Exhibit 1.1
________________________________________________________________________
________________________________________________________________________
USN COMMUNICATIONS, INC.
(a Delaware corporation)
6,400,000 Shares of Common Stock
U.S. PURCHASE AGREEMENT
-----------------------
Dated: February __, 1998
________________________________________________________________________
________________________________________________________________________
Table of Contents
SECTION 1. Representations and Warranties................................... 8
(a) Representations and Warranties by the Company.......................... 8
(b) ▇▇▇▇▇▇ Communications..................................................14
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing..................15
(a) Initial Securities...........................Error! Bookmark not defined.
(b) Option Securities......................................................15
(c) Payment................................................................15
(d) Denominations; Registration............................................16
SECTION 3. COVENANTS OF THE COMPANY.........................................16
(a) Compliance with Securities Regulations and Commission Requests.........16
(b) Filing of Amendments...................................................17
(c) Delivery of Registration Statements....................................17
(d) Delivery of Prospectuses...............................................17
(e) Continued Compliance with Securities Laws..............................18
(f) Blue Sky Qualifications................................................18
(g) Rule 158...............................................................18
(h) Use of Proceeds........................................................18
(i) Listing................................................................19
(j) Restriction on Sale of Securities......................................19
(k) Reporting Requirements.................................................20
(l) Compliance with NASD Rules.............................................20
SECTION 4. PAYMENT OF EXPENSES..............................................20
(a) Expenses...............................................................20
(b) Termination of Agreement...............................................21
SECTION 5. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS.....................21
(a) Effectiveness of Registration Statement................................21
(b) Opinion of Counsel for Company.........................................22
(c) Opinion of General Counsel for Company.................................25
(d) Opinion of Counsel for U.S. Underwriters...............................27
(e) Officer's Certificate..................................................28
(f) Accountant's Comfort Letter............................................28
(g) Bring-down Comfort Letter..............................................28
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(h) Approval of Listing.....................................................28
(i) No Objection............................................................28
(j) Lock-up Agreements......................................................28
(k) Fees and Expenses of QIU................................................29
(l) Purchase of Initial International Securities............................29
(m) Conditions to Purchase of U.S. Option Securities........................29
(n) Additional Documents....................................................30
(o) Termination of Agreement................................................30
SECTION 6. INDEMNIFICATION...................................................31
(a) Indemnification of U.S. Underwriters....................................32
(b) Actions against Parties; Notification...................................33
(c) Settlement without Consent if Failure to Reimburse......................33
(d) Indemnification for Reserved Securities.................................33
SECTION 7. CONTRIBUTION......................................................33
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY....35
SECTION 9. TERMINATION OF AGREEMENT..........................................36
(a) Termination; General....................................................36
(b) Liabilities.............................................................36
SECTION 10. DEFAULT BY ONE OR MORE OF THE U.S. UNDERWRITERS..................36
SECTION 11. NOTICES..........................................................37
SECTION 12. PARTIES..........................................................37
SECTION 13. GOVERNING LAW AND TIME...........................................37
SECTION 14. EFFECT OF HEADINGS...............................................37
SCHEDULES
Schedule A - List of U.S. Underwriters
Schedule B - Pricing Information
Schedule C - List of Persons Subject to Lock-up
Schedule I - Applicable Contracts
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel to be Delivered Pursuant
to Section 5(b)
Exhibit B - Form of Opinion of General Counsel for Company to be Delivered
Pursuant to Section
5(c)
Exhibit C - Form of Lock-Up Letter Pursuant to Section 5(J)
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USN COMMUNICATIONS, INC.
(a Delaware corporation)
6,400,000 Shares of Common Stock
(Par Value $.01 Per Share)
U.S. PURCHASE AGREEMENT
-----------------------
February ___, 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ & Company
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
as U.S. Representatives of the several U.S. Underwriters
c/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
USN Communications, Inc., a Delaware corporation (the "Company"), confirms
its agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other U.S. Underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ & Company and ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ Securities Corporation ("DLJ") are acting as representatives (in such
capacity, the "U.S. Representatives"), with respect to the issue and sale by the
Company and the purchase by the U.S. Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.01 per
share ("Common Stock"), of the Company set forth in said Schedule A, and with
respect to the grant by the Company to the U.S. Underwriters, acting severally
and not jointly, of the option described in Section 2(b) hereof to purchase all
or any part of 960,000 additional shares of Common Stock to cover over-
allotments, if any. The aforesaid 6,400,000 shares of Common Stock (the "Initial
U.S. Securities") to be
4
purchased by the U.S. Underwriters and all or any part of the 960,000 shares of
Common Stock subject to the option described in Section 2(b) hereof (the "U.S.
Option Securities") are hereinafter called, collectively, the "U.S. Securities."
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of 1,600,000 shares of
Common Stock (the "Initial International Securities") through arrangements with
certain underwriters outside the United States and Canada (the "International
Managers") for which ▇▇▇▇▇▇▇ ▇▇▇▇▇ International, Cowen International L.P. and
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ International and are acting as lead managers (the
"Lead Managers") and the grant by the Company to the International Managers,
acting severally and not jointly, of an option to purchase all or any part of
the International Managers' pro rata portion of up to 240,000 additional shares
of Common Stock solely to cover over-allotments, if any (the "International
Option Securities" and, together with the U.S. Option Securities, the "Option
Securities"). The Initial International Securities and the International Option
Securities are hereinafter called the "International Securities." It is
understood that the Company is not obligated to sell, and the U.S. Underwriters
are not obligated to purchase, any Initial U.S. Securities unless all of the
Initial International Securities are contemporaneously purchased by the
International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities," and the U.S. Securities and the International Securities
are hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the U.S. Underwriters propose to make a public
offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the Underwriters agree that up to 800,000 shares of the
Securities to be purchased by the Underwriters (the "Reserved Securities") shall
be reserved for sale by the Underwriters to certain eligible employees and
persons having business relationships with the Company, as part of the
distribution of the Securities by the Underwriters, subject to the terms of this
Agreement and the International Purchase Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. and all other applicable laws, rules and regulations. To the
extent that such Reserved Securities are not orally confirmed for purchase by
such eligible employees and persons having business relationships with the
Company by the end of the first business day after the date of this Agreement,
such Reserved Securities may be offered to the public as part of the public
offering contemplated hereby.
