Exhibit 1.1
_________ Shares of Common Stock
PAC-WEST TELECOMM, INC.
UNDERWRITING AGREEMENT
----------------------
___________, 1999
BEAR, XXXXXXX & CO. INC.
BANC OF AMERICA SECURITIES LLC
FIRST UNION CAPITAL MARKETS CORP.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Pac-West Telecomm, Inc., a corporation organized and existing under
the laws of California (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to the several underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of ________ shares (the
"Firm Shares") of its common stock, par value $.001 per share (the "Common
Stock") and, for the sole purpose of covering over-allotments in connection with
the sale of the Firm Shares, at the option of the Underwriters, up to an
additional ______ shares (the "Additional Shares") of Common Stock. The Firm
Shares and any Additional Shares purchased by the Underwriters are referred to
herein as the "Underwritten Shares." The Underwritten Shares are more fully
described in the Registration Statement referred to below.
It is understood that certain shareholders of Safeguard Scientifics,
Inc. ("Safeguard"), an affiliate of one of the Company's principal shareholders,
Safeguard 98 Capital, L.P., are concurrently subscribing with the Company to
purchase up to an aggregate of _______ shares of Common Stock, _____ of which
will be newly issued shares of Common Stock (the "Primary DSSP Shares") and, to
the extent necessary to satisfy all purchases under the program, up to _____ of
which will be shares of Common Stock held by Safeguard 98 Capital, L.P. (the
"Secondary DSSP Shares" and, collectively with the Primary DSSP Securities, the
"DSSP Shares") pursuant to a directed share subscription program (the "Directed
Share Subscription Program"). The Underwritten Shares and the DSSP Shares are
hereinafter collectively called the "Shares." Only Safeguard shareholders
owning at least 100 shares of common stock of Safeguard as of September 7, 1999
are eligible to participate in the Directed Share Subscription Program. These
shareholders may subscribe for one share of the DSSP Shares for every ten
shares of common stock of Safeguard held by them and may not transfer their
subscription rights to another person. The purchase price for each share of the
DSSP Shares will equal the public offering price per share of Common Stock of
the Company set forth on the cover page of the DSSP Prospectus (as defined).
Payments and deliveries of DSSP Shares under the Directed Share Subscription
Program will occur on the Closing Date (as defined). If any of the Primary DSSP
Shares are not purchased by shareholders of Safeguard, then Safeguard or its
designee will purchase those shares pursuant to a stand-by stock subscription
and indemnity agreement between Safeguard, Safeguard 98 Capital, L.P., Bear,
Xxxxxxx & Co. Inc. and the Company of even date herewith (the "Standby
Subscription Agreement").
Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (No. 333-86607) covering
the registration of the Shares under the Securities Act of 1933, as amended (the
"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 of
the rules and regulations of the Commission under the Act and Rule 424(b) of the
rules and regulations of the Commission under the Act (the "Regulations") or
(ii) if the Company has elected to rely upon Rule 434 of the Regulations,
prepare and file 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 Shares: (i) a form relating to the Underwritten Shares
(the "Form of Primary Prospectus") and (ii) a form relating to the DSSP Shares
(the "Form of DSSP Prospectus"). The Form of DSSP Prospectus is identical to
the Form of Primary Prospectus except that a letter to the shareholders of
Safeguard Scientifics, Inc. detailing the procedures for the Directed Share
Subscription Program will be bound to the cover of the prospectus to be used in
that program. 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 (i) pursuant to paragraph
(b) of Rule 430A is referred to as "Rule 430A Information" or (ii) pursuant to
paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each Form
of Primary Prospectus and Form of DSSP 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 prospectuses, financial statements and schedules, exhibits and all
other documents filed as a part thereof, as amended at the time of effectiveness
of the registration statement 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 Prospectus
and Form of DSSP Prospectus in the forms first furnished to the Underwriters for
use in connection with the offering of the Securities or used in the Directed
Share Purchase Program are herein called the
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"Primary Prospectus" and the "DSSP Prospectus," respectively, and collectively,
the "Prospectus."
At the time of the effectiveness of the Registration Statement or
the effectiveness of any post-effective amendment to the Registration Statement,
when the Prospectus is first filed with the Commission pursuant to Rule 424(b)
or Rule 434 of the Regulations, when any supplement to or amendment of the
Prospectus is filed with the Commission, when any document filed under the
Securities and Exchange Act of 1934 (the "Exchange Act") is filed and at the
Closing Date and the Additional Closing Date, if any, (as hereinafter
respectively defined), the Registration Statement and the Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and do not or will not contain an untrue statement of a material fact and do not
or will not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein (i) in the case of the
Registration Statement, not misleading and (ii) in the case of the Prospectus,
in light of the circumstances under which they were made, not misleading. When
any related preliminary prospectus was first filed with the Commission (whether
filed as part of the registration statement for the registration of the Shares
or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when
any amendment thereof or supplement thereto was first filed with the Commission,
such preliminary prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not contain an untrue statement of a material fact and
did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein in light of the circumstances
under which they were made not misleading. No representation and warranty is
made in this subsection (b), however, with respect to any information contained
in or omitted from the Registration Statement or the Prospectus or any related
preliminary prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through you as herein stated
expressly for use in connection with the preparation thereof. If Rule 434 is
used, the Company will comply with the requirements of Rule 434.
Xxxxxx Xxxxxxxx LLP, who have certified the financial statements
and supporting schedules included in the Registration Statement, are independent
public accountants as required by the Act and the Regulations.
Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth in
the Registration Statement and the Prospectus, (i) there has been no material
adverse change or any development involving a prospective material adverse
change in the business, prospects, properties, operations, condition (financial
or other) or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and since the date of the
latest balance sheet presented in the Registration Statement and the Prospectus,
(ii) the Company has not incurred or undertaken any liabilities or obligations,
direct or contingent, which are material to the Company, except for liabilities
or obligations which are reflected in the Registration Statement and the
Prospectus, (iii) the Company has not issued or granted any securities, (iv)
the Company
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has not entered into any material transaction not in the ordinary course of
business and (v) the Company has not declared any dividends on its capital
stock.
Each of this Agreement and the Standby Subscription Agreement and
any other agreement relating to the Directed Share Subscription Program, and the
transactions contemplated herein and therein have been duly and validly
authorized by the Company, and this Agreement and the Standby Subscription
Agreement and any other agreement relating to the Directed Share Subscription
Program has been duly and validly executed and delivered by the Company.
The execution, delivery, and performance of this Agreement and
the Standby Subscription Agreement and any other agreement relating to the
Directed Share Subscription Program, and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or result
in a breach of any of the terms and provisions of, or constitute a default (or
an event which with notice or lapse of time, or both, would constitute a
default) under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to, any
agreement, instrument, franchise, license or permit to which the Company is a
party or by which the Company or its properties or assets may be bound or (ii)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Company or any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of its properties or assets
(including, without limitation, the Telecommunications Act of 1996, the Federal
Communications Commission (the "FCC") and any similar state or local regulations
or regulatory agencies). No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court or
any public, governmental or regulatory agency or body (including, without
limitation, the FCC and any similar state and local regulatory agency) having
jurisdiction over the Company or any of its properties or assets is required for
the execution, delivery and performance of this Agreement, and the Standby
Subscription Agreement, any other agreement relating to the Directed Share
Subscription Program, or the consummation of the transactions contemplated
hereby or thereby, including the issuance, sale and delivery of the Shares to be
issued, sold and delivered by the Company hereunder and under the Directed Share
Subscription Program, except the registration under the Act of the Shares and
such consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the
Underwritten Shares by the Underwriters.
All of the outstanding shares of Common Stock are duly and
validly authorized and issued, fully paid and nonassessable and were not issued
and are not now in violation of or subject to any preemptive rights. The
Underwritten Shares, when issued, delivered and sold in accordance with this
Agreement and the DSSP Shares, when issued and delivered in accordance with the
Directed Share Subscription Program, will be duly and validly issued and
outstanding, fully paid and nonassessable, and will not have been issued in
violation of or be subject to any preemptive rights. The Company had, at
__________, 1999, an authorized and outstanding capitalization as set forth in
the Registration Statement and the
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Prospectus. The Common Stock, the Firm Shares, the Additional Shares and the
DSSP Shares conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of California. The
Company has no subsidiaries and the Company does not own or control, directly or
indirectly, any corporation, association or other entity. The Company is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned, leased or licensed) or
the nature or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which will not in the
aggregate have a material adverse effect on the Company. As of the date hereof,
(a) the Company has obtained competitive local exchange carrier ("CLEC")
regulatory approval in each of the following states: California, Nevada,
Washington, Oregon and Colorado and no such regulatory approval has been
withdrawn, and to the Company's knowledge no such regulatory approval is the
subject of any legal challenge (except as disclosed in the Prospectus) and (b)
the Company has not received any notice of rejection or denial, nor has it
withdrawn, any of its applications for CLEC approval in Arizona, where
applications for CLEC regulatory approval, as of the date of the Prospectus, are
pending approval. As of the date of the Prospectus, Arizona is the only state
where such applications have been filed and are pending approval. The Company
has all requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits of
and from all public, regulatory or governmental agencies and bodies, to own,
lease and operate its properties and conduct its business as now being conducted
and as described in the Registration Statement and the Prospectus, and no such
consent, approval, authorization, order, registration, qualification, license or
permit contains a materially burdensome restriction not adequately disclosed in
the Registration Statement and the Prospectus.
Except as described in the Prospectus, there is no litigation or
regulatory or governmental proceeding to which the Company is a party or to
which any property of the Company is subject or which is pending or, to the
knowledge of the Company, contemplated against the Company which might result in
any material adverse change or any development involving a material adverse
change in the business, prospects, properties, operations, condition (financial
or other) or, results of operations of the Company or which is required to be
disclosed in the Registration Statement and the Prospectus.
The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of its Common Stock to facilitate the sale or resale
of the Shares.
The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the Prospectus
present fairly the financial position of the Company as of the dates indicated
and the results of its operations for the periods specified; except as otherwise
stated in the Registration Statement, said financial statements have been
prepared in conformity with generally accepted accounting principles
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applied on a consistent basis; and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein.
No holder of securities of the Company has any rights to the
registration of securities of the Company because of the filing of the
Registration Statement or otherwise in connection with the sale of the Shares
contemplated hereby.
The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940.
There are no contracts or documents which are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits thereto which have not been so described or filed, as required.
The Company has reviewed its operations to evaluate the extent to
which the businesses or operations of the Company will be affected by the Year
2000 Problem (as defined); as a result of such review, the Company believes that
the disclosure in the Prospectus relating to the Year 2000 Problem is accurate
in all material respects. As used in this clause, the "Year 2000 Problem" means
any significant risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, transmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
Except as described in the Registration Statement, the Company
has not sold or issued any shares Common Stock during the six-month period
proceeding the date of the Prospectus, including any sales pursuant to Rule 144A
or under Regulations D or S of the Act.
The Company owns or possesses adequate rights to use all material
patent, patent applications, trademarks, service marks, trade names, trademark
registrations, service xxxx registrations, copyrights and licenses necessary for
the conduct of its business as now conducted and has no reason to believe that
the conduct of its business will conflict with, and has not received any notice
of any claim of conflict with, any such rights of others.
No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers,
or suppliers of the Company on the other hand, which is required to be described
in the Prospectus and is not so described.
