivery of all
preliminary and final Blue Sky memoranda prepared and delivered in connection
herewith; (iii) the registration with the Commission and the Nasdaq National
Market (including all filing fees incident thereto) and the issuance, transfer
and delivery of the Shares to the Underwriters, including, without limitation,
the fees of the transfer agent and registrar for the Company, the cost of its
personnel and other internal costs, the costs of printing and engraving the
certificates representing the Shares and any transfer or other taxes payable in
connection with the original issuance and sale of the Company Shares; (iv) the
qualification or registration of the Shares for offering and sale under state
and foreign securities or Blue Sky laws, including, without limitation, the
costs of printing and mailing preliminary and final Blue Sky memoranda and the
reasonable fees and disbursements of Underwriters' counsel in relation thereto;
(v) the fees, disbursements and expenses of the Company's counsel and
accountants; (vi) the filing, registration, review and clearance of the terms
of the public offering of the Shares with and by the NASD including, in each
case, any filing fees and fees and disbursements of Underwriters' counsel in
connection
22
therewith; (vii) all other fees, costs and expenses incident to the performance
of the obligations of the Company hereunder; (viii) all fees, costs and expenses
of the Selling Stockholders which are not specifically designated as expenses to
be paid by the Selling Stockholders under the terms of the Warrant Agreement,
the Series A Agreement, the Series B Agreement or the Merger Agreement; and (ix)
"roadshow" travel and other expenses incurred in connection with the marketing
and sale of the Shares (other than out-of-pocket expenses incurred by the
Underwriters for travel, meals and lodging).
9. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject to the absence from any
certificates, opinions, written statements or letters furnished pursuant to
this Section 9 to the Underwriters or to Underwriters' counsel of any
misstatement or omission and to the satisfaction of each of the following
additional conditions, except that with respect to the Additional Shares,
references to the Closing Date shall mean the Option Closing Date:
(a) All of the representations and warranties of the Company
contained herein 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 Registration Statement shall have become effective (or
if a post-effective amendment is required to be filed pursuant to Rule
430A under the Securities Act Regulations, such post effective amendment
shall become effective) not later than 5:00 P.M., New York City time, on
the date of this Agreement or at such later time and date as shall have
been consented to in writing by the Underwriters. At or prior to the
Closing Date no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof shall have
been issued and no proceedings therefor shall have been initiated or
threatened by the Commission, and every request for additional
information on the part of the Commission (including, without limitation,
any request or comment with respect to the Registration Statement, the
Prospectus or any document incorporated by reference therein) shall have
been complied with in all material respects. No stop order suspending the
sale of the Shares in any jurisdiction designated by the Underwriters
shall have been issued and no proceedings for that purpose shall have
been commenced or be pending or, to the best knowledge of the Company, be
contemplated.
(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 Company Shares; and 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 or any
subsidiary before any court or arbitrator or any governmental body,
agency or official that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect.
23
(d) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, and except as disclosed in the
Registration Statement or contemplated thereby, (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 and the subsidiaries from that set forth in the Registration
Statement and the Prospectus, (ii) no dividend or distribution of any
kind shall have been declared, paid or made by the Company or any
subsidiary on any class of its capital stock and (iii) neither the
Company nor any subsidiary shall have incurred any liabilities or
obligations, direct or contingent, that are material, individually or in
the aggregate, to the Company and the subsidiaries, 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
Registration Statement and the Prospectus. Since the date hereof and
since the dates as of which information is given in the Registration
Statement and the Prospectus, there shall not have occurred any Material
Adverse Effect.
(e) The Underwriters shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by (i) ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, President and Chief Executive Officer and (ii) ▇▇▇▇▇ ▇.
Sunbury, Senior Vice President and Chief Financial Officer of the Company
in form and substance reasonably satisfactory to the Underwriters,
confirming, as of the Closing Date, the matters set forth in paragraphs
(a), (b), (c) and (d) of this Section 9 and that, as of the Closing Date,
the obligations of the Company to be performed hereunder on or prior
thereto have been duly performed and stating that each signer of such
certificate has examined the Registration Statement and the Prospectus
and (A) as of the date of such certificate, such documents do not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading and (B) since
the Effective Date no event has occurred as a result of which it is
necessary to amend or supplement the Registration Statement or Prospectus
in order to make the statements therein, in light of the circumstances
under which they were made, not untrue or misleading in any material
respect, and (C) there has been no document required to be filed under
the Exchange Act and the Exchange Act Regulations that upon such filing
would be incorporated by reference into the Prospectus that has not been
so filed.