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The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-38381) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Securities: one relating to the U.S. Securities (the "Form of U.S.
Prospectus") and one relating to the International Securities (the "Form of
International Prospectus"). The Form of International Prospectus is identical
to the Form of U.S. Prospectus, except for the front cover and back cover pages
and the information under the caption "Underwriting." The information included
in any such prospectus or in any such Term Sheet, as the case may be, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto, at the time became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final Form of U.S.
Prospectus and the final Form of International Prospectus in the forms first
furnished to the Underwriters for use in connection with the offering of the
Securities are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated January 7, 1998 and preliminary
International Prospectus dated January 7, 1998, respectively, each together with
the applicable Term Sheet and all references in this Agreement to the date of
such Prospectuses shall mean the date of the applicable Term Sheet. The terms
"Registration Statement" and "U.S. Prospectus" shall include any supplements or
amendments thereto, including the exhibits thereto and the schedules thereto, at
the time such supplement or amendment is filed pursuant to Section 3(k) hereof.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the U.S. Prospectus, the International Prospectus or
any Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("▇▇▇▇▇").
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SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents and
warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof and agrees with each U.S.
Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b)
Registration Statement and any amendments and supplements thereto, complied and
will comply in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and 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 not misleading, and the
Prospectuses, any preliminary prospectus and any amendment or supplement thereto
or prospectus wrapper prepared in connection therewith, at their respective
times of issuance and at the Closing Time (and, if any U.S. Option Securities
are purchased, at the Date of Delivery), complied and will comply in all
material respects with any applicable laws or regulations of foreign
jurisdictions in which the Prospectuses and such preliminary prospectus, as
amended or supplemented, if applicable, are distributed in connection with the
offer and sale of Reserved Securities. Neither of the Prospectuses nor any
amendments or supplements thereto, at the time the Prospectuses or any
amendments or supplements thereto (including any prospectus wrapper) were issued
and at the Closing Time (and, if any U.S. Option Securities are purchased, at
the Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. If Rule 434 is used, the Company will
comply with the requirements of Rule 434 and the Prospectuses shall not be
"materially different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective. The
representations and warranties in this subsection shall not apply to statements
in or omissions from the Registration Statement, any Rule 462(b) Registration
Statement or any post-effective amendment thereto or the U.S. Prospectus made in
reliance upon and in conformity with information furnished to the Company in
writing by any U.S. Underwriter through the U.S. Representatives expressly for
use in the Registration Statement or the U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant
7
to Rule 424 under the 1933 Act, complied when so filed in all material respects
with the 1933 Act Regulations and each preliminary prospectus and the
Prospectuses delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
(ii) Capitalization and Authorization of Securities. The authorized
issued and outstanding capital stock of the Company will be as of the
Closing Time as set forth in the column entitled "As Adjusted" under the
caption "Capitalization" in the Prospectuses; and the authorized capital
stock of the Company will conform as of the Closing Time in all material
respects to the description thereof contained in the Prospectuses under the
caption "Description of Capital Stock"; all the outstanding shares of
capital stock of the Company have been duly authorized and validly issued,
are fully paid and nonassessable, and are free of any preemptive or similar
rights, except as set forth in the Prospectuses, and were issued and sold
in compliance with all applicable Federal and state securities laws. The
Securities to be purchased by the U.S. Underwriters and the International
Managers from the Company have been duly authorized for issuance and sale
to the Underwriters pursuant to this Agreement and the International
Purchase Agreement, respectively, and when issued and delivered by the
Company pursuant to this Agreement and the International Purchase
Agreement, respectively, against payment of the consideration set forth in
this Agreement and the International Purchase Agreement, will be validly
issued and fully paid and non-assessable and no holder of the Securities is
or will be subject to personal liability by reason of being such holder.
(iii) Good Standing of the Company and the Subsidiaries. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of the Company's Subsidiaries
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. The term
"Subsidiaries" as used in this Agreement shall include USN Communications
Northeast, Inc. (formerly United Telemanagement Services, Inc.), USN
Communications Long Distance, Inc. (formerly United Telecom of America,
Inc.), Quest United, Inc., USN Southwest, Inc., U.S. Network Corporation,
FoneNet/Ohio, Inc. ("FoneNet"), USN Solutions, Inc., USN Communications
Midwest, Inc. (formerly USN Communications, Inc.), USN Communications
Atlantic, Inc., USN Communications Virginia, Inc., USN Northeast, Inc. and
Quest United, Inc. Each of the Company and its Subsidiaries has full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectuses, and is duly
registered and qualified to conduct its business and is in good standing
under the laws of each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not
have a material adverse effect and would not reasonably be expected to have
a material adverse effect upon the financial condition, business,
liabilities (contingent or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole (a "Material Adverse
Effect").
