Exhibit 1.1
Xxxxxxxxx Securities Underwriting Agreement
InfoHighway Communications Corporation Page 1
INFOHIGHWAY COMMUNICATIONS CORPORATION
1,600,000 SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
___________, 1999
Xxxxxxxxx Securities Corporation
Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
InfoHighway Communications Corporation, a corporation organized under
the laws of the State of Delaware (the "Company"), hereby confirms its
agreement with Xxxxxxxxx Securities Corporation as representative (the
"Representative") of the underwriters named in Schedule 1 hereto
(collectively, with the Representative, the "Underwriters"), as set forth
below:
1. PROPOSED UNDERWRITING. The Company proposes to issue and sell to the
Underwriters an aggregate of 1,600,000 shares (the "Firm Shares") of the
Company's common stock, par value $.0001 per share (the "Common Stock") in an
initial public offering (the "IPO"). In addition, for the sole purpose of
covering over-allotments from the sale of the Firm Shares, the Company
proposes to grant to the Underwriters an option (the "Option") to purchase an
additional 240,000 shares of Common Stock (the "Option Shares"). The Firm
Shares and the Option Shares are collectively referred to herein as the
"Shares."
2. DEFINITIONS. The following terms shall have the following meanings
ascribed to them in this Agreement:
(a) "Agreement" means this Underwriting Agreement.
(b) "Application" means application or other document, or any
amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Shares under the securities laws thereof
or filed with the Commission or any securities association or securities
exchange.
(c) "ARC" means ARC Networks, Inc., a Delaware Corporation.
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InfoHighway Communications Corporation Page 2
(d) "AXCES" means AXCES, Inc., a Delaware Corporation.
(e) "Board" means the Board of Directors of the Company.
(f) "Commission" means the United States Securities and Exchange
Commission.
(g) "Company" means InfoHighway Communications Corporation.
(h) "Effective Date" means the date the Commission declares the
Registration Statement effective pursuant to Section 8 of the Securities Act.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Firm Closing Date" means ___________,1999, or such date as the
Underwriter and the Company may agree upon.
(k) "Founding Companies" means, collectively, AXCES, ARC, and
InfoHighway.
(l) "InfoHighway" means InfoHighway International, Inc., a Texas
Corporation.
(m) "Investment Company Act" means the Investment Company Act of 1940,
as amended.
(n) "Material Adverse Effect" means a material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs, or
business prospects of the company being referred to.
(o) "NASD" means National Association of Securities Dealers, Inc.
(p) "Preliminary Prospectus" means each prospectus subject to completion
filed with the Registration Statement (including the prospectus subject to
completion, if any, included in the Registration Statement at the time it was
or is declared effective).
(q) "Prospectus" means the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Securities Act or, if no prospectus is so
filed pursuant to Rule 424(b), the prospectus included in the Registration
Statement.
(r) "Registration Statement" means the registration statement on Form
S-1 (File No. 333-82151), with respect to the Shares, as amended at the time
it was or is declared effective, and any amendment thereto that was or is
thereafter declared effective, including all financial schedules and exhibits
thereto and any information omitted therefrom pursuant to Rule 430A under the
Securities Act and included in the Prospectus, together with any Rule 462(b)
Registration Statement.
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InfoHighway Communications Corporation Page 3
(s) "Securities Act" means the Securities Act of 1933, as amended.
(t) "Underwriters' Securities" shall mean the Underwriters' Warrants and
the Underwriters' Warrant Shares.
(u) "Underwriters' Warrant Agreement" means the warrant agreement
relating to the Underwriters' Warrants.
(v) "Underwriters' Warrants" shall mean the warrants issuable to the
Underwriter pursuant to the Underwriters' Warrant Agreement.
(w) "Underwriters' Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of the Underwriters' Warrants.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with, the Underwriters that the following
statements are true and correct on the date hereof and as of the times
referred to below:
(a) The Registration Statement, including the Preliminary Prospectus,
has been filed by the Company with the Commission under the Securities Act,
and one or more amendments to the Registration Statement have been so filed.
Copies of the Registration Statement and of each amendment, heretofore filed
by the Company with the Commission have been delivered to each of the
Underwriters. After the execution of this Agreement, the Company will file
with the Commission either (i) if the Registration Statement, as it may have
been amended, has been declared by the Commission to be effective under the
Securities Act, the Prospectus in the form most recently included in the
Registration Statement (or, if an amendment thereto shall have been filed, in
such amendment), with such changes or insertions as are required by Rule 430A
under the Securities Act or permitted by Rule 424(b) under the Securities Act
and as have been provided to and approved by the Underwriters prior to the
execution of this Agreement, or (ii) if the Registration Statement, as it may
have been amended, has not been declared by the Commission to be effective
under the Securities Act, an amendment to the Registration Statement,
including a form of Prospectus, a copy of which amendment has been furnished
to and approved by the Underwriters prior to the execution of this Agreement.