(f) All of the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date and the Underwriters shall have received a certificate,
dated the Closing Date, signed by an authorized officer, partner, member,
manager, trustee or similar person of such Selling Stockholder, if not an
individual, or by such Selling Stockholder, if an individual, to the
effect that the person signing such certificate has examined the
Registration Statement, the Prospectus and this Agreement and the
representations and warranties of such Selling Stockholder in this
Agreement are true and correct in all material respects
24
on and as of the Closing Date with the same force and effect as if made on
the Closing Date.
(g) At the Closing Date, the Underwriters and the Selling
Stockholders shall have received the opinion of Ellis, Funk, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Dokson, P.C., counsel for the Company, dated the Closing Date,
in form and substance reasonably satisfactory to the Underwriters and
Underwriters' counsel, to the effect set forth in Exhibit A hereto.
(h) At the Closing Date, the Underwriters and the Selling
Stockholders shall have received the opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP,
special regulatory counsel for the Company, dated the date of its
delivery, addressed to the Underwriters and in form and substance
satisfactory to the Underwriters' counsel, to the effect set forth in
Exhibit B hereto.
(i) At the Closing Date, each Selling Stockholder shall have
delivered to the Underwriters the opinion of counsel for such Selling
Stockholder, in each case dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriters and Underwriters' counsel, to
the effect set forth in Exhibit C hereto.
(j) At the time this Agreement is executed and at the Closing
Date the Underwriters and the Selling Stockholders shall have received
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent certified public accountants for
the Company, dated as of the date of this Agreement and as of the Closing
Date, a customary comfort letter addressed to the Underwriters and in
form and substance satisfactory to the Underwriters and counsel to the
Underwriters with respect to the financial statements and certain
financial information of the Company together with each of its
subsidiaries contained in the Registration Statement and the Prospectus.
(k) Kronish ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ 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 9 and in order to evidence
the accuracy, completeness or satisfaction in all material respects of
any of the representations, warranties or conditions herein contained.
(l) On or prior to the Closing Date, the Underwriters shall
have received the executed agreements referred to in Section 6(p) hereof.
(m) Prior to the Closing Date, the Company, its subsidiaries
and the Selling Stockholders shall have furnished to the Underwriters
such further information, certificates and documents as the Underwriters
may reasonably request.
(n) On or prior to the Closing Date, the Company shall have
filed a Notification Form for Listing Additional Shares on the Nasdaq
National Market, such Form for Listing Additional Shares shall have been
approved and a copy thereof shall have been provided by the Company to
the Underwriters.
25
If any of the conditions specified in this Section 9 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the
Underwriters or to Underwriters' counsel pursuant to this Section 9 shall not be
reasonably satisfactory in form and substance to the Underwriters and to
Underwriters' counsel, all of the obligations of the Underwriters hereunder may
be cancelled by the Underwriters at, or at any time prior to, the Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telecopy, telex or telegraph, confirmed in writing.
10. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) each of
the Underwriters, (ii) each person, if any, who controls any of the
Underwriters 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 Underwriters
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 Registration
Statement as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
preliminary prospectus or the Prospectus, in 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 Underwriters 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 Selling Stockholder, severally but not jointly, agrees to
indemnify and hold harmless (i) each of the Underwriters, (ii) each
person, if any, who controls any of the Underwriters 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 Underwriters 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
26
and all amounts paid in settlement of any claim or litigation), joint or
several, (x) to which they or any of them may become subject, insofar as
such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon the breach of the
representations or warranties made by the Selling Stockholders in Section
7(2)(b) of this Agreement, or (y) to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any supplement thereto or
amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
preliminary prospectus or the Prospectus, in light of the circumstances
under which they were made) not misleading, in each case to the extent,
but only to the extent that 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
information furnished to the Company or the Underwriters by or on behalf
of such Selling Stockholder expressly for use therein; provided, however,
that in no case shall any Selling Stockholder be liable or responsible for
any amount in excess of the aggregate gross proceeds received by such
Selling Stockholder from the sale of such Selling Stockholder's Shares
hereunder. This indemnity agreement will be in addition to any liability
which any Selling Stockholder may otherwise have, including under this
Agreement.
(c) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company, each Selling Stockholder and each person,
if any, who controls the Company or such Selling Stockholder 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 Registration
Statement, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in 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 any Underwriter expressly for use therein;
provided, however, that in no case shall any Underwriter be liable or
responsible for any amount
27
in excess of the discounts and commissions received by such Underwriter,
as set forth on the cover page of the Prospectus. This indemnity agreement
will be in addition to any liability which any Underwriter may otherwise
have, including under this Agreement.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) 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 10 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 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 Underwriters are the indemnified parties, Bear ▇▇▇▇▇▇▇ shall
have the right to select such counsel for the Underwriters), 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), (b) or (c) 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.