8
(iv) Authorization of Subsidiary Capital Stock. All the outstanding
shares of capital stock of each Subsidiary have been duly authorized and
validly issued, are fully paid and nonassessable, and, except as otherwise
set forth in the Prospectuses, all of the outstanding shares of capital
stock of the Subsidiaries are, and will be at the Closing Time (and, if any
U.S. Option Securities are purchased, at the Date of Delivery), owned
directly by the Company free and clear of any lien, adverse claim, security
interest or equity or other encumbrance.
(v) Absence of Proceedings. There are no legal or governmental
proceedings, complaints or investigations including, without limitation,
before the Federal Communications Commission (the "FCC") or any comparable
state regulatory agency with direct regulatory jurisdiction over
telecommunications matters in any state in which the Company or any
Subsidiary provides services (each, a "State Regulatory Agency") pending
or, to the knowledge of the Company, threatened, against the Company or any
of the Subsidiaries or to which the Company or any of the Subsidiaries, or
to which any of their respective properties, is subject, that are not
disclosed in the Prospectuses and which, individually or in the aggregate,
would be reasonably likely to cause a Material Adverse Effect or materially
affect the issuance of the Securities or the consummation of the
transactions contemplated hereby or by the International Purchase
Agreement. There are no material agreements, contracts, indentures, leases
or other instruments to which the Company or any Subsidiary is a party or
by which any of them may be bound or to which any of their respective
properties may be subject that are not described in the Prospectuses, the
failure of which to describe would constitute a material misstatement or
omission of a material fact.
(vi) Absence of Defaults and Conflicts. Neither the Company nor any
of its Subsidiaries is (A) in violation of its certificate of
incorporation, by-laws or other organizational documents, (B) in breach of,
or in default in, the performance of any obligation, agreement, covenant or
condition contained in any material bond, debenture, note or any other
evidence of indebtedness or in any agreement, indenture, lease or other
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them may be bound or to which any of their respective
properties may be subject, or (C) in violation of any judgment, injunction,
order or decree applicable to the Company or any of its Subsidiaries of any
court, regulatory body (including any self-regulatory body), administrative
agency, governmental body or arbitrator having jurisdiction over the
Company or any of its Subsidiaries, and no event has occurred which, with
notice or lapse of time or both, would constitute such a violation or
default, except, in the case of clauses (B) and (C) hereof, for any such
breach, default or violation which would not have a Material Adverse
Effect. Each of the Company and its Subsidiaries is in compliance with all
applicable statutes, laws, rules, regulations and filing requirements
(including the applicable rules and regulations of self-regulatory bodies),
except where the failure to so be in compliance would not have a Material
Adverse Effect.
(vii) No Consents. Neither the issuance, offer, sale or delivery of
the Securities, compliance by the Company with the provisions hereof or of
the International
9
Purchase Agreement nor consummation by the Company of the transactions
contemplated hereby or thereby (A) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency
or official, including, without limitation, the FCC or any State Regulatory
Agency, (except such as has been obtained in connection with the
registration under the 1933 Act of the Securities and except for compliance
with the securities or Blue Sky laws of various jurisdictions), (B)
conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, the certificate of incorporation, by-laws or other
organizational documents of the Company or any of the Subsidiaries or,
except where such conflict, breach or default would not have a Material
Adverse Effect, any material bond, debenture, note or other evidence of
indebtedness or any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any of
them or any of their respective properties is or may be bound, or (C)
violates or will violate any statute, law, rule, regulation, filing
requirement, judgment, injunction, order or decree applicable to the
Company or any of the Subsidiaries or any of their respective properties,
or will result in the creation or imposition of any lien, adverse claim,
security interest or equity or other encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms of
any agreement or instrument to which any of them is a party or by which any
of them may be bound or to which any of the property or assets of any of
them is subject, except where such violation, creation or imposition would
not have a Material Adverse Effect.
(viii) Independent Accountants. The accountants, Deloitte & Touche
LLP ("D&T") and KPMG Peat Marwick LLP ("KPMG"), who have certified or shall
certify the financial statements included as part of the Prospectuses, are
independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretations and rulings and within the
meaning of the 1933 Act and the Rules and Regulations promulgated
thereunder.
(ix) Financial Statements. The financial statements, together with
related schedules and notes forming part of the Prospectuses, present
fairly in all material respects the consolidated financial position,
results of operations and changes in stockholders' equity and cash flows of
the Company and the Subsidiaries on the basis stated in the Prospectuses at
the respective dates or for the respective periods to which they apply;
such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as otherwise noted therein;
and the other financial and statistical information and data set forth in
the Prospectuses are accurately presented and, to the extent such
information and data are derived from the financial books and records of
the Company, are prepared on a basis consistent with such financial
statements and the books and records of the Company. The pro forma
financial information of the Company and its subsidiaries 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 pro
forma financial statements, have been properly compiled on the bases
10
described therein and, in the opinion of the Company and its subsidiaries,
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.
(x) Authorization of Agreement. The Company has all requisite
power and authority to execute, deliver and perform its obligations under
this Agreement and the International Purchase Agreement; the execution and
delivery of, and the performance by the Company of its obligations under
this Agreement and the International Purchase Agreement have been duly and
validly authorized by the Company, and each of this Agreement and the
International Purchase Agreement has been duly executed and delivered by
the Company and constitutes the valid and binding agreements of the
Company, enforceable against the Company in accordance with their terms,
except as the enforcement hereof and thereof may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, by general equitable principles and any rights to indemnity and
contribution may be limited by Federal and state securities laws and by
public policy considerations.