The Company has filed all federal, state, local and foreign
income and franchise tax returns required to be filed through the date hereof
and has paid all taxes due thereon, and no tax deficiency has been determined
adversely to the Company which has resulted in (nor does the Company have any
knowledge of any tax deficiency which, if determined adversely to the Company,
could reasonably be expected to result in) a material change or any
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development involving a material adverse change in the business, prospects,
properties, operations, condition (financial or other) or results of operations
of the Company or which is required to be disclosed in the Registration
Statement and the Prospectus.
There has been no storage, disposal, generation, manufacture,
transportation, handling or treatment of toxic wastes, hazardous wastes or
hazardous substances by the Company (or, to the knowledge of the Company, any of
its predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or its predecessors in violation of
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit or which would require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except for any
violation or remedial action which would not result in, or could not be
reasonably likely to result in, singularly or in the aggregate with all such
violations and remedial actions, a material change or any development involving
a material adverse change in the business, prospects, properties, operations,
condition (financial or other) or results of operations of the Company. There
has been no material spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto such property or into the environment
surrounding such property of any toxic wastes, solid wastes, hazardous wastes or
hazardous substances due to or caused by the Company or with respect to which
the Company has knowledge, except for any such spill, discharge, leak, emission,
injection, escape, dumping or release which would not result in or would not be
reasonably likely to result in, singularly or in the aggregate with all such
spills, discharges, leaks, emissions, injections, escapes, dumpings and
releases, a material change or any development involving a material adverse
change in the business, prospects, properties, operations, condition (financial
or other) or results of operations of the Company. The terms "hazardous
wastes", "toxic wastes", "hazardous substances" and "medical wastes" shall have
the meanings specified in any applicable local, state, federal and foreign laws
or regulations with respect to environmental protection, but shall include
without limitation asbestos and "PCBs."
The Company has (a) good and marketable title to all of the
properties and assets described in the Prospectus or the financial statements
included in the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the Prospectus or
as would not have a material adverse change in the business, prospects,
properties, operations, condition (financial or other) or results of operations
of the Company or which is required to be disclosed in the Registration
Statement or Prospectus, (b) peaceful and undisturbed possession under all
material leases to which it is a party as lessee, (c) all licenses,
certificates, permits, authorizations, approvals, franchises and other rights
from, and has made all declarations and filings with, all federal, state and
local authorities (including, without limitation, the FCC and similar state and
local agencies), all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
conducted by the Company in the manner described in the Prospectus, except as
described in the Prospectus and except insofar as the failure to obtain any such
Authorization would not reasonably be expected to have a material adverse change
in the business, prospects, properties, operations, condition (financial or
other) or results of operations of the Company or which is required to be
disclosed in the Registration Statement or Prospectus, and no such Authorization
contains a materially burdensome restriction that is not disclosed in
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the Prospectus and (d) not received any notice that any governmental body or
agency is considering limiting, suspending or revoking any such Authorization.
Except where the failure to be in full force and effect would not have a
material adverse change in the business, prospects, properties, operations,
condition (financial or other) or results of operations of the Company or which
is required to be disclosed in the Registration Statement or Prospectus, all
such Authorizations are valid and in full force and effect and the Company is in
compliance in all material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory authorities
having jurisdiction with respect thereto. All material leases to which the
Company is a party are valid and binding and no default by the Company has
occurred and is continuing thereunder and, to the Company's knowledge, no
material defaults by the landlord are existing under any such lease that could
reasonably be expected to result in a material adverse change in the business,
prospects, properties, operations, condition (financial or other) or results of
operations of the Company or which is required to be disclosed in the
Registration Statement or Prospectus.
Purchase, Sale and Delivery of the Shares.
On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters and the Underwriters,
severally and not jointly, agree to purchase from the Company, at a purchase
price per share of $_______, the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any additional
number of Underwritten Shares which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 9 hereof.
Payment of the purchase price for, and delivery of certificates
for, the Underwritten Shares shall be made at the office of Xxxxxx & Xxxxxxx,
Chicago, Illinois or at such other place as shall be agreed upon by you and the
Company, at 10:00 A.M. on the third or fourth business day (as permitted under
Rule 15c6-1 under the Exchange Act) (unless postponed in accordance with the
provisions of Section 9 hereof) following the date of the effectiveness of the
Registration Statement (or, if the Company has elected to rely upon Rule 430A of
the Regulations, the third or fourth business day (as permitted under Rule 15c6-
1 under the Exchange Act) after the determination of the initial public offering
price of the Shares), or such other time not later than ten business days after
such date as shall be agreed upon by you and the Company (such time and date of
payment and delivery being herein called the "Closing Date"). Payment shall be
made to the Company by wire transfer in same day funds, against delivery to you
for the respective accounts of the Underwriters of certificates for the
Underwritten Shares to be purchased by them. Certificates for the Underwritten
Shares shall be registered in such name or names and in such authorized
denominations as you may request in writing at least two full business days
prior to the Closing Date. The Company will permit you to examine and package
such certificates for delivery at the offices of Xxxxxx & Xxxxxxx, Chicago,
Illinois at least one full business day prior to the Closing Date.
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In addition, the Company hereby grants to the Underwriters the
option to purchase up to ______ Additional Shares at the same purchase price per
share to be paid by the Underwriters to the Company for the Firm Shares as set
forth in this Section 2, for the sole purpose of covering over-allotments in the
sale of Firm Shares by the Underwriters. This option may be exercised at any
time, in whole or in part, on or before the thirtieth day following the date of
the Prospectus, by written notice by you to the Company. Such notice shall set
forth the aggregate number of Additional Shares as to which the option is being
exercised and the date and time, as reasonably determined by you, when the
Additional Shares are to be delivered (such date and time being herein sometimes
referred to as the "Additional Closing Date"); provided, however, that the
Additional Closing Date shall not be earlier than the Closing Date or earlier
than the second full business day after the date on which the option shall have
been exercised nor later than the eighth full business day after the date on
which the option shall have been exercised (unless such time and date are
postponed in accordance with the provisions of Section 9 hereof). Certificates
for the Additional Shares shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Additional Closing Date. The Company will permit you
to examine and package such certificates for delivery at the offices of Xxxxxx &
Xxxxxxx, Chicago, Illinois at least one full business day prior to the
Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto (or such number increased as set forth
in Section 9 hereof) bears to [insert the total number of Firm Shares being
purchased from the Company], subject, however, to such adjustments to eliminate
any fractional shares as you in your sole discretion shall make.