11. Contribution. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 10 is for any reason held
to be unavailable from the Company or any of the Selling Stockholders or is
insufficient to hold harmless a party indemnified thereunder, the Company, the
Selling Stockholders and the Underwriters shall contribute to the aggregate
losses, claims, damages, liabilities and expenses of the nature contemplated by
such indemnification provision (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims
28
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company or any Selling Stockholder,
any contribution received by the Company or any Selling Stockholder from
persons, other than the Underwriters, who may also be liable for contribution,
including persons who control the Company or such Selling Stockholder within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to
which the Company and any Selling Stockholder, on the one hand, and any of the
Underwriters, on the other hand, may be subject, in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders, on the one hand, and the Underwriters, on the other hand,
from the sale of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 10, 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 Selling
Stockholders, on the one hand, and the Underwriters, on the other hand, 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
Selling Stockholders, on the one hand, and the Underwriters, on the other hand,
shall be deemed to be in the same proportion as (x) the total proceeds from the
sale of Shares (net of discounts but before deducting expenses) received by the
Company or any Selling Stockholder and (y) the underwriting discounts and
commissions received by the Underwriters, respectively, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault of
the Company, the Selling Stockholders and of the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company, the
Selling Stockholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 11 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 11, (i) in no case shall any Underwriter be required to contribute any
amount in excess of the amount by which the underwriting discount applicable to
the Shares purchased by such Underwriter pursuant to this Agreement exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of any untrue or alleged untrue statement or omission or alleged
omission, (ii) the aggregate liability of any Selling Stockholder pursuant to
the provisions of this paragraph shall be limited to an amount equal to the
aggregate gross proceeds received by such Selling Stockholder from the sale of
such Selling Stockholder's Shares hereunder and (iii) 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 11, (A) each person,
if any, who controls any Underwriter 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
Underwriters or any controlling person shall have the same rights to
contribution as such Underwriters; 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; and
each person who controls each Selling Stockholder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act shall have the same rights
to contribution as such Selling Stockholder, subject in each case to clauses
(i), (ii) and (iii) of this
29
Section 11. 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 11, 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 11 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.
12. Substitution of Underwriters.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Shares hereunder, and if the total number of
Shares with respect to which such default relates do not (after giving
effect to arrangements, if any, made pursuant to subsection (b) below)
exceed 10% of the total number of Shares which the Underwriters have
agreed to purchase hereunder, then such Shares to which the default
relates shall be purchased by the non-defaulting Underwriters in
proportion to the respective proportions which the number of Shares set
forth opposite their respective names on Schedule II hereto bear to the
total number of Shares set forth opposite the names of the non-defaulting
Underwriters.
(b) In the event that such default relates to more than 10% of
the total number of Shares, the non-defaulting Underwriters may in their
discretion arrange for themselves or for another party or parties to
purchase the Shares to which such default relates on the terms contained
herein. In the event that within five (5) calendar days after such a
default the non-defaulting Underwriters do not arrange for the purchase
of the Shares to which such default relates as provided in this Section
12, this Agreement and the obligations of the Underwriters to purchase,
and of the Company to sell, the Shares shall thereupon terminate without
liability on the part of the Company with respect thereto (except in each
case as provided in Sections 8, 10(a), 10(b) and 11) or the Selling
Stockholders (except as provided in Sections 10(a), 10(b), 11 and 14(a))
or the Underwriters (except as provided in Sections 10(c) and 11), but
nothing in this Agreement shall relieve a defaulting Underwriter of its
liability, if any, to the other Underwriters and the Company for damages
occasioned by its default hereunder.
(c) In the event that the Shares to which the default relates
are to be purchased by the non-defaulting Underwriters, or are to be
purchased by another party or parties as aforesaid, the Underwriters or
the Company shall have the right to postpone the Closing Date for a
period not exceeding five (5) business days in order to effect whatever
changes may thereby be made necessary in the Registration Statement or
the Prospectus or in any other documents and arrangements, and the
Company agrees to file promptly any amendment or supplement to the
Registration Statement or the Prospectus which, in the opinion of
Underwriters' counsel, may thereby be made necessary or advisable. The
term "Underwriter" as used in this Agreement shall include any party
substituted under this
30
Section 12 with like effect as if it had originally been a party to this
Agreement with respect to such Shares.
13. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective when the Underwriters
and the Company shall have received notification of the effectiveness of
the Registration Statement. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying the
Underwriters or by the Underwriters by notifying the Company.
Notwithstanding the foregoing, the provisions of this Section 13 and of
Sections 8, 10, 11 and 14(a) shall at all times be in full force and
effect.
(b) The Underwriters shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company
from the Underwriters, without liability (other than with respect to
Sections 10 and 11) on the Underwriters' part to the Sellers if, on or
prior to such date, (i) the Company or any Selling Stockholder 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 Underwriters hereunder as provided in Section 9
is not fulfilled when and as required in any material respect, (iii) in
the reasonable judgment of the Underwriters any material adverse change
shall have occurred since the respective dates as of which information is
given in the Registration Statement in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects, net
worth, results of operations or cash flows of the Company and the
subsidiaries taken as a whole, or (iv)(A) any domestic or international
event or act or occurrence has materially disrupted, or in the opinion of
the Underwriters 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 Underwriters' judgment, to make it
inadvisable or impracticable to proceed with the offering or delivery of
the Shares on the terms and in the manner contemplated in the
Registration Statement; 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 Underwriters' judgment, makes it
inadvisable or impracticable to proceed with the delivery of the Shares
as contemplated hereby.
(c) Any notice of termination pursuant to this Section 13 shall
be by telephone, telex, telephonic facsimile, or telegraph, confirmed in
writing by letter.
31
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by the
Underwriters as provided in Section 13(a) or (ii) Section 12(b)), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of
the Company or the Selling Stockholders to perform any agreement herein
or comply with any provision hereof, the Company will, subject to demand
by the Underwriters, reimburse the Underwriters for all out-of-pocket
expenses (including, without limitation, the reasonable fees and expenses
of Underwriters' counsel) incurred by the Underwriters in connection
herewith.
14. Agreements of the Selling Stockholders. Each Selling Stockholder
severally agrees with the Underwriters and the Company:
(a) To pay or to cause to be paid all transfer taxes with
respect to the Shares to be sold by such Selling Stockholder and all
other expenses required to be paid by such Selling Stockholder pursuant
to the terms of the Warrant Registration Rights Agreement, the Series A
Agreement, the Series B Agreement or the Merger Agreement; and
(b) To take all reasonable actions in cooperation with the
Company and the Underwriters to cause the Registration Statement to
become effective at the earliest possible time, to do and perform all
things to be done and performed under this Agreement prior to the Closing
Date and to satisfy all conditions precedent to the delivery of the
Shares pursuant to this Agreement.
15. Survival of Representations and Agreements. All representations
and warranties, covenants and agreements of the Underwriters, the Company and
the Selling Stockholders contained in this Agreement, including, without
limitation, the agreements contained in Sections 8, 13(d) and 14(a), the
indemnity agreements contained in Section 10 and the contribution agreements
contained in Section 11, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, 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 Shares to and
by the Underwriters. The representations contained in Section 7 and the
agreements contained in Sections 8, 10, 11, 13(d) and 14(a) shall survive the
termination of this Agreement, including, without limitation, any termination
pursuant to Sections 12 or 13.
16. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Underwriters shall be mailed, delivered, or telexed, telegraphed or telecopied
and confirmed in writing c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇▇▇▇▇, Sachs & Co. and
ING Barings LLC, c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Finance Department, telecopy number: (212)
272-3092; and if sent to the Company, shall be mailed, delivered or telexed,
telegraphed or telecopied and confirmed in writing to MGC Communications, Inc.,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial
Officer, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Ellis, Funk, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Dokson, P.C., One Securities Centre, Suite 400, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, telecopy number: (404)
32
233-2188; and if sent to the Selling Stockholders, shall be mailed, delivered
or telexed, telegraphed or telecopied and confirmed in writing to ▇▇▇▇▇ ▇.
▇▇▇▇▇ or ▇▇▇▇▇ ▇. Sunbury c/o MGC Communications, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇; provided, however, that any notice to any party
pursuant to Section 10 or 11 shall be mailed, delivered or telexed, telegraphed
or telecopied and confirmed in writing to such party.
17. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters and the Sellers and the controlling
persons and agents referred to in Sections 10 and 11, 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 Shares from the Underwriters.
18. Construction. This Agreement shall be construed in accordance with
the internal laws of the State of New York.
19. 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.
20. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument.
[Signature page to follow]
33
If the foregoing correctly sets forth the understanding among
the Underwriters 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:
THE SELLING STOCKHOLDERS NAMED
ON SCHEDULE I HERETO
By:
----------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇▇, ▇▇▇▇▇ & CO.