(xi) No Material Adverse Change in Business. Except as disclosed in
the Prospectuses, subsequent to the date as of which such information is
given in the Prospectuses, neither the Company nor any of the Subsidiaries
has incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is
material to the Company and the Subsidiaries taken as a whole, and there
has not been any material change in the capital stock, or material increase
in the short-term or long-term debt, of the Company or any of the
Subsidiaries, or any material adverse change, or any development which
could reasonably be expected to have a Material Adverse Effect.
(xii) Properties. Each of the Company and the Subsidiaries has good
and marketable title to all property (real and personal) described in the
Prospectuses as being owned by it, free and clear of all liens, adverse
claims, security interests or equity or other encumbrances except such as
do not materially and adversely effect the value of such property and do
not materially interfere with the use made or proposed to be made of such
property by the Company or any Subsidiary or the conduct of the business of
the Company and the Subsidiaries, and all the property described in the
Prospectuses as being held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable leases,
with only such exceptions as in the aggregate are not materially burdensome
and do not interfere in any material respect with the conduct of the
business of the Company and the Subsidiaries, taken as a whole.
(xiii) Distribution of Prospectuses. Except as permitted by the 1933
Act, the Company has not distributed and, prior to the later to occur of
the Closing Time (and, if any U.S. Option Securities are purchased, at the
Date of Delivery) and completion of the distribution of the securities,
will not distribute any offering material in connection with
11
the offering and sale of the Securities other than the preliminary
prospectuses and the Prospectuses.
(xiv) Possession of Licenses and Permits. Each of the Company and
the Subsidiaries owns, holds, possesses or has obtained all such
governmental agreements, licenses, permits, certificates, franchises,
consents, orders, approvals, waivers and other authorizations (A) as are
required under such Federal and state laws as specifically regulate the
operation of the Company or any Subsidiary including all Licenses (as
defined below) required by the FCC and the State Regulatory Agencies for
the provision of telecommunications services by the Company and the
Subsidiaries and (B) of the appropriate governmental or regulatory agencies
or bodies as are necessary to own, hold or lease their respective
properties and to conduct their respective businesses as described in the
Prospectuses (collectively, "Licenses"); each of such Licenses is in full
force and effect and is fairly described in the Prospectuses; the Company
and each of the Subsidiaries has fulfilled and performed in all material
respects all of their respective obligations with respect to all such
Licenses possessed by any of them; no event has occurred which allows, or
after notice or lapse of time, or both, would allow, revocation or
termination thereof or result in any other material impairment of the
rights of the holder of any such License; and neither the Company nor any
of its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of, or denial of any application for, any such
License other than as described in the Prospectuses, and the Company has no
knowledge that the relevant authorities have threatened any such
proceeding.
(xv) Accounting. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
material transactions are executed in accordance with management's general
or specific authorization; (B) material transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; and (C) access to assets is permitted only in accordance with
management's general or specific authorization.
(xvi) Absence of Payments. Neither the Company nor any Subsidiary
nor, to the Company's knowledge, any employee or agent of the Company or
any Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any statute,
law, rule, regulation, filing requirement, judgment, injunction, order or
decree, which violation would have a Material Adverse Effect.
(xvii) Tax Returns. Except as disclosed in the Prospectuses, the
Company and each Subsidiary have filed all tax returns required to be
filed, which returns are true and correct in all material respects, and
neither the Company nor any Subsidiary is in default in the payment of any
taxes which were payable pursuant to said returns or any assessments with
respect thereto, except where the failure to so file or pay would not have
a Material Adverse Effect.
12
(xviii) Rights to Acquire Capital Stock. Except as described in or
contemplated by the Company's 1994 Stock Option Plan, the Omnibus
Securities Plan of USN Communications, Inc. or the Prospectuses, there are
no outstanding options, warrants or other rights calling for the issuance
of, and there are no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company.
(xix) Possession of Intellectual Property. The Company and the
Subsidiaries own or possess all material patents, trademarks, trademark
registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Prospectuses as being owned by any of them or necessary for the conduct of
their respective businesses, and the Company is not aware of any claim to
the contrary or any challenge by any other person to the rights of the
Company and the Subsidiaries with respect to the foregoing.
(xx) ERISA. The execution and delivery of this Agreement and the
International Purchase Agreement, the sale of the U.S. Securities to the
U.S. Underwriters or by the U.S. Underwriters and the sale of the
International Securities to the International Managers or by the
International Managers will not involve any prohibited transaction within
the meaning of Section 406 of the Employee Retirement Income Security Act
of 1974 or Section 4975 of the Internal Revenue Code of 1986, as amended.
(xxi) Absence of Labor Disputes. No labor strike, job action,
dispute, disturbance, lockout, slowdown or stoppage by any group of
employees of the Company or any of its Subsidiaries currently exists and,
to the knowledge of the Company, no such action or dispute is imminent or
threatened.
(xxii) Investment Company Act. The Company is not now, and will not
be, immediately following its receipt of the proceeds of the offering
contemplated hereby, required to register as an investment company (an
"Investment Company") as defined in the Investment Company Act of 1940 (the
"Investment Company Act"). If the Company should at any time become an
Investment Company, it will comply with all applicable provisions of the
Investment Company Act and the rules and regulations thereunder.
(xxiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectuses or to be filed as exhibits thereto which have not been so
described and filed as required.
(xxiv) Compliance with Cuba Act. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida
Act relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
13
(xxv) Registration Rights. Except as described in the Prospectuses
under the caption "Description of Capital Stock--Registration Rights"),
there are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933 Act.