Payment for the Additional Shares shall be made to the Company by wire
transfer in same day funds at the offices of Xxxxxx & Xxxxxxx, Chicago, Illinois
or such other location as may be mutually acceptable, upon delivery of the
certificates for the Additional Shares to you for the respective accounts of the
Underwriters.
Offering. Upon your authorization of the release of the Firm
Shares, the Underwriters propose to offer the Underwritten Shares for sale to
the public upon the terms set forth in the Primary Prospectus. Under no
circumstances are the Underwriters intending to offer or offering any DSSP
Shares for sale.
Covenants of the Company. The Company covenants and agrees with
the Underwriters that:
If the Registration Statement has not yet been declared effective
the Company will use its best efforts to cause the Registration Statement and
any amendments thereto to become effective as promptly as possible, and if Rule
430A is used or the filing of the Prospectus is otherwise required under Rule
424(b) or Rule 434, the Company will file the Prospectus (properly completed if
Rule 430A has been used) pursuant to Rule 424(b) or Rule 434 within the
prescribed time period and will provide evidence satisfactory to you of such
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timely filing. If the Company elects to rely on Rule 434, the Company will
prepare and file a term sheet that complies with the requirements of Rule 434.
The Company will notify you immediately (and, if requested by you,
will confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iii) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any post-
effective amendment thereto or of the initiation, or the threatening, of any
proceedings therefor, (v) of the receipt of any comments from the Commission,
and (vi) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any jurisdiction or
the initiation or threatening of any proceeding for that purpose. If the
Commission shall propose or enter a stop order at any time, the Company will
make every reasonable effort to prevent the issuance of any such stop order and,
if issued, to obtain the lifting of such order as soon as possible. The Company
will not file any amendment to the Registration Statement or any amendment of or
supplement to the Prospectus (including the prospectus required to be filed
pursuant to Rule 424(b) or Rule 434) that differs from the prospectus on file at
the time of the effectiveness of the Registration Statement before or after the
effective date of the Registration Statement to which you shall reasonably
object in writing after being timely furnished in advance a copy thereof.
If at any time when a prospectus relating to the Shares is
required to be delivered under the Act any event shall have occurred as a result
of which the Prospectus as then amended or supplemented would, in the judgment
of the Underwriters or the Company include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary at any
time to amend or supplement the Prospectus or Registration Statement to comply
with the Act or the Regulations, the Company will notify you promptly and
prepare and file with the Commission an appropriate amendment or supplement (in
form and substance satisfactory to you) which will correct such statement or
omission and will use its best efforts to have any amendment to the Registration
Statement declared effective as soon as possible.
The Company will promptly deliver to you two signed copies of the
Registration Statement, including exhibits and all amendments thereto, and the
Company will promptly deliver to each of the Underwriters such number of copies
of any preliminary prospectus, the Prospectus, the Registration Statement, and
all amendments of and supplements to such documents, if any, as you may
reasonably request.
The Company will endeavor in good faith, in cooperation with you,
at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions as you may designate
and to maintain such qualification in effect for so long as
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required for the distribution thereof; except that in no event shall the Company
be obligated in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process.
The Company will make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of its fiscal quarter in
which the first anniversary date of the effective date of the Registration
Statement occurs, an earning statement (in form complying with the provisions of
Rule 158 of the Regulations) covering a period of at least twelve consecutive
months beginning after the effective date of the Registration Statement.
During the period of 180 days from the date of the Prospectus,
the Company will not, without your prior written consent, issue, sell, offer or
agree to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock), and the Company will obtain
the undertaking of each of its officers and directors and such of its
shareholders as have been heretofore designated by you and listed on Schedule II
attached hereto not to engage in any of the aforementioned transactions on their
own behalf, other than the Company's sale of Shares hereunder, the Company's
issuance of Common Stock upon the exercise of presently outstanding stock
options, and Safeguard 98 Capital, L.P.'s sale of Shares under the Directed
Share Subscription Program.
During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its shareholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or any
national securities exchange.
The Company will apply the proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus.
The Company will use its best efforts to cause the Shares to be
listed for inclusion in the National Association of Securities Dealers Automated
Quotation National Market System ("Nasdaq").
The Company will file with the Commission such reports on Form SR
as may be required pursuant to Rule 463 of the Regulations.
The Company, during the period when the Prospectus is required to
be delivered under the Act or Exchange Act, will file all documents required to
be filed with the Commission pursuant to the Act and the Exchange Act within the
time periods required by the Act and the Exchange Act and the rules and
regulations of the Commission thereunder.