ING BARINGS LLC
By: BEAR, ▇▇▇▇▇▇▇ & CO. INC.
By:
-------------------------------
Name:
Title:
▇▇▇▇▇▇▇, ▇▇▇▇▇ & CO.
By:
-------------------------------
Name:
Title:
34
ING BARINGS LLC
By:
---------------------------------
Name:
Title:
35
Schedule I
SELLING STOCKHOLDERS
Selling Stockholder Shares
------------------- ------
Winston Partners II LDC 33,436
Winston Partners II LLC 10,627
S-C Phoenix Holdings, LLC 171,428
Prospect Street High Income Portfolio Inc. 15,870
Strategic Investment Partners Ltd. 342,857
Libertyview Funds LP 2,695
CPR (USA) Inc. 8,357
Libertyview Enhanced High Yield Fund 2,425
36
Schedule II
Number of Shares
Underwriter to be Purchased
----------- ---------------
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇▇▇▇▇, Sachs & Co.
ING Barings LLC
37
Schedule III
Stockholders Subject to Lockup Agreements
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
JK&B Capita, L.P.
JK&B Capital II, L.P.
JK&B Capital III, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇'▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ Sunbury
38
EXHIBIT A
Form of Opinion of Ellis, Funk, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Dokson, P.C.
1. Each of the Company and its subsidiaries (A) is duly organized and
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 being conducted and as described in
the Registration Statement and Prospectus 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 except, with respect to this clause (C), where the failure to be
so qualified or in good standing does not and could not reasonably be expected
to have a Material Adverse Effect. All of the issued and outstanding shares of
capital stock of, or other ownership interests in, each subsidiary have been
duly authorized and validly issued, are fully paid and non-assessable and were
not issued in violation of or subject to any preemptive or similar rights under
the Nevada General Corporation Law, or known to us, after reasonable inquiry,
and are owned by the Company of record, and to our knowledge, after reasonable
inquiry, beneficially, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or other restriction on transferability or
voting. Except for the capital stock of the subsidiaries owned by the Company,
to our knowledge, neither the Company nor any of its subsidiaries owns or holds
any interest in any corporation, partnership, trust or association, joint
venture or other entity.
2. All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) and each
subsidiary 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
Registration Statement and Prospectus. Except as set forth in the Prospectus,
there are no outstanding subscriptions, rights, warrants, calls, commitments of
sale or options to acquire (other than options issued during the period
commencing on the date of the Underwriting Agreement and ending on the Closing
Date pursuant to the Stock Option Plan in accordance with the third paragraph
of Section 3 of the Underwriting Agreement), or instruments convertible into or
exercisable or exchangeable for, any capital stock or other equity interest in
the Company or any of its subsidiaries known to us, after reasonable inquiry.
None of the outstanding shares of the capital stock of the Company or the
subsidiaries were issued in violation of the registration requirements of the
Act or the registration or qualification requirements of the applicable state
securities or "Blue Sky" laws.
3. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Underwriting Agreement
to consummate the transactions contemplated thereby, including, without
limitation, the corporate power and authority to issue, sell and deliver the
Company Shares as provided therein.
4. The Underwriting Agreement has been duly and validly authorized,
executed and
39
delivered by the Company and, assuming due execution by the other parties
thereto, is the legally valid and binding agreement of the Company.
5. The Company Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance with the
terms of the Underwriting Agreement, will be validly issued, fully paid and
nonassessable and, to our knowledge after reasonable inquiry, free of any
preemptive or similar rights that entitle or will entitle any person to acquire
any Shares upon the issuance thereof by the Company.
6. The statements under the caption "Description of Securities" in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein, present a fair summary thereof.