(xxvi) Authorization of Stock Purchase Agreement. The Company has
all requisite power and authority to execute, deliver and perform its
obligations under the Stock Purchase Agreement, dated as of January 7,
1998, by and among the Company and ▇▇▇▇ ▇▇▇▇▇▇, Triumph-Connecticut Limited
Partnership, a Connecticut limited partnership, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Day
School of Greater Hartford, Inc., a not-for-profit educational institution
and ▇▇▇▇▇▇ Communications Holding Company, Inc., a Connecticut corporation
("▇▇▇▇▇▇ Communications") (collectively, the "Sellers"); the execution and
delivery of, and the performance by the Company of its obligations under
the Stock Purchase Agreement have been duly and validly authorized by the
Company and the Stock Purchase Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as the enforcement hereof may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the enforcement of creditors' rights generally and
by general equitable principles.
(xxvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws and (ii) such as have been obtained
under the laws and regulations of jurisdictions outside the United States
in which the Reserved Securities are offered.
(b) ▇▇▇▇▇▇ Communications. To the Company's knowledge, since October 31,
1997, ▇▇▇▇▇▇ Communications has not suffered a material adverse effect on its
business, operations or financial condition.
14
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each U.S. Underwriter, severally and not
jointly, and each U.S. Underwriter, severally and not jointly, agrees to
purchase from the Company, at the price per share set forth in Schedule B, the
number of Initial U.S. Securities set forth in Schedule A opposite the name of
such U.S. Underwriter, plus any additional Initial U.S. Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the U.S. Underwriters,
severally and not jointly, to purchase up to an additional 960,000 shares of
Common Stock at the price per share set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial U.S. Securities but not payable on the U.S. Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Initial U.S. Securities upon notice by the Global
Coordinator to the Company setting forth the number of U.S. Option Securities as
to which the several U.S. Underwriters are then exercising the option and the
time and date of payment and delivery for such U.S. Option Securities. Any such
time and date of delivery for the U.S. Option Securities (a "Date of Delivery")
shall be determined by the Global Coordinator, but shall not be earlier than one
full business day or later than seven full business days after the exercise of
said option, nor in any event prior to the Closing Time, as hereinafter defined.
If the option is exercised as to all or any portion of the U.S. Option
Securities, each of the U.S. Underwriters, acting severally and not jointly,
will purchase that proportion of the total number of U.S. Option Securities then
being purchased which the number of Initial U.S. Securities set forth in
Schedule A opposite the name of such U.S. Underwriter bears to the total number
of Initial U.S. Securities, subject in each case to such adjustments as the
Global Coordinator in its discretion shall make to eliminate any sales or
purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Akin,
Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, or at such other place as shall be agreed upon by the Global Coordinator
and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the
pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the Global Coordinator and the Company (such time and
date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be
15
agreed upon by the Global Coordinator and the Company, on each Date of Delivery
as specified in the notice from the Global Coordinator to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the U.S. Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such U.S. Underwriter from
its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
(e) Appointment of Qualified Independent Underwriter. The Company hereby
confirms its engagement of DLJ as, and DLJ hereby confirms its agreement with
the Company to render services as, a "qualified independent underwriter" within
the meaning of Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD") with respect to the offering and sale of
the U.S. Securities. DLJ, solely in its capacity as qualified independent
underwriter and not otherwise, is referred to herein as the "Independent
Underwriter" or the "QIU." As compensation for the services of the QIU
hereunder, the Company agrees to pay the QIU $5,000 on the date of the Closing
Time. The price at which the Securities will be sold to the public shall not be
higher than the maximum price recommended by DLJ acting as QIU.
SECTION 3. Covenants of the Company. The Company covenants with each U.S.
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Global Coordinator immediately,
and confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement or amendment to
the Prospectuses or any amended Prospectuses shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any
16
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectuses or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b) and any filing required by
Section 3(k) hereof), any Term Sheet or any amendment, supplement or revision to
either the prospectus included in the Registration Statement at the time it
became effective or to the Prospectuses, will furnish the Global Coordinator
with copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any such
document without the consent of the Global Coordinator, which consent shall not
be unreasonably withheld. Neither the consent of the Global Coordinator, nor the
delivery of any such document by any of the Underwriters shall constitute a
waiver of any of the conditions set forth in Section 5 hereof.
(c) Delivery of Registration Statements. The Company has furnished or will
deliver to the U.S. Representatives and counsel for the U.S. Underwriters,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the U.S. Representatives,
without charge, a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for each of the U.S.
Underwriters. The copies of the Registration Statement and each amendment
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), such number of copies of the
U.S. Prospectus (as amended or supplemented) as such U.S. Underwriter may
reasonably request. The U.S. Prospectus and any amendments or supplements
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
▇▇▇▇▇, except to the extent permitted by Regulation S-T.
17
(e) Continued Compliance with Securities Laws . The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement, the
International Purchase Agreement and in the Prospectuses and to permit the U.S.
Underwriters to engage in market-making activities pursuant to Section 3(k)
hereof. If at any time when a prospectus is required by the 1933 Act or the 1934
Act to be delivered in connection with sales of the Securities, any event shall
occur or condition shall exist as a result of which it is necessary, in the
opinion of counsel for the U.S. Underwriters or for the Company, to amend the
Registration Statement or amend or supplement any Prospectus in order that the
Prospectuses will not include any untrue statements of a material fact or omit
to state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement any Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectuses comply with such requirements, and the Company
will furnish to the U.S. Underwriters such number of copies of such amendment or
supplement as the U.S. Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its reasonable best
efforts, in cooperation with the U.S. Underwriters, to qualify the Securities
for offering and sale under the applicable securities laws of such states and
other jurisdictions (domestic or foreign) as the Global Coordinator may
designate and to maintain such qualifications in effect for as long as required
for the sale of the Securities; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earning statement for the purposes of,
and to provide the benefits contemplated by, the last paragraph of Section 11(a)
of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect and maintain
the quotation of the Common Stock on the Nasdaq National Market and will file
with the Nasdaq National Market all documents and notices required by the Nasdaq
National Market of companies that have securities that are traded in the over-
the-counter market and quotations for which are reported by the Nasdaq National
Market.