The Company has caused to be delivered to the Underwriters copies of each
Preliminary Prospectus and has consented to the use of those copies for the
purposes permitted by the Securities Act.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus. When each Preliminary Prospectus and
each amendment and each supplement thereto was filed with the Commission, it
(i) contained all statements required to be stated therein, in accordance
with, and complied with, in all material respects, the requirements of, the
Securities Act and the rules and regulations of the Commission thereunder and
(ii) did not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
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InfoHighway Communications Corporation Page 4
(c) When the Registration Statement was and is declared effective, it:
(i) contained and will contain all statements required to be stated
therein in accordance with, and complied and will comply with, in all
material respects, the requirements of, the Securities Act and the rules and
regulations of the Commission thereunder, and
(ii) did not and will not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein not misleading.
(d) When the Prospectus and each amendment or supplement thereto is
filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or
such amendment or supplement is not required so to be filed, when the
Registration Statement containing such Prospectus or amendment or supplement
thereto was and is declared effective) and on the Firm Closing Date and any
Option Closing Date (as each such term is hereinafter defined), the
Prospectus, as amended or supplemented at any such time:
(i) contained and will contain all statements required to be stated
therein in accordance with, and complied and will comply with, in all
material respects, the requirements of, the Securities Act and the rules and
regulations of the Commission thereunder, and
(ii) did not and will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
The foregoing provisions do not apply to statements or omissions
made in any Preliminary Prospectus, the Registration Statement, or the
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by the
Underwriters specifically for use therein.
(e) Each of the Company and the Founding Companies has been duly
organized and is validly existing as a corporation in good standing under the
laws of its respective jurisdiction, and is duly qualified or authorized to
transact business as a foreign corporation and is in good standing in each
jurisdiction where the ownership or leasing of its property or the conduct of
its business requires such qualification or authorization, except where
failure to qualify would not have a Material Adverse Effect on each
respective company.
(f) Each of the Company and the Founding Companies has full corporate
power and authority, and all necessary material authorizations, approvals,
and permits, to own or lease its respective property and to conduct its
business as now being conducted and as proposed to be conducted as described
in the Registration Statement and the Prospectus (and, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), except where the
failure to do so would not have a Material Adverse Effect on each respective
company.
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InfoHighway Communications Corporation Page 5
(g) The Company has an authorized, issued, and outstanding
capitalization as set forth in the Prospectus (and, if the Prospectus is not
in existence, the most recent Preliminary Prospectus). All of the issued
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid, and nonassessable. There are no outstanding
options, warrants, or other rights granted by the Company to purchase shares
of its Common Stock or other securities, other than as described in the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The Shares have been duly authorized for issuance
by all necessary corporate action on the part of the Company and, when the
Shares are issued and delivered to and paid for by the Underwriters pursuant
to this Agreement, the Shares will be validly issued, fully paid and
nonassessable and will conform to the description thereof in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus). No holder of outstanding securities of the Company is entitled
to any preemptive or other right to subscribe for any of the Company's
securities other than as described in the Prospectus (and, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), and no person
is entitled to have securities registered by the Company under the
Registration Statement or otherwise under the Securities Act other than as
described in the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(h) The capital stock of the Company conforms to the description
thereof contained in the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(i) All issuances of securities heretofore effected by the Company and
each of the Founding Companies have been so effected pursuant to an exemption
from the registration requirements of the Securities Act. Except as
previously disclosed in writing to the Representative, no compensation was
paid to or on behalf of any member of the NASD, or any affiliate or employee
thereof, in connection with any such issuance.
(j) The financial statements of the Company and each of the Founding
Companies included in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
as opined on and prepared by BDO Xxxxxxx, LLP, Pannel Xxxx Xxxxxxx of Texas,
P.C., KPMG, LLP and Xxxxx Xxxxxxxx, P.C., as the case may be, fairly present
the financial position of the Company and each of the Founding Companies,
respectively, as of the dates indicated, and the results of operations of the
Company and each of the Founding Companies, respectively, for the periods
specified. Such financial statements have been prepared in all material
respects in accordance with accounting principles generally accepted in
effect in the United States of America, consistently applied, except to the
extent that certain footnote disclosures regarding unaudited interim periods
may have been omitted in accordance with the applicable rules of the
Commission under the Exchange Act and normal year-end audit adjustments. The
financial data set forth under the captions "Summary Pro Forma Combined
Financial Data Information," "Summary Historical Financial Information For
the Founding Companies," and "Selected Financial Data" in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present, in all material respects, on the basis stated in
the Prospectus (or such Preliminary Prospectus), the information included
therein.