7. None of (A) the execution, delivery or performance by the Company of
the Underwriting Agreement or (B) the issuance of the Company Shares and the
sale of the Shares by the Company and the Selling Stockholders 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 any
subsidiary, or an acceleration of any indebtedness of the Company or any
subsidiary pursuant to, (i) the charter or bylaws of the Company or any
subsidiary, (ii) any bond, debenture, note, indenture, mortgage, deed of trust
or other agreement or instrument known to us to which the Company or any
subsidiary is a party or by which any of them or their property is or may be
bound, (iii) any local, state, federal or administrative statute, rule or
regulation applicable to the Company or any subsidiary or any of their
respective assets or properties (except that we express no opinion as to the
matters addressed by the opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP) or (iv) any
judgment, order or decree of any court or governmental agency or authority
having jurisdiction over the Company or any subsidiary or any of their assets
or properties known to us (except that we need express no opinion as to the
matters addressed by the opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP), except that the
Company has not received written approval from the Georgia Public Service
Commission as to the sale of the Company Shares and 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 Registration Statement. Assuming compliance with applicable state
securities and Blue Sky laws, as to which we express no opinion, and except for
the filing of a registration statement under the Act and for the approval
required to be obtained by the Georgia Public Service Commission, 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 (1) the execution, delivery and
performance by the Company of the Underwriting Agreement, or (2) the issuance
of the Company Shares and the sale of the Shares by the Company and the Selling
Stockholders, except such as have been obtained and made or have been disclosed
in the Registration Statement, and except where the failure to obtain such
consents or waivers would not, singly or in the aggregate, have a Material
Adverse Effect. To our knowledge, after reasonable inquiry, no consents or
waivers from any other person are required for the execution, delivery and
performance by the Company of the Underwriting Agreement or the issuance of the
Company Shares and the sale of the Shares by the Company and the Selling
Stockholders, other than such
40
consents and waivers as have been obtained and except that we express no
opinion as to the matters addressed in the opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP.
8. None of the Company or the subsidiaries is (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.
9. Except for the Shares sold by the Selling Stockholders, no holders
of any securities of the Company or of any subsidiary or their respective
affiliates or of any options, warrants or other convertible or exchangeable
securities of the Company or any subsidiary or their respective affiliates are
entitled to include any such securities in or to have such securities
registered under the Registration Statement.
10. Except as set forth in the Prospectus, to our 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 any of the Company
or any subsidiary is or may be a party or to which the business or property of
the Company or any of its subsidiaries is or may be 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 (except
that we need express no opinion with respect to Telecommunications Laws) or
(iii) no injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction to which any of the Company or any
subsidiary is or may be subject or to which the business, assets or property of
the Company or any of its subsidiaries are or may be subject has been issued
that, in the case of clauses (i), (ii) and (iii) above, (x) is required to be
disclosed in the Registration Statement or the Prospectus, (y) could reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect or (z) might interfere with, adversely affect or in any manner
question the validity of the issuance of the Company Shares and the sale of the
Shares by the Company and the Selling Stockholders or any of the other
transactions contemplated by the Underwriting Agreement and the Registration
Statement and except that we express no opinion as to the matters addressed in
the opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP.
11. We are not aware of any order directed to any document incorporated
by reference in the Registration Statement which has been issued by the
Commission or any challenge that has been made by the Commission as to the
accuracy or adequacy of any such document.
12. The Company and the transactions contemplated by the Underwriting
Agreement meet the requirements for using Form S-3 under the Act. The
Registration Statement and the Prospectus, and the documents filed under the
Act and the Exchange Act and incorporated by reference in the Registration
Statement and the Prospectus or any amendment thereof or supplement thereto or
from which information is so incorporated by reference (other than financial
statements, notes and schedules thereto and other financial and accounting
information included or incorporated by reference therein, as to which we
express no opinion) comply as to form in all material respects with the Act or
the Exchange Act, as the case may be, and the Regulations.
41
13. The Registration Statement was declared effective under the Act on
July 21, 1999. To our knowledge, after reasonable inquiry, no stop order
suspending the effectiveness of the Registration Statement or preventing or
suspending the use of any preliminary prospectus has been issued, and no
proceedings for that purpose have been instituted or threatened.
14. There are no contracts or documents of the Company or any of its
subsidiaries known to us, after reasonable inquiry, that are required to be
filed (A) as exhibits to the Registration Statement by the Act, or (B) as
exhibits to any of the documents incorporated by reference by the Exchange Act
or (C) by the Regulations that have not been so filed. Insofar as statements in
the Prospectus (other than statements addressed in the opinion of ▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇ LLP) purport to summarize the provisions of laws, rules, regulations,
proposed rules, proposed regulations, orders, judgments, decrees, contracts,
agreements, instruments, leases or licenses, such statements accurately reflect
the status of such provisions purported to be summarized and are correct in all
material respects.
15. The Company has authorized capital stock as set forth in the
Prospectus. All the shares of capital stock of the Company outstanding prior to
the issuance of the Company Shares are duly and validly authorized and issued,
are fully paid and nonassessable and were not issued in violation of or subject
to any preemptive rights.
16. The form of certificates for the Shares conforms to the equirements
of the General Corporation Law of the State of Nevada.
17. The Company's Notification Form for Listing Additional Shares on
the Nasdaq National Market has been filed and approved.