(j) Restriction on Sale of Securities. During a period of 180 days
following the date of the Prospectuses, the Company will not, without the prior
written consent of the Global
18
Coordinator, directly or indirectly, (i) sell, offer to sell, grant any option
for sale of, or dispose of, any capital stock of the Company or any security
convertible or exchangeable into, or exerciseable for, such capital stock or
file any registration statement (other than any registration statements on Form
S-8) with respect to any of the foregoing pursuant to the 1933 Act or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Securities to be sold hereunder or under the
International Purchase Agreement or (B) any options to purchase shares of Common
Stock issued by the Company pursuant to existing stock option plans or any
shares issued upon the exercise of options or upon exercise of currently
existing warrants.
(k) Market-Making Activities. If at any time ▇▇▇▇▇▇▇ ▇▇▇▇▇ is unable to
obtain opinions from ▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois) and Akin,
Gump, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇, L.L.P. that it is not an affiliate of the Company
for purposes of the 1933 Act, then the Company shall, at its expense, (i) use
its best efforts to amend the Registration Statement as soon as practicable to
include such disclosures as may be necessary to permit the U.S. Prospectus
contained in the Registration Statement to be used in connection with offers and
sales by the U.S. Underwriters for market-making activities of the Common Stock
and (ii) use its best efforts to keep the Registration Statement continuously
effective, supplemented and amended and to take such other actions, including,
but not limited to, filing an amendment to the Registration Statement and
related U.S. Prospectus to update such Registration Statement and U.S.
Prospectus to include all information required to be filed pursuant to Section
3(l) hereof (including, but not limited to, the Company's annual reports on Form
10-K, quarterly reports on Form 10-Q and periodic reports on Form 8-K), to the
extent necessary, in the reasonable judgment of ▇▇▇▇▇▇▇ ▇▇▇▇▇, to ensure that it
is available for sales of Common Stock in connection with market-making
activities by the U.S. Underwriters and to ensure that it conforms with the
requirements of this Agreement, the 1933 Act and the policies, rules and
regulations of the Commission as announced from time to time, until such time as
▇▇▇▇▇▇▇ ▇▇▇▇▇ shall receive such opinions, at the expense of the Company, from
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois) and ▇▇▇▇, Gump, ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇, L.L.P. that ▇▇▇▇▇▇▇ ▇▇▇▇▇ is not an affiliate of the Company for purposes
of the 1933 Act. The Company agrees, at its expense, to furnish the U.S.
Underwriters with as many copies of the Registration Statement, U.S. Prospectus
and each report of the Company filed with the Commission pursuant to Section 13
or 15 of the 1934 Act attached to the most recent U.S. Prospectus as the U.S.
Underwriters shall reasonably request in connection with its market-making
activities. If at any time when the U.S. Prospectus is required by the 1933 Act
to be delivered in connection with market-making activities of the U.S.
Underwriters, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the U.S. Underwriters or
for the Company, to amend the Registration Statement or amend or supplement the
U.S. Prospectus in order that the U.S. Prospectus will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered in connection with the U.S.
Underwriters' market-making activities, or if it shall be necessary, in the
opinion of such counsel, at any such time to amend the Registration Statement
19
or amend or supplement the U.S. Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such statement or
omission or to make the Registration Statement or the U.S. Prospectus comply
with such requirements, and the Company will furnish to the U.S. Underwriters
such number of copies of such amendment or supplement as the U.S. Underwriters
may reasonably request. The Company agrees to obtain from its independent
accountants, at its expense, on each effective date of any post-effective
amendment to the Registration Statement a letter addressed to ▇▇▇▇▇▇▇ ▇▇▇▇▇
dated such date covering matters describe in Section 5(f) hereof, in each case,
in form and substance satisfactory to ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(l) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(m) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the NASD
or the NASD rules from sale, transfer, assignment, pledge or hypothecation for a
period of three months following the date of this Agreement. The U.S.
Underwriters will notify the Company as to which persons will need to be so
restricted. At the request of the U.S. Underwriters, the Company will direct the
transfer agent to place a stop transfer restriction upon such securities for
such period of time. Should the Company release, or seek to release, from such
restrictions any of the Reserved Securities, the Company agrees to reimburse the
U.S. Underwriters for any reasonable expenses (including, without limitation,
legal expenses) they incur in connection with such release.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and any schedules or exhibits and any document incorporated
therein) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery (other than fees, expenses or disbursements
of counsel to the Underwriters) to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters and the transfer of the Securities between the
U.S. Underwriters and the International Managers, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the
20
Prospectuses and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities and (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (x) the
fees and expenses incurred in connection with the inclusion of the Securities in
the Nasdaq National Market, (xi) all costs and expenses of the Underwriters,
including the fees and disbursements of counsel for the Underwriters, in
connection with matters related to the Reserved Securities which are designated
by the Company for sale to employees and others having a business relationship
with the Company and (xii)) the fees and expenses of the Independent
Underwriter.
(b) Termination of Agreement. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations of
the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any of its Subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for Company. The U.S. Underwriters shall have
received at the Closing Time an opinion of ▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
(Illinois), counsel for the Company, dated the date of the Closing Time and
addressed to the U.S. Underwriters in form and substance reasonably satisfactory
to counsel for the U.S. Underwriters to the effect set forth in Exhibit A hereto
and to such further effect as counsel to the U.S. Underwriters may reasonably
request.