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InfoHighway Communications Corporation Page 6
(k) BDO Xxxxxxx, LLP, which has audited certain financial statements
of the Company and delivered its reports with respect to those financial
statements included in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
are independent public accountants with respect to the Company as required by
the Securities Act and the applicable rules and regulations thereunder.
(l) Pannel Xxxx Xxxxxxx of Texas, P.C., which has audited certain
financial statements of AXCES and delivered its report with respect to those
financial statements included in the Registration Statement and the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), are independent public accountants with respect to
AXCES as required by the Securities Act and the applicable rules and
regulations thereunder.
(m) KPMG, LLP, which has audited certain financial statements of
InfoHighway and delivered its report with respect to those financial
statements included in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
are independent public accountants with respect to the InfoHighway as
required by the Securities Act and the applicable rules and regulations
thereunder.
(n) Xxxxx Xxxxxxxx, P.C., which has audited certain financial
statements of ARC and delivered its report with respect to those financial
statements included in the Registration Statement and the Prospectus (and, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
are independent public accountants with respect to ARC as required by the
Securities Act and the applicable rules and regulations thereunder.
(o) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus):
(i) there has been no material adverse change in the business,
operations, condition (financial or otherwise), earnings or prospects of the
Company or any of the Founding Companies, whether or not arising in the
ordinary course of business;
(ii) there have been no transactions entered into by the Company or
any of the Founding Companies and no commitments made by the Company or any
of the Founding Companies that, individually or in the aggregate, are
material with respect to the Company or any of the Founding Companies;
(iii) there has not been any change in the capital stock or
indebtedness of the Company or any of the Founding Companies; and
(iv) there has been no dividend or distribution of any kind
declared, paid, or made by the Company or any of the Founding Companies in
respect of any class of its capital stock.
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InfoHighway Communications Corporation Page 7
(p) The Company has full corporate power and authority to enter into
and perform its obligations under this Agreement and the Underwriters'
Warrant Agreement. The execution and delivery of this Agreement and the
Underwriters' Warrant Agreement have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement and the
Underwriters' Warrant Agreement have each been duly executed and delivered by
the Company and each is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium, and other similar laws affecting
creditors' rights generally and by general principles of equity.
(q) The issuance, offer, and sale by the Company to the Underwriters
of the Shares pursuant to this Agreement or the Underwriters' Warrants
pursuant to the Underwriters' Warrant Agreement, the compliance by the
Company with the provisions of this Agreement and the Underwriters' Warrant
Agreement, and the consummation of the other transactions contemplated by
this Agreement and the Underwriters' Warrant Agreement do not:
(i) require the consent, approval, authorization, registration, or
qualification of or with any court or governmental or regulatory authority
(other than (1) as obtained or required under state securities or blue sky
laws and federal and state communications laws, rules, and regulations and,
(2) if the Registration Statement is not effective under the Securities Act
as of the time of execution hereof, as required by the Securities Act), or
(ii) conflict with or result in a breach or violation of, or
constitute a default under, any contract, indenture, mortgage, deed of trust,
loan agreement, note, lease, or other agreement or instrument to which the
Company is a party or by which the Company or any of its property is bound or
subject, or the certificate of incorporation or by-laws of the Company, or
any statute or any rule, regulation, judgment, decree, or order of any court
or other governmental or regulatory authority or any arbitrator or tribunal
applicable to the Company, other than federal and state communications laws,
rules and regulations.
(r) No legal or governmental proceedings are pending to which the
Company or any of the Founding Companies is a party or to which the property
of the Company or any of the Founding Companies is subject, and no such
proceedings have been threatened against the Company or any of the Founding
Companies or with respect to any of their respective properties, except as
described in the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus). No contract or other document is
required to be described in the Registration Statement or the Prospectus or
to be filed as an exhibit to the Registration Statement that is not described
therein (and, if the Prospectus is not in existence, in the most recent
Preliminary Prospectus) or filed as required.
(s) Neither the Company nor any of the Founding Companies is in (i)
violation of its certificate of incorporation, by-laws, or other governing
documents, (ii) except as described in the Prospectus (and, if the Prospectus
is not in existence, then the
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InfoHighway Communications Corporation Page 8
most recent Preliminary Prospectus), violation of any law, statute,
regulation, ordinance, rule, order, judgment, or decree of any court or any
governmental or regulatory authority applicable to it, or (iii) except as
described in the Prospectus (and, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), default in the performance or observance
of any obligation, agreement, covenant, or condition contained in any
material contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, or other agreement or instrument to which it is a party or by which it
or any of its property may be bound or subject, and no event has occurred
which with notice (whether or not notice has been, or will be, given) or
lapse of time (or both) would constitute such a default.