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent certified
public accountants of the Company and the Underwriters and their
representatives at which the contents of the Prospectus and the Registration
Statement and any amendment thereof or supplement thereto and related matters
were discussed and, although we have not undertaken to investigate or verify
independently, and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Prospectus and the
Registration Statement or any amendment thereof or supplement thereto (except
as indicated above), on the basis of the foregoing, no facts have come to our
attention which led us to believe that the Prospectus and the Registration
Statement (or any amendment thereof made prior to the Closing Date as of the
date of such amendment) 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 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 data included therein).
We are members of the Bar of the State of Georgia, and we do 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, we have relied on Kronish, Lieb, Weiner & ▇▇▇▇▇▇▇ LLP as
42
to the laws of the State of New York.
43
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 and the
subsidiaries, as we understand those services to be provided currently based
upon the Prospectus and the Registration Statement, have been issued to and are
validly held by the Company and the subsidiaries. All of the licenses, permits
and authorizations required by any "state commissions" as defined in Section 3
of the Communications Act of 1934, as amended (the "State Telecommunications
Agencies") for the provision of telecommunications services by the Company and
the subsidiaries, as we understand those services to be provided currently
based upon the Registration Statement, have been issued to and, to the best of
our knowledge, are validly held by the Company and the subsidiaries, except
where the failure to obtain or hold such license, permit or authority would not
have a Material Adverse Effect. All such licenses, permits and authorizations
are in full force and effect.
2. Neither the Company nor its subsidiaries is the subject of any
proceeding (including a rule making proceeding), pending complaint or
investigation, or, to the best of our knowledge, any threatened complaint or
investigation, before the FCC, or, to the best of our 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 or any subsidiary in
connection with their provision of or failure to provide telecommunications
services of a character required to be disclosed in the Registration Statement
which is not disclosed in the Registration Statement.
3. The statements in the Registration Statement under the
headings of "Risk Factors - Our services are highly regulated and changes in
current or future laws or regulations could restrict the way we operate our
business" and "Business - Regulation" regarding the Telecommunications Laws of
the FCC or the State Telecommunications Agencies fairly and accurately
summarize the matters therein described.
4. The Company and its subsidiaries have the consents, approvals,
authorizations, licenses, certificates, permits, or orders of the FCC or the
State Telecommunications Agencies, if any is required, for the consummation of
the transactions contemplated in the Registration Statement, except where the
failure to obtain the consents, approvals, authorizations, licenses,
certificates, permits or orders would not have a Material Adverse Effect.
5. Neither the execution and delivery of the Underwriting
Agreement nor the sale of the Shares contemplated thereby will conflict with or
result in a violation of any Telecommunications Laws applicable to the Company
or its subsidiaries, except where the conflict with or the violation of any
Telecommunications Laws would not have a Material Adverse Effect.
44
6. In connection with our representation of the Company and its
subsidiaries, except as disclosed in the Registration Statement or the
Prospectus, we have not become aware of any Telecommunications Laws that could
reasonably be expected to have a Material Adverse Effect on the business of the
Company, taken as a whole, as described in the Prospectus and the Registration
Statement. The foregoing assumes that the Company currently is in substantial
compliance with all material Telecommunications Laws applicable to it except as
disclosed in the Registration Statement or the Prospectus.
45
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO SELLING STOCKHOLDERS]
[Letterhead of Counsel]
July __, 1999
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
ING Barings LLC
c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: MGC Communications, Inc.
Ladies and Gentlemen:
We have acted as counsel for each of the selling stockholders listed of
Schedule A hereto (the "Selling Stockholders"), in connection with the
sale by the Selling Stockholders of ______________ shares of common stock
(the "Securities") of MGC Communications, Inc. (the "Company") to Bear,
▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇▇▇▇▇, Sachs & Co. and ING Barings LLC (together,
the "Underwriters"). The sale is being made pursuant to an underwriting
agreement (the "Underwriting Agreement") dated as of July __, 1999, by and
among the Company, the Selling Stockholders and the Underwriters.
This opinion is delivered to the Underwriters at the request of the
Selling Stockholders pursuant to Section 9(i) of the Underwriting
Agreement. All capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned to them in the Underwriting
Agreement.
Based upon and subject to the limitations and qualifications set forth
herein, we are of the opinion that:
1. The Underwriting Agreement and the Custody Agreement relating
to the sale of the Securities by the Selling Stockholders, and the Power
of Attorney, dated as of __________, 1999, appointing ▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇ ▇. Sunbury as the attorneys in fact of the Selling Stockholders
have been duly authorized, executed and delivered by each Selling
Stockholder and are valid and binding on each Selling Stockholder, and
each Selling Stockholder has full legal right and authority to sell,
transfer and deliver in the manner provided in the Underwriting Agreement
and the Custody Agreement the Securities being sold by such Selling
Stockholder thereunder.