Payment of Expenses. Whether or not the transactions contemplated
in this Agreement, the Standby Subscription Agreement and any other agreement
relating to the Direct Share Subscription Program are consummated or this
Agreement, the Standby Subscription Agreement and any other agreement relating
to the Direct Share Subscription
11
Program is terminated, the Company hereby agrees to pay all costs and expenses
incident to the performance of the obligations of the Company under this
Agreement, the Standby Subscription Agreement and any other agreement relating
to the Direct Share Subscription Program, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereof (including all
exhibits thereto), any preliminary prospectus, the Prospectus and any amendments
or supplements thereto (including, without limitation, fees and expenses of the
Company's accountants and counsel), the underwriting documents (including this
Agreement and the Agreement Among Underwriters) and all other documents related
to the public offering of the Shares (including those supplied to the
Underwriters in quantities as hereinabove stated), (ii) the issuance, transfer
and delivery of the Underwritten Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the qualification of the Shares
under state or foreign securities or Blue Sky laws, including the costs of
printing and mailing a preliminary and final "Blue Sky Survey" and the fees of
counsel for the Underwriters and such counsel's disbursements in relation
thereto and (iv) filing fees of the Commission and the National Association of
Securities Dealers, Inc.
Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company herein contained, as of the date hereof and as of the
Closing Date (for purposes of this Section 6 "Closing Date" shall refer to the
Closing Date for the Firm Shares and any Additional Closing Date, if different,
for the Additional Shares), to the absence of any misstatement or omission from
any certificates, opinions, written statements or letters furnished to you or to
Xxxxxx & Xxxxxxx ("Underwriters' Counsel") pursuant to this Section 6, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
The Registration Statement shall have become effective not later
than [if pricing pursuant to Rule 430A, 5:30 P.M., New York time, on the date of
this Agreement] [if pricing pursuant to a pricing amendment -- 12:00 P.M., New
York time on the date an amendment to the Registration Statement containing the
public offering price has been filed with the Commission], or at such later time
and date as shall have been consented to in writing by you; if the Company shall
have elected to rely upon Rule 430A or Rule 434 of the Regulations, the
Prospectus shall have been filed with the Commission in a timely fashion in
accordance with Section 4(a) hereof; and, at or prior to the Closing Date no
stop order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof shall have been issued and no proceedings
therefor shall have been initiated or threatened by the Commission.
At the Closing Date you shall have received the opinions of
Xxxxxxxx & Xxxxx and [____________________], counsel for the Company, dated the
Closing Date addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
12
incorporation. The Company is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which the character or location
of its properties (owned, leased or licensed) or the nature or conduct of
its business makes such qualification necessary, except for those failures
to be so qualified or in good standing which will not in the aggregate have
a material adverse effect on the Company. The Company has all requisite
corporate authority to own, lease and license its respective properties and
conduct its business as now being conducted and as described in the
Registration Statement and the Prospectus and to consummate the
transactions contemplated by the Purchase Agreement, including without
limitation, the corporate power and authority to issue, sell and deliver
the Shares on the Closing Date.
The Company has an authorized capital stock as set forth in
the Registration Statement and the Prospectus. All of the outstanding
shares of Common Stock are duly and validly authorized and issued, are
fully paid and nonassessable and were not issued in violation of or subject
to any preemptive rights. The Shares to be delivered on the Closing Date
have been duly and validly authorized and, when delivered by the Company in
accordance with this Agreement, will be duly and validly issued, fully paid
and nonassessable and will not have been issued in violation of or subject
to any preemptive rights. The Common Stock, the Firm Shares, the
Additional Shares and the DSSP Shares conform to the descriptions thereof
contained in the Registration Statement and the Prospectus.
To such counsel's knowledge, there are not currently, and
will not be following the offering of the Shares, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any capital
stock or other equity interest of the Company, except as described in the
Prospectus.
To such counsel's knowledge, there are no holders of
securities of the Company who, by reason of the execution by the Company of
this Agreement or the consummation by the Company of the transactions
contemplated hereby, have the right to request or demand that the Company
register securities held by them under the Securities Act.
The Underwritten Shares to be sold under this Agreement to
the Underwriters and the DSSP Shares to be sold under the Directed Share
Subscription Program are duly authorized for listing on the National
Association of Securities Dealers Automated Quotation National Market
System.
This Agreement and the Standby Subscription Agreement and
[any other agreement related to the Directed Share Subscription Program to
which the Company is party [list here]] have been duly and validly
authorized, executed and delivered by the Company.
There is no litigation or governmental or other action,
suit,
13
proceeding or investigation before any court or before or by any
public, regulatory or governmental agency or body pending or to the best of
such counsel's knowledge, threatened against, or involving the properties
or business of the Company, which is of a character required to be
disclosed in the Registration Statement and the Prospectus which has not
been properly disclosed therein.
The execution, delivery, and performance of this
Agreement, and the Standby Subscription Agreement, [any other agreement
related to the Directed Share Subscription Program to which the Company is
party [list here]] and the consummation of the transactions contemplated
hereby and thereby by the Company do not and will not (A) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
pursuant to, any agreement, instrument, franchise, license or permit known
to such counsel to which the Company is a party or by which the Company or
its properties or assets may be bound or (B) violate or conflict with any
provision of the certificate of incorporation or by-laws of the Company,
or, to the best knowledge of such counsel, any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or any of
its properties or assets. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court
or any public, governmental, or regulatory agency or body having
jurisdiction over the Company or any of its properties or assets is
required for the execution, delivery and performance of this Agreement, and
the Standby Subscription Agreement or any other agreement related to the
Directed Share Subscription Program or the consummation of the transactions
contemplated hereby or thereby, except for (1) such as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Underwritten Shares by the Underwriters (as to which
such counsel need express no opinion) and (2) such as have been made or
obtained under the Act.
The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and schedules and other financial data included or incorporated
by reference therein, as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of the Act and the
Regulations.
The Registration Statement is effective under the Act, and,
to the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof has been issued and no proceedings therefor have been initiated or
threatened by the Commission and all filings required by Rule 424(b) of the
Regulations have been made.
The information in the Prospectus and Registration
Statement under the headings "Management," "Certain Relationships and
Related Transactions," "Description of Capital Stock," "Description of
Indebtedness," and
14
"Shares Eligible for Future Sale" and Items 14 and 15 in Part II of the
Registration Statement are, to the extent that they summarize laws,
government rules, regulations or documents, correct in all material
respects.