(t) Except as described in the Prospectus (and, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), the Company and
the Founding Companies each currently own or possess adequate rights to use
all intellectual property, including all patents, trademarks, service marks,
trade names, copyrights, inventions, know-how, trade secrets, proprietary
technologies, processes, substances, and applications, that are described in
the Prospectus (and if the Prospectus is not in existence, the most recent
Preliminary Prospectus), and any other rights or interests in items of
intellectual property necessary for the conduct of the business now conducted
or proposed to be conducted by the Company and each of the Founding Companies
as described in the Prospectus (and if the Prospectus is not in existence,
the most recent Preliminary Prospectus). Except as disclosed in the
Prospectus (and if the Prospectus is not in existence, the most recent
Preliminary Prospectus), neither the Company nor any of the Founding
Companies is aware of, nor has the Company nor any of the Founding Companies
received notice of, infringement of, or conflict with asserted rights of
others with respect to any of the foregoing. All such intellectual property
rights and interests are (i) valid and enforceable and (ii) to the best
knowledge of the Company and each of the Founding Companies, not being
infringed by any third parties, except as disclosed in the Prospectus (and if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
(u) The Company and each of the Founding Companies possess adequate
licenses, orders, authorizations, approvals, certificates, and permits issued
by the appropriate federal, state, local, or foreign regulatory agencies or
bodies necessary to conduct their respective businesses as described in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). Except as disclosed in
the Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no pending proceedings relating to the
revocation or modification of any such license, order, authorization,
approval, certificate or permit, and no such proceedings have been
threatened.
(v) The Company and the Founding Companies have good and indefeasible
title to all of the properties and assets reflected in their respective
financial statements and as described in the Registration Statement and the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), subject to no lien, security interest, mortgage,
pledge, charge, hypothecation, or encumbrance of any kind, except those
reflected in such financial statements or as described in the Registration
Statement and the Prospectus (and if the Prospectus is not in existence, the
most recent Preliminary Prospectus). Except as disclosed in the Prospectus
(and if the Prospectus is not in
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existence, the most recent Preliminary Prospectus), the Company and the
Founding Companies occupy their respective leased properties under valid and
enforceable leases conforming to the description thereof set forth in the
Registration Statement and the Prospectus (and if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(w) (i) The Company, through ARC, has good and indefeasible title to
all of the assets of ARC, subject to and in accordance with that certain
Agreement and Plan of Reorganization dated June 30, 1999, by and among ARC,
ARC Acquisition, Inc., the Company and its Stockholders Named Therein (the
"ARC Acquisition Agreement.")
(ii) The Company, through AXCES, has acquired good and
indefeasible title to all of the assets of AXCES, on the Firm Closing Date,
subject to and in accordance with that certain Agreement and Plan of
Reorganization dated June 24, 1999, by and among AXCES, AXCES Acquisition,
Inc., the Company, MTM Holdings Corporation and its Stockholders Named
Therein (the "AXCES Acquisition Agreement.")
(iii) The Company, through InfoHighway, has acquired good and
indefeasible title to all of the assets of InfoHighway, on the Firm Closing
Date, subject to and in accordance with that certain Agreement and Plan of
Reorganization dated June 30, 1999, by and among InfoHighway, Info
Acquisition, Inc., the Company and its Stockholders Named Therein (the
"InfoHighway Acquisition Agreement.")
(x) The Company is not, and does not intend to conduct its business in
a manner in which it would be, an "investment company" as defined in Section
3(a) of the Investment Company Act.
(y) No labor dispute with the employees of the Company or any of the
Founding Companies exists, is threatened, or is imminent that could result in
a Material Adverse Effect in the condition (financial or otherwise),
business, prospects, net worth, or results of operations of the Company or
any of the Founding Companies.
(z) The Company and the Founding Companies are each insured, by
insurers of recognized financial responsibility licensed in all jurisdictions
in which each of the Company and the Founding Companies maintain facilities,
against such losses and risks and in such amounts as are prudent and
customary in the businesses in which each is engaged. Neither the Company
nor any of the Founding Companies has been refused any insurance coverage
sought or applied for. Neither the Company nor any of the Founding Companies
has reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
at a cost that would not materially and adversely affect the condition
(financial or otherwise), business, prospects, net worth, or results of
operations of the Company or the Founding Companies.