46
2. The delivery by each Selling Stockholder to the several
Underwriters of certificates for the Securities being sold pursuant to
the Underwriting Agreement by such Selling Stockholder against payment
therefor as provided in the Underwriting Agreement will pass good and
marketable title to such Securities to the several Underwriters, free and
clear of all liens, encumbrances, equities and claims whatsoever.
3. No consent, approval, authorization or order of any court or
governmental agency or body known by us to be applicable to the
transactions contemplated in the Underwriting Agreement is required for
the consummation by each Selling Stockholder of the transactions
contemplated in the Underwriting Agreement, except such as may have been
obtained under the Securities Act of 1933, as amended, and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities by the Underwriters and
such other approvals as have been obtained and are listed on Schedule B
hereto.
4. Neither the sale of the Securities being sold by the Selling
Stockholders nor the consummation of any other of the transactions
contemplated in the Underwriting by any Selling Stockholder or the
fulfillment of the terms of the Underwriting Agreement by any Selling
Stockholder will conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or by-laws of the
Selling Stockholder, if not an individual, or the terms of any indenture
or other agreement or instrument known to us and to which any Selling
Stockholder or, if not an individual, any of its subsidiaries, is a party
or bound, or any judgment, order or decree known to us to be applicable
to any Selling Stockholder or, if not an individual, any of its
subsidiaries, of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over any Selling
Stockholder or, if not an individual, any of its subsidiaries.
In rendering such opinions, we have relied (A) as to matters involving the
application of laws of any jurisdiction other than the State of [New York]
or the Federal laws of the United States, to the extent we deemed proper
[specify], upon the opinion of other counsel of good standing whom we
believe to be reliable and who are satisfactory to counsel for the
Underwriters (which opinions are attached hereto), and (B) as to matters
of fact, to the extent we deemed proper, on certificates of authorized
officers of the Selling Stockholders and public officials.
47
EXHIBIT D
FORM OF LOCK-UP AGREEMENT
June __, 1999
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇▇▇▇▇, Sachs & Co.
ING Barings LLC
c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
MGC Communications, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
In order to induce Bear, ▇▇▇▇▇▇▇ & Co. Inc. ("Bear ▇▇▇▇▇▇▇"),
▇▇▇▇▇▇▇, Sachs & Co. ("Goldman") and ING Barings LLC (together with Bear
▇▇▇▇▇▇▇ and Goldman, the "Underwriters") and MGC Communications, Inc., a
Nevada corporation (the "Company"), to enter into an underwriting
agreement (the "Underwriting Agreement") pursuant to which the
Underwriters will purchase, severally but not jointly, shares of common
stock, par value $.001 per share, of the Company ("Common Stock"), the
undersigned hereby agrees that for a period of 90 days following the date
on which the Company's registration statement on Form S-3 (Commission file
No. 333-79863) shall become effective by order of the United States
Securities and Exchange Commission (the "Effective Date"), the undersigned
will not directly or indirectly offer to sell, sell, contract to sell,
grant an option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber or dispose of (either pursuant to Rule 144 of the
regulations under the Securities Act of 1933, as amended, or otherwise)
any shares of Common Stock or any other securities issued by the Company
("Securities") registered in the undersigned's name or beneficially owned
by the undersigned, including without limitation, any Securities with
respect to which the undersigned becomes the registered or beneficial
owner after the date hereof, or dispose of any beneficial interest therein
without the prior written consent of Bear ▇▇▇▇▇▇▇ and the Company.
In order to enable you to enforce the aforesaid agreement and grant
of rights, the undersigned hereby consents to the placing of legends and
stop-transfer orders with the transfer agent of the Company's Securities
with respect to any of the Securities registered in the undersigned's
name or beneficially owned by the undersigned.
48
This agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to conflict
of law principles. Any legal action or proceeding with respect to this
agreement shall be brought exclusively in the courts of the State of New
York residing in the Borough of Manhattan or of the United States of
America for the Southern District of New York, and, by execution and
delivery of this agreement, the parties hereto hereby accept for
themselves and in respect of their property, generally and
unconditionally, the exclusive jurisdiction of the aforesaid courts.
This agreement shall be binding on the undersigned and his, her or
its respective heirs, personal representatives, successors and assigns.
------------------------------
Signature
------------------------------
Print Name of Stockholder
------------------------------
Print Name and Title of Officer
------------------------------
Print Address
------------------------------
Print Social Security
Number or Taxpayer I.D.Number