The Company is not and, after giving effect to the
offering of the Shares and the application of the proceeds therefrom as
described in the Prospectus, will not be an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In addition, such opinion shall also contain a statement
that such counsel has participated in conferences with officers and
representatives of the Company, representatives of the independent public
accountants for the Company and the Underwriters at which the contents and
the Prospectus and related matters were discussed and, no facts have come
to the attention of such counsel which would lead such counsel to believe
that either the Registration Statement at the time it became effective
(including the information deemed to be part of the Registration Statement
at the time of effectiveness pursuant to Rule 430A(b) or Rule 434, if
applicable), or any amendment thereof made prior to the Closing Date as of
the date of such amendment, contained an untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus as of its date (or any amendment thereof or supplement thereto
made prior to the Closing Date as of the date of such amendment or
supplement) and as of the Closing Date contained or contains an untrue
statement of a material fact or omitted or omits to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no belief or opinion
with respect to the financial statements and schedules and other financial
data included or incorporated by reference therein).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent they
deem proper, on certificates of responsible officers of the Company and
certificates or other written statements of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and, in their opinion, you and they are
justified in relying thereon.
At the Closing Date you shall have received the opinion of
Goodin, MacBride, Xxxxxx, Xxxxxxx & Xxxxxxx, LLP, regulatory counsel for the
Company, dated the
15
Closing Date addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
The Company validly holds all of the licenses, permits, and
authorizations, if any, required by the Federal Communications Commission
("FCC") and the California Public Utilities Commission, the Nevada Public
Utilities Commission, the Washington Public Utility Commission, the Oregon
Public Utility Commission and the Colorado Public Utility Commission
[others] (collectively the "State Telecommunications Agencies" or
individually, the "State Telecommunications Agency") for the provision of
telecommunications services as we understand those services to be provided
based on the declaration of an executive officer of the Company, except
where the failure to obtain or hold such license, permit, or authority
would not have a material adverse effect on the Company's business as
described in the Prospectuses.
The Company is not subject to any proceeding (including
rulemaking proceeding), pending complaint, or investigation, or, to the
best knowledge of counsel, any threatened complaint or investigation before
the FCC or any State Telecommunications Agencies based on any alleged
violation of the Company in connection with its provision or failure to
provide telecommunications service of a character required to be disclosed
in the Prospectuses that is not disclosed in the Prospectuses.
The statements in the Prospectuses under the headings of
"Risk Factors -- A Failure to establish interconnection agreements on
favorable terms would adversely affect our business," "-- We may not be
entitled to receive reciprocal compensation for calls to Internet service
providers," "We may not be able to compete effectively with the Xxxx
operating companies if they are permitted to enter the long distance
service market," "Business -- Competition," "-- Regulation," and "--
Regulatory Proceedings," regarding state and federal telecommunications
laws and regulations, fairly and accurately summarize the matters therein
described.
The Company has the consents, approvals, authorizations,
licenses, certificates, permits or orders of the FCC or any State
Telecommunications Agency, if any, required to consummate the transactions
contemplated in the Underwriting Agreement, and the Standby Subscription
Agreement and any other agreement relating to the Direct Share Subscription
Program, except where the failure to obtain the consents, approval,
authorizations, licenses, certificates, permits, or orders would not have a
material adverse effect on the Company's ability to consummate such
transactions.
Neither the execution nor delivery of the Underwriting
Agreement, and the Standby Subscription Agreement nor any other agreement
relating to the Direct Share Subscription Program, the consummation of the
transactions contemplated by such agreements, nor the sale of the Shares
contemplated thereby will
16
conflict with or result in a violation of any order or regulation of the
FCC or any State Telecommunications Agency applicable to the Company,
except where the conflict or violation which would not have a material
adverse effect thereon.
All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be satisfactory in
form and substance to you and to Underwriters' Counsel, and the Underwriters
shall have received from Underwriters' Counsel a favorable opinion, dated as of
the Closing Date with respect to the issuance and sale of the Underwritten
Shares, the Registration Statement and the Prospectus and such other related
matters as you may reasonably require, and the Company shall have furnished to
Underwriters' Counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
At the Closing Date you shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of the Company, dated the
Closing Date to the effect that (i) the condition set forth in subsection (a) of
this Section 6 has been satisfied, (ii) as of the date hereof and as of the
Closing Date the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date the obligations of
the Company to be performed hereunder on or prior thereto have been duly
performed and (iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or interference with its business or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental proceeding,
and there has not been any material adverse change, or any development involving
a material adverse change, in the business prospects, properties, operations,
condition (financial or otherwise), or results of operations of the Company,
except in each case as described in or contemplated by the Prospectus.