(aa) The Underwriters' Warrants will conform to the description thereof
in the Registration Statement and in the Prospectus (and, if the Prospectus
is not in existence, the most recent Preliminary Prospectus). The
Underwriters' Warrants, when sold to and
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paid for by the Underwriters in accordance with the Underwriters' Warrant
Agreement, will have been duly authorized and validly issued and will
constitute valid and binding obligations of the Company, and the holders of
the Underwriters' Warrants shall be entitled to the benefits of the
Underwriters' Warrant Agreement. The Underwriters' Warrant Shares have been
duly authorized and reserved for issuance upon exercise of the Underwriters'
Warrants by all necessary corporate action on the part of the Company. When
issued, delivered, and paid for upon such exercise in accordance with the
terms of the Underwriters' Warrant Agreement, the Underwriters' Warrants, and
the Underwriters' Warrant Shares will be validly issued, fully paid, and
nonassessable and will conform to the descriptions thereof in the Prospectus
(and, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(bb) Except as set forth in the Registration Statement and the
Prospectus (and, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), no person has acted as a finder in connection with,
or is entitled to any commission, fee, or other compensation or payment for
services as a finder for or for originating, or introducing the parties to,
the transactions contemplated herein. Except as set forth in the
Registration Statement and the Prospectus (and, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company has no
management or financial consulting agreement with anyone. No promoter,
officer, director, or stockholder of the Company is, directly or indirectly,
affiliated or associated with an NASD member. No securities of the Company
have been acquired by an NASD member.
(cc) The Company and the Founding Companies have filed all federal,
state, local, and foreign tax returns which are required to be filed through
the date hereof, or have received extensions thereof, and have paid all taxes
shown on such returns and all assessments received by them to the extent that
the same have become due, except as disclosed in the financial statements
included in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the Preliminary Prospectus).
(dd) None of the Company, the Founding Companies, or any director,
officer, agent, employee, or other person associated with or acting on behalf
of the Company or any of the Founding Companies, has, directly or indirectly:
(i) used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity;
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds;
(iii) violated any provision of the Foreign Corrupt Practices Act of
1977, as amended or;
(iv) made any bribe, rebate, payoff, influence payment, kickback, or
other unlawful payment.
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(ee) No transaction has occurred between or among the Company and any
of its officers, directors, agents, employees, or any affiliates, or between
or among any of the Founding Companies and any of their respective officers,
directors, agents, employees or any affiliates, that is required to be
described in and is not described in the Registration Statement and the
Prospectus (and if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(ff) None of the Company, any of the Founding Companies, or any
officer, director, agent, employee, or other person associated with or acting
on behalf of the Company or the Founding Companies has taken or will take,
directly or indirectly, prior to the completion of the IPO, any action
designed to stabilize or manipulate the price of any security of the Company,
or which has caused or resulted in, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the price
of any security of the Company, to facilitate the sale or resale of any of
the Shares.
(gg) The Company owns all capital stock of the Founding Companies, and
such capital stock is validly issued, fully paid, nonassessable and free of
preemptive rights.
4. PURCHASE, SALE, AND DELIVERY OF THE SHARES AND THE UNDERWRITERS' WARRANTS
(a) On the basis of the representations, warranties, agreements, and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to each Underwriter, and each
Underwriter, severally, not jointly, agrees to purchase from the Company, the
number of Firm Shares set forth opposite its name on Schedule 1 hereto at a
purchase price of $[91% OF PUBLIC OFFERING PRICE] per share.
(b) Certificates in definitive form for the Firm Shares that the
Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names as the Underwriters
request upon notice to the Company at least 48 hours prior to the Firm
Closing Date, shall be delivered by or on behalf of the Company to the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by wire transfer or certified or official bank check
or checks drawn upon or by a New York Clearing House bank and payable in
next-day funds to the order of the Company. Such delivery of and payment for
the Firm Shares shall be made at the offices of the Representative, Xxx Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, at 9:30 A.M., New York
City time on the Firm Closing Date. The Company will make such certificates
for the Firm Shares available for checking and packaging by the Underwriters,
at such offices as may be designated by the Representative, at least 24 hours
prior to the Firm Closing Date. In lieu of physical delivery, the closing may
occur by customary DTC delivery.
(c) For the purpose of covering any over-allotments in connection with
the distribution and sale of the Firm Shares as contemplated by the
Prospectus (and if the Prospectus is not in existence, the most recent
Preliminary Prospectus), the Company hereby grants to the Underwriters the
Option to purchase any or all of the Option Shares, which Option is
exercisable by the Representative on behalf of and for the account of the
Underwriters. The purchase price to be paid for any of the Option Shares
shall be the
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same price per share as the price per share for the Firm Shares. The Option
may be exercised as to all or any part of the Option Shares from time to time
within 45 calendar days after the Firm Closing Date (the "Option Period").
