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EXHIBIT 10.9
PRIVATE PLACEMENT
BANK ESCROW AGREEMENT
This Bank Escrow Agreement is made and entered into as of this ___ day
of September, 1997, by and among MGC COMMUNICATIONS, INC., a Nevada corporation
(the "Company"), MARINE MIDLAND BANK, as Escrow Agent (the "Escrow Agent"), and
those persons indentified on Exhibit "A" attached hereto (the "Investors").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue units (consisting of Senior
Secured Notes and Warrants to purchase Common Stock) to raise gross proceeds of
at least $150 million (the "Debt Offering"); and
WHEREAS, the Debt Offering contemplates that the Company will complete,
within 60 days after the closing of the Debt Offering, the sale of its
convertible preferred stock (the "Preferred Stock Offering") resulting in gross
proceeds to the Company of at least $15 million or alternatively, that the
Company will complete within 60 days after the closing of the Debt Offering, the
sale of Common Stock (the "Common Stock Offering") resulting in gross proceeds
to the Company of at least $15 million; and
WHEREAS, the Company has arranged for the Investors to contribute $15
million into escrow under this Agreement to provide assurance to those
participating in the Debt Offering that either the Preferred Stock Offering or
Common Stock Offering will be completed within 60 days after the closing of the
Debt Offering; and
WHEREAS, the Escrow Agent agrees to serve as Escrow Agent in accordance
with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, it is hereby agreed
as follows:
1. Establishment of Escrow Account. Each of the Investors hereby
agrees to contribute to the Escrow Agent for the purposes set forth herein the
amount set forth opposite his name on Exhibit "A" hereto. The parties shall
establish a non-interest bearing escrow account with the Escrow Agent for the
funds received from the Investors, which escrow account shall be entitled "MGC
Communications, Inc. Escrow Account" (the "Escrow Account"). Amounts on
deposit in the Escrow Account shall be invested by the Escrow Agent only in
"Government Securities" that mature on or before the earlier of sixty (60) days
after the closing date of the Debt Offering or December 15, 1997, which
Government Securities shall be designated by the Company and relayed to the
Escrow Agent from time to time. For purposes of this Agreement, "Goverment
Securities" means direct obligations of, or obligations guaranteed by, the
United States of America for the payment of which guarantee or obligations the
full faith and credit of the United States is pledged. The Escrow Agent shall
not be liable to the Investors or to the
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Company for any losses or expenses incurred in connection with the investment of
amounts on deposit in the Escrow Account as directed by the Investors.
2. Escrow Period. The escrow period for the Escrow Account shall begin
upon deposit of funds from the Investors and shall terminate (subject to the
disbursement provisions in paragraph 3) upon the earliest to occur of the
following dates (the "Offering Termination Date"):
A. The date which is five (5) days after the date the Escrow Agent
receives written notice from the Company that the Preferred Stock Offering has
been closed; or
B. The date which is sixty (60) days after the closing of the Debt
Offering; or
C. December 15, 1997.
During the escrow period, the Company is aware and understands it is not
entitled to any portion of the Escrow Account and no amounts deposited in the
Escrow Account shall become the property of the Company or any other entity, or
be subject to the debts of the Company or any other entity, until disbursed to
the Company in accordance with this Agreement.
3. Disbursement from the Escrow Account. Amounts in the Escrow Account
shall be disbursed as follows:
A. In the event the Escrow Agent (i) receives written notice from
the Company prior to the Offering Termination Date that the Debt Offering has
been written closed or that the Company has otherwise issued debt obligations
resulting in gross proceeds to the Company of at least $100 million and (ii)
receives written notice from the Company that the Preferred Stock Offering has
not been closed prior to the Offering Termination Date, then upon receipt of
such notification by Escrow Agent from the Company, the Escrow Agent shall
disburse the amounts contributed by the Investors to the Escrow Account to the
Company, in which event, the Investors shall be entitled to receive between
3,000,000 and 4,285,712 shares of Common Stock in the Company (reflecting a per
share price of $3.50 to $5.00) as determined by separate agreement of the
Company and the Investors. The Escrow Agent shall notify the Company and the
Investors of its distribution of funds under this Paragraph A.
B. In the event the Escrow Agent receives written notice from the
Company that the Preferred Stock Offering has been closed on or prior to the
Offering Termination Date, the Escrow Agent shall provide immediate written
notice thereof to Bear, Xxxxxxx & Co. Inc. ("Bear"). If Bear does not deliver to
the Escrow Agent its written objection to the disbursement of the Escrow Account
within five (5) days after such notice to Bear or if Bear otherwise consents in
writing to the disbursement of the Escrow Account prior to the expiration of
such five-day period, then the Escrow Agent shall promptly notify the Investors
that the amounts in the Escrow Account are available for disbursement. Upon
receipt by the Escrow Agent of appropriate written instructions from any
Investor, the Escrow Agent shall disburse the amount contributed by such
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Investor to the Escrow Account, or such portions thereof, either (i) to the
Company, with respect to which such Investor shall be entitled to shares of
Convertible Preferred Stock of the Company upon the same terms as the Preferred
Stock Offering, or (ii) to such Investor, as directed by such Investor. If any
Investor fails to direct the disbursement under this Paragraph B within ten (10)
days after notice from the Escrow Agent, such disbursement with respect to such
Investor shall be made by check to such Investor and sent to him at the address
indicated on Exhibit "A".
C. Upon the disbursement of the amounts contributed to the Escrow
Account as provided in Paragraph A or B above, all investment earnings in the
Escrow Account shall be disbursed to the Investors in proportion to the amounts
contributed to the Escrow Account.