At the time this Agreement is executed and at the Closing Date,
you shall have received a letter, from Xxxxxx Xxxxxxxx, LLP, independent public
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in form
and substance satisfactory to you, to the effect that: (i) they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the Regulations and stating that the answer to Item 10 of the
Registration Statement is correct insofar as it relates to them; (ii) stating
that, in their opinion, the financial statements and schedules of the Company
included in the Registration Statement and the Prospectus and covered by their
opinion therein comply as to form in all material respects with the applicable
accounting requirements of the Act and the applicable published rules and
regulations of the Commission thereunder; (iii) on the basis of procedures
consisting of a reading of the latest available unaudited interim consolidated
financial statements of the Company, a reading of the minutes of meetings and
consents of the shareholders and board of directors of the Company and the
committees of the board of directors subsequent to December 31, 1998, inquiries
of officers and other employees of the Company who have responsibility for
financial and accounting matters of the Company with respect to transactions and
events subsequent to December 31, 1998 and other specified procedures and
inquiries to a date not more than five
17
days prior to the date of such letter, nothing has come to their attention that
would cause them to believe that: (A) the unaudited consolidated financial
statements and schedules of the Company presented in the Registration Statement
and the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and, if applicable, the Exchange
Act and the applicable published rules and regulations of the Commission
thereunder or that such unaudited consolidated financial statements are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
consolidated financial statements included in the Registration Statement and the
Prospectus; (B) with respect to the period subsequent to[September 30], 1999
there were, as of the date of the most recent available monthly consolidated
financial statements of the Company, if any, and as of a specified date not more
than five days prior to the date of such letter, any changes in the capital
stock or long-term indebtedness of the Company or any decrease in the net
current assets or stockholders' equity of the Company, in each case as compared
with the amounts shown in the most recent balance sheet presented in the
Registration Statement and the Prospectus, except for changes or decreases which
the Registration Statement and the Prospectus disclose have occurred or may
occur or which are set forth in such letter or (C) that during the period from
[September 30], 1999 to the date of the most recent available monthly
consolidated financial statements of the Company, if any, and to a specified
date not more than five days prior to the date of such letter, there was any
decrease, as compared with the corresponding period in the prior fiscal year, in
total revenues, or total or per share net income, except for decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur or
which are set forth in such letter; and (iv) stating that they have compared
specific dollar amounts, numbers of shares, percentages of revenues and
earnings, and other financial information pertaining to the Company set forth in
the Registration Statement and the Prospectus, which have been specified by you
prior to the date of this Agreement, to the extent that such amounts, numbers,
percentages, and information may be derived from the general accounting and
financial records of the Company or from schedules furnished by the Company, and
excluding any questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries, and
other appropriate procedures specified by you set forth in such letter, and
found them to be in agreement.
The Standby Subscription Agreement, dated the date of this
Agreement, shall have been executed, substantially in the form reviewed by Bear,
Xxxxxxx & Co. Inc., and shall be in full force and effect.
Prior to the Closing Date and the Additional Closing Date, if
any, as the case may be, the Company shall have furnished to you such further
information, certificates and documents as you may reasonably request.
You shall have received from each person who is a director or
officer of the Company or such shareholder as have been heretofore designated by
you and listed on Schedule II hereto an agreement to the effect that such person
will not for a period of 180 days after the date of the Prospectus, directly or
indirectly, without your prior written consent, offer, sell, contract to sell,
swap, make any short sale, pledge, establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Exchange Act, grant any option to
18
purchase or otherwise dispose (or publicly announce the undersigned's intention
to do any of the foregoing) of any shares of Common Stock or other capital stock
of the Company, or any securities convertible into, or exerciseable or
exchangeable for, any shares of Common Stock or other capital stock of the
Company that the undersigned currently beneficially owns (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, or may beneficially
own, directly or indirectly, in the future. The foregoing sentence shall not
apply to (a) transfers to immediate family members or trusts for the benefit of
such family members, or (b) bona fide gifts, provided that in either case, the
transferee agrees to be bound by this agreement, or (c) transfers of shares in
connection with a merger, recapitalization or consolidation of the Company so
long as securities received by the undersigned in consideration for any such
transaction become subject to the provisions of this agreement.
On or before the Closing Date, the Shares shall have been
approved for listing on the National Association of Securities Dealers Automated
Quotation National Market System.
Contemporaneously with the purchase by the underwriters of the
Underwritten Shares under this Agreement, Safeguard or Safeguard's shareholders,
pursuant to their respective agreements and the Standby Subscription Agreement,
as the case may be, shall have purchased the Primary DSSP Shares.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telex or telegraph, confirmed in writing.
Indemnification.
The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act as
follows:
against any and all losses, liabilities, claims, damages and
expenses whatsoever as incurred (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any
claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact
19
contained in the Registration Statement for the registration of the Shares,
as originally filed or any amendment thereof, or any related preliminary
prospectus or the Prospectus, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading;
against any and all losses, liabilities, claims, damages
and expenses whatsoever as incurred (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, arising out of or
based upon (A) any untrue statement or alleged untrue statement of a
material fact included in the DSSP Prospectus wrapper material distributed
in connection with the reservation and sale of the DSSP Securities or the
omission of alleged omission therefrom of a material fact necessary to make
the statements therein, when considered in conjunction with the Prospectus
or preliminary prospectus, not misleading and (B) the reservation and sale
of DSSP Shares to shareholders of Safeguard in connection with the Directed
Share Subscription Program as described in the Prospectus and the
Registration Statement; and
against any and all losses, liabilities, claims, damages
and expenses whatsoever as incurred (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to the extent of
the aggregate amount paid in settlement of any litigation, or 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 or
in connection with any violation of the nature referred to in Section
7(a)(ii) (A) and (B) hereof; provided, however, that the Company will not
be liable in any such case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter through you expressly for use therein. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have including under this Agreement.
Each Underwriter severally, and not jointly, agrees to indemnify
and hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration Statement, and
each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or
20
litigation), jointly or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement for the registration of
the Shares, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein; provided,
however, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Underwritten
Shares purchased by such Underwriter hereunder. This indemnity will be in
addition to any liability which any Underwriter may otherwise have including
under this Agreement. The Company acknowledges that the statements set forth in
the third and fourth sentences of the fourth paragraph and the eleventh
paragraph under the caption "Underwriting" in the Prospectus constitute the only
information furnished in writing by or on behalf of any Underwriter expressly
for use in the registration statement relating to the Shares as originally filed
or in any amendment thereof, any related preliminary prospectus or the
Prospectus or in any amendment thereof or supplement thereto, as the case may
be.
Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any
21
settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to which the Company and one or more of
the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company and the Underwriters from
the offering of the Underwritten Shares or, if such allocation is not permitted
by applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 7 hereof,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Underwriters shall be deemed to be in the same proportion as (x)
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and (y) the
underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and of the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
Section 8, (i) in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Underwritten
Shares purchased by such Underwriter hereunder, and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section 8
and the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Underwritten Shares underwritten by it and distributed to the public were
offered to
22
the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. For purposes of this Section 8, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties, notify each party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
Default by an Underwriter.
If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if the
Firm Shares or Additional Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to the respective proportions which
the numbers of Firm Shares set forth opposite their respective names in Schedule
I hereto bear to the aggregate number of Firm Shares set forth opposite the
names of the non-defaulting Underwriters.
In the event that such default relates to more than 10% of the
Firm Shares or Additional Shares, as the case may be, you may in your discretion
arrange for yourself or for another party or parties (including any non-
defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within 5 calendar days after
such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 9, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the Underwriters to purchase and of
the Company to sell the Additional Shares shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but nothing in
this Agreement shall relieve a defaulting Underwriter or Underwriters of its or
their liability, if any, to the other Underwriters and the Company for damages
occasioned by its or their default hereunder.
In the event that the Firm Shares or Additional Shares to which
the default relates are to be purchased by the non-defaulting Underwriters, or
are to be purchased by
23
another party or parties as aforesaid, you or the Company shall have the right
to postpone the Closing Date or Additional Closing Date, as the case may be for
a period, not exceeding five business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus or
in any other documents and arrangements, and the Company agrees to file promptly
any amendment or supplement to the Registration Statement or the Prospectus
which, in the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares and Additional
Shares.
Survival of Representations and Agreements. All representations
and warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Section 5,
the indemnity agreements contained in Section 7 and the contribution agreements
contained in Section 8, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Underwritten Shares to and by the Underwriters.
The representations contained in Section 1 and the agreements contained in
Sections 5, 7, 8 and 11(d) hereof shall survive the termination of this
Agreement and the Standby Subscription Agreement and any other agreement
relating to the Directed Share Subscription Program, including termination of
this Agreement pursuant to Section 9 or 11 hereof.
Effective Date of Agreement; Termination.
This Agreement shall become effective, upon the later of when (i)
you and the Company shall have received notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement. If either the
initial public offering price or the purchase price per Share has not been
agreed upon prior to 5:00 P.M., New York time, on the fifth full business day
after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Company or the Underwriters
except as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you or by you
notifying the Company. Notwithstanding the foregoing, the provisions of this
Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times be in full
force and effect.
You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the obligations of the Underwriters to purchase the
Additional Shares at any time prior to the Additional Closing Date, as the case
may be, if (A) any domestic or international event or act or occurrence has
materially disrupted, or in your opinion will in the immediate future materially
disrupt, the market for the Company's securities or securities in general; or
(B) if trading on the New York or American Stock Exchanges or Nasdaq shall have
been suspended, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges for prices for securities shall have been required, on the New
York or American Stock Exchanges by the New York or American Stock Exchanges, on
the Nasdaq by Nasdaq or by
24
order of the Commission or any other governmental authority having jurisdiction;
or (C) if a banking moratorium has been declared by a state or federal authority
or if any new restriction materially adversely affecting the distribution of the
Firm Shares or the Additional Shares, as the case may be, shall have become
effective; or (D) (i) if the United States becomes engaged in hostilities or
there is an escalation of hostilities involving the United States or there is a
declaration of a national emergency or war by the United States or (ii) if there
shall have been such change in political, financial or economic conditions if
the effect of any such event in (i) or (ii) as in your judgment makes it
impracticable or inadvisable to proceed with the offering, sale and delivery of
the Firm Shares or the Additional Shares, as the case may be, on the terms
contemplated by the Prospectus.
Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, or telegraph, confirmed in writing by letter.
If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof), or if
the sale of the Underwritten Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth herein is
not satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by you, reimburse the Underwriters for all out-
of-pocket expenses (including the fees and expenses of their counsel), incurred
by the Underwriters in connection herewith.
Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and , if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx, 00000, Attention: Xxxx Xxxxxx; if sent to the Company, shall
be mailed, delivered, or telegraphed and confirmed in writing to the Company,
0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx, 00000 Attention: Xxxxxxx X. Xxxxxx.
Parties. This Agreement shall insure solely to the benefit of,
and shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Section 7 and
8, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Shares from any of the Underwriters.
Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.
25
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
PAC-WEST TELECOMM, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
BANC OF AMERICA SECURITIES LLC
FIRST UNION CAPITAL MARKETS CORP.
By:
Bear, Xxxxxxx & Co. Inc.
On behalf of themselves and the other Underwriters named in Schedule I hereto.
26
SCHEDULE I
----------
Number of Firm
Name of Underwriter Shares to be Purchased
------------------- ----------------------
Bear, Xxxxxxx & Co. Inc.
Banc of America Securities LLC
First Union Capital Markets Corp.
[ ]
Total
=====================
27
SCHEDULE II
-----------
Xxxxxxx X. Xxxxxxx
Xxxx X. Xx Xxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Xxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Xxxxx X. Xxxxx
Xxxxxxx Xxxxxx
Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
H. Xxxx Xxxx
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxxx
Xxxx X. XxXxxx
Xxxx X. Xxxxxx
Xxxxxx X. Plum
Xx. Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxxxxx
Bay Alarm Company
SCP Private Equity Partners, L.P.
Xxxxxxx Xxxxx Capital Partners VI, L.P.
Safeguard 98 Capital, L.P.
(except Secondary DSSP
Shares subject to sale under the Directed
Share Subscription Program)
TL Ventures III L.P.
TL Ventures III Offshore L.P.
TL Ventures III Interfund L.P.
EnerTech Capital Partners, L.P.
Safeguard Scientifics, Inc.
[Names of additional shareholders subject to the lock-up provision]
28