The Underwriters shall not be under any obligation to purchase any of the
Option Shares prior to the exercise of the Option. The Representative may
from time to time exercise the Option for the account of and on behalf of the
Underwriters by giving notice in writing or by telephone (confirmed in
writing) to the Company setting forth the aggregate number of Option Shares
as to which the Underwriters are then exercising the Option and the date and
time for delivery of and payment for such Option Shares. Any such date of
delivery shall be determined by the Underwriters but shall not be earlier
than 2 business days or later than 8 business days after such exercise of the
Option and, in any event, shall not be earlier than the Firm Closing Date.
The time and date set forth in such notice, or such other time on such other
date as the Representative and the Company may agree upon, is herein called
the "Option Closing Date" with respect to such Option Shares. Upon exercise
of the Option as provided herein, the Company shall become obligated to sell
to the Underwriters, and, subject to the terms and conditions herein set
forth, each Underwriter shall become obligated to purchase from the Company,
the Option Shares as to which the Underwriter is then exercising its Option.
If the Option is exercised as to all or any portion of the Option Shares,
certificates in definitive form for such Option Shares, and payment therefor,
shall be delivered on the related Option Closing Date in the manner, and upon
the terms and conditions, set forth in paragraph (b) of this section 4,
except that references therein to the Firm Shares and the Firm Closing Date
shall be deemed, for purposes of this paragraph, to refer to such Option
Shares and Option Closing Date, respectively. The Company will make such
certificates for the Option Shares available for checking and packaging by
the Underwriters, at such offices as may be designated by the Representative,
at least 24 hours prior to the Option Closing Date. In lieu of physical
deliery, the closing may occur by customary DTC delivery.
(d) On the Firm Closing Date, the Company will grant to the each of the
Underwriters or, at the direction of the Underwriters, to shareholders and
officers of the Underwriters, Underwriters' Warrants to purchase (i) an
aggregate of 160,000 shares of Common Stock on the Firm Closing Date, and
(ii) an aggregate of shares of Common Stock on each Option Closing Date equal
to 10% of the number of Option Shares purchased on each such Option Closing
Date (for a total of 184,000 Shares if the Underwriters exercise the Option
in full) for a period of five (5) years, commencing on the first anniversary
of the Effective Date. The Underwriters' Warrants shall be exercisable in
whole or in part, from time to time and at any time, at a price equal to 165%
of the price of the Common Stock offered in the IPO, and shall contain terms
and provisions more fully described herein below and as set forth more
particularly in the Underwriters' Warrant Agreement attached hereto as
Exhibit A.
5. OFFERING BY THE UNDERWRITER. The Underwriters propose to offer the
Shares for sale to the public upon the terms set forth in the Prospectus.
6. COVENANTS OF THE COMPANY. The Company covenants to, and agrees
with, the Underwriters that:
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(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, to
become effective as promptly as possible. If required, the Company will file
the Prospectus, and any amendment or supplement thereto, with the Commission
in the manner and within the time period required by Rule 424(b) under the
Securities Act (or a successor rule). During any time when the Prospectus is
required to be delivered under the Securities Act, the Company:
(i) will comply with all requirements imposed upon it by the
Securities Act and the rules and regulations of the Commission thereunder to
the extent necessary to permit the continuance of sales of or dealings in the
Shares in accordance with the provisions hereof and of the Prospectus, as
then amended or supplemented, and
(ii) will not file with the Commission any Prospectus, amendment,
or supplement to the Prospectus or any amendment to the Registration
Statement as to which the Underwriters shall not previously have been advised
and furnished with a copy for a reasonable period of time prior to the
proposed filing and as to which filing the Underwriters shall not have given
their consent. The Company will prepare and file with the Commission, in
accordance with its rules and regulations promptly upon request by the
Underwriters or counsel to the Underwriters, any amendments to the
Registration Statement or amendments or supplements to the Prospectus that
may be necessary or advisable in connection with the distribution of the
Shares by the Underwriters, and will use its best efforts to cause any such
amendment to the Registration Statement to be declared effective by the
Commission as promptly as possible at the direction of the Underwriters. The
Company will advise the Underwriters, promptly after receiving notice
thereof, of the time when the Registration Statement or any amendment thereto
has been filed or declared effective or the Prospectus or any amendment or
supplement thereto has been filed and will provide evidence satisfactory to
the Underwriters of each such filing or effectiveness.
(b) The Company will advise the Underwriters, promptly after receiving
notice or obtaining knowledge, of:
(i) the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto,
(ii) the suspension of the qualification of any Shares for
offering or sale in any jurisdiction,
(iii) the institution, threat, or contemplation of any proceeding
for any such purpose or
(iv) any request made by the Commission or any jurisdiction for
amending the Registration Statement, for amending or supplementing the
Prospectus, or for additional information. The Company will use its best
efforts to prevent the issuance of
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any such stop order, suspension, or proceeding, and, if any such stop order,
suspension, or proceeding is issued, to obtain the withdrawal thereof as
promptly as possible.