D. In the event the Escrow Agent receives written notice from the
Company at any time after October 15, 1997, that the Debt Offering has not been
closed, the Escrow Agent shall provide prompt written notice thereof to Bear. If
Bear does not deliver to the Escrow Agent its written objection to the
disbursement of the Escrow Account within five (5) days after such notice to
Bear or if Bear otherwise consents in writing to the disbursement of the Escrow
Account prior to the expiration of such five-day period, then the Escrow Agent
shall promptly notify the Investors that the amounts in the Escrow Account are
available for disbursement. Upon receipt by the Escrow Agent of appropriate
written instructions from each Investor, the Escrow Agent shall disburse all
funds contributed by such Investor to the Escrow Account to such Investor.
4. Payment to Escrow Agent. The Company agrees to pay the Escrow Agent a
fee for its services under this Agreement as has been agreed by the Company and
the Escrow Agent, and to reimburse the Escrow Agent upon demand for all
expenses, including legal fees, reasonably incurred by the Escrow Agent in the
performance of its duties hereunder.
5. Liability of Escrow Agent. Upon payment by Escrow Agent of all the
funds in the Escrow Account as provided herein, the Escrow Agent shall be
relieved of all liabilities in connection with this Agreement.
6. Duties of Escrow Agent. It is understood and agreed further that the
Escrow Agent shall:
A. be protected in acting upon any notice, request, certificate,
approval, consent or other paper believed by it to be genuine, signed by the
proper party or parties and in accordance with the terms of this Agreement.
B. be deemed conclusively to have given and delivered any notice
required to be given or delivered hereunder if the same is in writing, signed by
any of its authorized officers and mailed, by registered or certified mail,
addressed to the Company at 0000 Xxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000, to
the Investors at their addresses as set forth in Exhibit "A" and to Bear at 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Corporate Finance Department.
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C. provide the Company with a detailed statement which summarizes
all activity in the Escrow Account.
D. be under no duty or obligation other than those herein
specifically provided. The Escrow Agent shall have no liability under, or duty
to inquire into, the terms and provisions of any other agreement. The duties of
the Escrow Agent are purely ministerial in nature, and the Escrow Agent shall
incur no liability whatsoever except for willful misconduct or gross negligence.
The Escrow Agent may consult with counsel of its choice, including in-house
counsel, and shall not be liable for any action taken, suffered or omitted by it
in accordance with the advice of such counsel. The Escrow Agent shall not be
bound by any modification, amendment, termination, cancellation, rescission or
supersession of this Agreement unless the same shall be in writing and unless it
shall have given prior written consent thereto. In the event the Escrow Agent
shall be uncertain as to its duties or rights hereunder or shall receive
instruction, claims or demands from the parties hereto which, in its opinion,
are in conflict with any of the provisions of this Agreement, it shall be
entitled to refrain from taking any action other than to keep safely all funds
held in the Escrow Account until it shall be directed otherwise in writing by
all of the parties hereto or by a final judgment of a court of competent
jurisdiction and time for appeal has expired and no appeal has been perfected.
7. Escrow Agent Resignation. The Escrow Agent may at any time resign
hereunder by giving written notice of its resignation to the parties hereto at
their addresses set forth below, at least 10 days prior to the date specified
for such resignation to take effect, and upon the effective date of such
resignation, all property then held by the Escrow Agent hereunder shall be
delivered by it to such person as may be designated in writing by the Company
and the Investors, whereupon all the Escrow Agent's obligations hereunder shall
cease and terminate. If no such person shall have been designated by such date,
all obligations of the Escrow Agent (except as stated in the following sentence)
hereunder shall, nevertheless, cease and terminate. The Escrow Agent's sole
responsibility thereafter shall be to keep safely the funds held in the Escrow
Account and to deliver the same to a person designated by all parties hereto or
in accordance with the directions of a final order or judgment of a court of
competent jurisdiction.
8. Indemnity. The Company agrees to indemnify, defend and hold the Escrow
Agent harmless from and against any and all loss, damage, tax, liability and
expense, including attorneys fees, that may be incurred by the Escrow Agent
arising out of or in connection with its acceptance of appointment as Escrow
Agent hereunder, except as caused by its gross negligence or willful misconduct,
including the legal costs and expenses of defending itself against any claim or
liability in connection with its performance hereunder, and the legal costs and
expenses of any action instituted by it to resolve any dispute as to the funds
held in the Escrow Account. The provisions of this Section 8 shall survive the
resignation or removal of the Escrow Agent and the termination of this
Agreement.
9. Modification. This Agreement may be modified only by an instrument in
writing signed by all of the parties hereto; provided, however, that neither
Section 2 nor Section 3 hereof
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may be amended without the consent of Bear, Xxxxxxx & Co. Inc., as one of the
managers of the Debt Offering.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. Nothing in this Agreement is intended to or shall
confer upon anyone other than the parties hereto any legal or equitable right,
remedy or claim. This Agreement shall be construed in accordance with the laws
of the State of New York and may be modified only in writing.
IN WITNESS WHEREOF, the parties have executed this Private Placement Bank
Escrow Agreement on the date first above written.
MGC COMMUNICATIONS, INC.
By:
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Xxxxx X. Xxxxxxxxxx, President
MARINE MIDLAND BANK, Escrow Agent
By:
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INVESTORS:
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EXHIBIT "A"
Investors
Name and Address Amount Contributed
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The Xxxxxxxxx Trust dated $3,750,000
October 20, 1992
0000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Xxxxxxx X. Xxxxx $3,750,000
0000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Xxxxxx X. Xxxxxx* $3,750,000
0000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Bonderman Family Limited Partnership $3,750,000
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, XX 00000
Attn: Xxxxx X. X'Xxxxx
*Copies of all notices to be sent to 0000 Xxxxxxxxx Xxxx, #0000, Xxxxxxx,
Xxxxxxx 00000.