(c) Opinion of General Counsel for Company. The Underwriters shall have
received at the Closing Time an opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., General
Counsel of the Company, dated the date of the Closing Time and addressed to the
Underwriters in form and substance
21
reasonably satisfactory to counsel for the U.S. Underwriters to the effect set
forth in Exhibit B hereto and to such further effect as counsel to the U.S.
Underwriters may reasonably request.
(d) Opinion of Counsel for U.S. Underwriters. The Underwriters shall have
received at the Closing Time an opinion of ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇,
L.L.P., counsel for the Underwriters, dated the date of the Closing Time, and
addressed to the Underwriters, with respect to the matters referred to in
clauses (i) (with respect to the Company only) and the last paragraph of the
foregoing paragraph (b) and such other related matters as the Underwriters may
request.
(e) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the U.S.
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the best knowledge of the Company,
are pending or are contemplated by the Commission.
(f) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the U.S. Representatives shall have received from each of D&T and
KPMG a letter dated such date, in form and substance satisfactory to the U.S.
Representatives, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectuses.
(g) Bring-down Comfort Letter. At Closing Time, the U.S. Representatives
shall have received from D&T a letter dated as of Closing Time, to the effect
that they reaffirm the statements made in the letter furnished pursuant to
subsection (f) of this Section, except that the specified date referred to shall
be a date not more than three business days prior to Closing Time.
(h) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(i) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
22
(j) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto (each, a "Lock-up Letter") signed by the persons listed on
Schedule C hereto
(k) Fees and Expenses of QIU. At Closing Time, the QIU shall have received
its fees and expenses (including the fees and disbursements of counsel to the
QIU) as set forth herein.
(l) Purchase of Initial International Securities. Contemporaneously with
the purchase by the U.S. Underwriters of the Initial U.S. Securities under this
Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(m) Conditions to Purchase of U.S. Option Securities. In the event that
the U.S. Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the U.S. Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the relevant Date
of Delivery, the U.S. Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the
Closing Time pursuant to Section 5(e) hereof remains true and
correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
▇▇▇▇▇▇▇, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois), counsel for
the Company, together with the favorable opinion of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq., general counsel for the Company, each in form and
substance reasonably satisfactory to counsel for the U.S.
Underwriters, dated such Date of Delivery, relating to the U.S.
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Sections 5(b) and 5(c) hereof.
(iii) Opinion of Counsel for U.S. Underwriters. The favorable opinion
of ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., counsel for the
U.S. Underwriters, dated such Date of Delivery, relating to the
U.S. Option Securities to be purchased on such Date of Delivery
and otherwise to the same effect as the opinion required by
Section 5(d) hereof.
(iv) Bring-down Comfort Letter. A letter from D&T in form and
substance satisfactory to the U.S. Representatives and dated
such Date of Delivery, substantially in the same form and
substance as the letter furnished to the U.S. Representatives
pursuant to Section 5(g) hereof, except that the
23
"specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to such
Date of Delivery.
(n) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the U.S. Underwriters shall have been furnished with such documents
and opinions as they may reasonably require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; provided, however,
that the only additional opinion of counsel the U.S. Underwriters shall require
is the opinion of ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C. and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance to
the U.S. Representatives and counsel for the U.S. Underwriters.
(o) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant Option
Securities, may be terminated by the U.S. Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6 and 7
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of U.S. Underwriters. (1) The Company agrees to
indemnify and hold harmless each U.S. Underwriter and each person, if any, who
controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto, including, but not limited to, any amendment
filed pursuant to Section 3(k) hereof), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectuses (or any
amendment or supplement thereto, including, but not limited to, any
amendment or supplement filed pursuant to Section 3(k) hereof), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or
24
any investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such settlement
is effected with the written consent of the Company; and
(iii) to the extent provided for in Section 6(b) below, against any
and all expense whatsoever, as incurred (including the fees and
disbursements of counsel chosen by ▇▇▇▇▇▇▇ ▇▇▇▇▇), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto);
provided, further, that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any U.S. Underwriter (or to the
benefit of any person controlling such U.S. Underwriter) from whom the person
asserting any such losses, claims, damages or liabilities purchased Securities
if such untrue statement or omission or alleged untrue statement or omission
made in any such preliminary prospectus is eliminated or remedied in the U.S.
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto to such U.S. Underwriter prior to confirmation
of the sale of such Securities to such person by such U.S. Underwriter and a
copy of the U.S. Prospectus (as so amended or supplemented) shall not have been
furnished to such person at or prior to the written confirmation of the sale of
such Securities to such person, unless such failure to deliver was a result of
non-compliance by the Company with Section 3(a) or 3(b), and the claims asserted
by such person do not include allegations of other untrue statements or
omissions of material facts made in the U.S. Prospectus, which allegations are
upheld in a final judgment.
(2) In addition to and without limitation of the Company's obligation to
indemnify DLJ as an Underwriter, the Company also agrees to indemnify and hold
harmless the Independent Underwriter and each person, if any, who controls the
Independent Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, (i) arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto, including, but not limited to, any
amendment filed pursuant to section 3(k) hereof), including the Rule 430A
Information and the Rule 434 Information, if applicable, or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of any
untrue statement or alleged
25
untrue statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto, including, but not
limited to, any amendment filed pursuant to section 3(k) hereof), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (ii) incurred as a result of the Independent
Underwriter's participation as a "qualified independent underwriter" within the
meaning of Rule 2720 of the Conduct Rules of the NASD in connection with the
offering of the U.S. Securities.