(c) The Company will, in cooperation with counsel to the Underwriters,
arrange for the qualification of the Shares for offering and sale under the
securities laws of such jurisdictions as the Underwriters may designate and
will continue such qualifications in effect for as long as may be necessary
to complete the distribution of the Shares; provided, however, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction which it is not
otherwise so subject.
(d) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act, any event occurs as a
result of which the Prospectus, as then amended or supplemented, would
include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any other
reason it is necessary or desirable at any time to amend or supplement the
Prospectus to comply with the Securities Act or the rules or regulations of
the Commission thereunder, the Company will promptly notify the Underwriters
thereof and, prepare and file with the Commission, at the Company's expense,
an amendment to the Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or effects such
compliance.
(e) The Company will, without charge, provide to the Underwriters and
to counsel for the Underwriters (i) as many signed copies of the Registration
Statement originally filed with respect to the Shares and each amendment
thereto (in each case including exhibits thereto) as the Underwriters may
reasonably request, (ii) as many conformed copies of such Registration
Statement and each amendment thereto (in each case without exhibits thereto)
as the Underwriter may reasonably request and (iii) so long as a prospectus
relating to the Shares is required to be delivered under the Securities Act,
as many copies of each Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto as the Underwriters may reasonably request.
(f) The Company shall make "generally available to its security
holders" (within the meaning of Rule 158 under the Securities Act) an
earnings statement (which need not be audited) complying with Section 11 (a)
of the Securities Act and in accordance with Rule 158 thereunder.
(g) The Company will reserve and keep available for issuance that
maximum number of authorized but unissued Underwriters' Warrant Shares
issuable upon exercise of the Underwriters' Warrants outstanding from time to
time.
(h) The Company will apply the net proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus.
(i) Prior to the end of the Option Period, the Company will not,
directly or indirectly, without prior written consent of the Representative,
issue any press release or
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other public announcement or hold any press conference with respect to the
Company or its activities with respect to the IPO.
(j) If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A
under the Securities Act, then immediately following the Firm Closing Date,
the Company will prepare, and file or transmit for filing with the Commission
in accordance with Rule 430A and Rule 424(b) under the Securities Act, copies
of the Prospectus including the information omitted in reliance on Rule 430A,
or, if required by such Rule 430A, a post-effective amendment to the
Registration Statement (including an amended Prospectus), containing all
information so omitted.
(k) The Company will cause the Shares to be included on the American
Stock Exchange on the Effective Date and to maintain such listing thereafter.
The Company will file with the American Stock Exchange all documents and
notices that are required pursuant to the rules of the American Stock
Exchange.
(l) During the period of five (5) years from the Firm Closing Date, the
Company will, as promptly as possible (not to exceed 120 days after each
fiscal year) render and distribute reports to its stockholders which will
include audited statements of its operations and changes of financial
position during such period and its audited balance sheet as of the end of
such period. Such financial statements shall be those required by Rule 14a-3
under the Exchange Act and shall be included in an annual report pursuant to
the requirements of such Rule. The Company's independent certified public
accountants shall have rendered an opinion as to the financial statements and
shall timely file all reports required to be filed under the federal and
state securities laws.
(m) During a period of three (3) years commencing with the Firm Closing
Date, the Company will furnish to the Representative, at the Company's
expense, copies of:
(i) all periodic and special reports furnished to and all
communications with, the Company's stockholders; and
(ii) information, documents, and reports filed with the Commission.
(n) The Company has appointed American Stock Transfer & Trust Company
as transfer agent for the Common Stock (the "Transfer Agent"). The Company
will not change or terminate such appointment for a period of three (3) years
from the Firm Closing Date without first obtaining the written consent of the
Representative. For a period of three (3) years after the Effective Date,
the Company shall cause the Transfer Agent to deliver promptly to the
Underwriters a duplicate copy of the daily transfer sheets relating to
trading of the Shares. The Company shall also provide to the Representative,
on a weekly basis, copies of the DTC special securities positions listing
report.
(o) For 180 days after the Firm Closing Date, the Company will not
directly or indirectly take any action designed to, or that will constitute,
or that might reasonably
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be expected to cause or result in, the stabilization or manipulation of the
price of the Common Stock.
(p) The Company will not take any action to facilitate the sale of any
shares of Common Stock pursuant to Rule 144 under the Securities Act or
otherwise if any such sale would violate the terms of the Lock-up Agreements.