(b) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
(1) of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary U.S. prospectus or
the U.S. Prospectus (or any amendment or supplement thereto) in reliance upon
and in conformity with written information furnished to the Company by such U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the U.S. Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. If it so elects within a reasonable time after receipt of such
notice, an indemnifying party, severally or jointly with any other indemnifying
parties receiving such notice, may assume the defense of such action with
counsel chosen by it, subject to the terms hereof, and reasonably acceptable to
the indemnified parties defendant in such action; provided, however, that if DLJ
is sued in its capacity as QIU, it has the right to assume its own defense
without consulting with any other named parties. If an indemnifying party
assumes the defense of such action, the indemnifying parties shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action, provided, however, that if the
instance contemplated by clause (ii) or (iii) of the following sentence occurs
then the indemnifying party can no longer assume such defense. Notwithstanding
the indemnifying party's election to appoint counsel to represent the
indemnified party in any action, the indemnified party shall have the right to
employ separate counsel at any time, and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the
indemnifying party shall have failed to assume the defense and employ counsel,
(ii) the use of counsel chosen by the indemnifying party to represent the
indemnified party would, in the opinion of counsel to the indemnified party,
present such counsel with a conflict of interest or (iii) DLJ is sued in its
capacity as QIU. In no event shall the indemnifying parties be liable for fees
and expenses of
26
more than one counsel (in addition to any local counsel and one additional
counsel for the QIU) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(1)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a request
in writing, to indemnify and hold harmless the U.S. Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and other persons
having a business relationship with the Company to pay for and accept delivery
of Reserved Securities which, by the end of the first business day following the
date of this Agreement, were subject to a properly confirmed agreement to
purchase.
SECTION 7. Contribution. (a) If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the U.S. Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
U.S. Underwriters on the other hand in connection with the statements or
omissions, which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
27
The relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the U.S. Prospectus, or,
if Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover.
The relative fault of the Company on the one hand and the U.S. Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof.
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the U.S. Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the
28
number of Initial U.S. Securities set forth opposite their respective names in
Schedule A hereto and not joint.
(b) If the indemnification provided for in Section 6 hereof is for any
reason unavailable to or insufficient to hold harmless the Independent
Underwriter in respect of any losses, liabilities, claims, damages or expenses
referred to therein, then the Company shall contribute to the amount paid or
payable by the Independent Underwriter as a result of such losses, liabilities,
claims, damages or expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Independent Underwriter on the other hand from the offering of the Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Independent Underwriter in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Independent Underwriter shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company as set forth in the table on the
cover page of the Prospectuses, and the fee received by the Independent
Underwriter pursuant to Section 2 hereof, bear to the sum of such total net
proceeds and such fee. The relative fault of the Company the Independent
Underwriter shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Independent Underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission and whether the Independent Underwriter's activities as Independent
Underwriter under its engagement pursuant to Section 2 hereof involved any
willful misconduct or gross negligence on the part of the Independent
Underwriter.
The Company and the U.S. Underwriters agree that DLJ will not receive any
additional benefits hereunder for serving as the Independent Underwriter in
connection with the offering and sale of the U.S. Securities, except as provided
in Section 2 hereof.
The Company and the Independent Underwriter agree that it would not be just
and equitable if contribution pursuant to this Section 7(b) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by a Independent Underwriter as a result
of the losses, liabilities, claims, damages or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Independent Underwriter in connection with investigating or defending any matter
that could have given rise to such losses, claims, damages, liabilities or
judgments. In no event shall any Independent Underwriter be required to
contributed in the aggregate an amount exceeding the fee received by DLJ
pursuant to Section 2 hereof. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
29
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any Independent
Underwriter at law or in equity.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any U.S. Underwriter or controlling person, or by or on behalf
of the Company, and shall survive delivery of the Securities to the U.S.
Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the U.S. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the U.S.
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or limited by the Commission or the Nasdaq National
Market, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal, New York or Delaware authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6
and 7 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or more
of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the
right, but not the obligation, within 24 hours thereafter, to make arrangements
for one or more of the non-defaulting U.S. Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as
30
may be agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of U.S. Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the U.S. Underwriters to purchase and of the Company to sell
the Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting U.S.
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the U.S.
Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either the U.S. Representatives or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to ▇▇▇▇▇▇▇ Lynch, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated at North Tower, World Financial Center, New York, New York 10281-
1201, attention of ▇▇▇▇▇▇ ▇▇▇▇▇; and notices to the Company shall be directed to
it at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of
General Counsel.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
be binding upon the U.S. Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company and their
respective successors, and said controlling persons and
31
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any U.S. Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction hereof.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
USN COMMUNICATIONS, INC.
By
------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
32
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
▇▇▇▇▇ & COMPANY
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
By: ▇▇▇▇▇▇▇ LYNCH, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By
--------------------------------------
Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A hereto.
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SCHEDULE A
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ----------
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated...............................................................
▇▇▇▇▇ & Company.................................................................
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation.....................................................
Total................................................................. 6,400,000
34
SCHEDULE B
USN COMMUNICATIONS, INC.
6,400,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $__________.
2. The purchase price per share for the U.S. Securities to be paid by the
several U.S. Underwriters shall be $__________, being an amount equal to the
initial public offering price set forth above less $__________ per share;
provided that the purchase price per share for any U.S. Option Securities
purchased upon the exercise of the over-allotment option described in Section
2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial U.S. Securities
but not payable on the U.S. Option Securities.
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SCHEDULE C
List of persons and entities
subject to lock-up
36
SCHEDULE I
Applicable Contracts
[To include Stock Purchase Agreement]
37