(q) As long as any shares of the Company's Common Stock remain subject
to the Lock-up Agreements, the Company shall not grant options, issue shares
of its Common Stock, or issue other securities except (i) the Shares, (ii)
shares issued under its incentive plan, (iii) any shares of Common Stock
issued by the Company upon the exercise of any option or any warrant or the
conversion of a security outstanding on the date hereof (PROVIDED that such
option, warrant, or other security was disclosed in the Registration
Statement and the Prospectus (and, if the Prospectus is not then in
existence, the Preliminary Prospectus), or (iv) in connection with
acquisitions of businesses, technologies, or products complementary to those
currently offered by the Company; PROVIDED, HOWEVER, that any recipients of
such options, shares, or securities issued pursuant to this paragraph agree
to be bound by the terms of the Lock-up Agreements. In addition, the
Company, at its own expense, shall file a registration statement at any time
for the resale of up to 165,000 shares of Common Stock by Benchmark Equity
Group during the period beginning 90 days after the Firm Closing Date and
ending 180 days after the Firm Closing Date.
(r) Prior to the 120th day after the Firm Closing Date, the Company
will provide the Underwriters and its designees with 8 leather bound volumes
of the transaction documents relating to the Registration Statement and the
closings thereunder, in form and substance reasonably satisfactory to the
Representative and its counsel.
(s) The Company shall give notice to the Underwriters immediately as to
any investigation, proceeding, order, event, or other circumstance, or any
threat thereof, by or relating to the Commission or any other governmental
authority, that could impair or prevent the IPO. Except as required by law
or as otherwise mutually agreed in writing, the Company will not acquiesce in
such circumstances and will defend any proceedings or orders in that
connection.
(t) The Company will, for a period of 3 years commencing immediately
after the Firm Closing Date, use its best efforts:
(i) to nominate one person (the "Nominee"), if any, designated by
the Representative for election to the Company's Board and
(ii) to cause the Nominee's election to the Board.
In the event the Representative elects not to exercise such right, the
Representative may designate a person (the "Designee") (a) to receive all
notices of meetings of the Board and all correspondence and communications
sent by the Company to the Board and (b) to attend all such meetings of the
Board. The Company shall reimburse the Nominee or the Designee (as the case
may be) for his reasonable out-of-pocket expenses incurred in
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connection with his attendance of meetings of the Company's Board, including,
but not limited to, food, lodging, and transportation. The Company shall pay
the Nominee an amount consistent with the Company's policy on paying
non-employee directors. The Company shall indemnify and hold the
Representative and its Nominee or Designee (as the case may be) harmless
against any and all claims, actions, damages, costs and expenses, and
judgments arising solely out of the attendance and participation of the
Nominee or Designee at any such meeting described herein or action taken by
the Board by consent in lieu of any such meeting. If the Company maintains a
liability insurance policy affording coverage for the acts of its officers
and directors, it shall, if possible, include and maintain the Nominee as an
insured under such policy, and shall furnish proof of insurance and proof of
payment to the Representative and the Nominee (if any).
(u) The Company shall first submit to the Representative certificates
representing the Shares for approval prior to printing, and shall, as
promptly as possible after filing the Registration Statement with the
Commission, obtain CUSIP numbers for the Shares.
(v) For so long as the Shares are registered under the Exchange Act but
not less than 5 years from Effective Date, the Company will hold an annual
meeting of stockholders for the election of directors within 180 days after
the end of each of its fiscal years.
(w) The Company will engage a financial public relations firm
satisfactory to the Representative on or before the Firm Closing Date, and
continuously engage such firm, or a substitute firm reasonably acceptable to
the Representative, for a period of 3 years following the Firm Closing Date.
(x) The Company will engage BDO Xxxxxxx (or a substitute independent
certified public accounting firm having a national reputation reasonably
acceptable to the Representative) on or before the Firm Closing Date, and
continuously engage such firm for 3 years following the Firm Closing Date.
(y) The Company will engage American Stock Transfer & Trust Company or
such other transfer agent reasonably acceptable to the Representative on or
before the Firm Closing Date, and continuously engage such firm (or a
substitute firm reasonably acceptable to the Representative) for 3 years
following the Firm Closing Date.
(z) The Company will take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions or other equivalent
manual and to maintain its listing therein for a period of 5 years from the
Effective Date.
(aa) On or prior to the Firm Closing Date, the Company will give
written instructions to the Transfer Agent directing the placement of
stop-order restrictions against, and appropriate legends advising of the
Lock-Up Agreements on, all certificates representing all securities of the
Company owned by the persons who have entered into the Lock-Up Agreements.
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InfoHighway Communications Corporation Page 18
(bb) The Company shall participate in "road shows" at and upon the
request of the Underwriters.
(cc) The Company shall uphold and strictly enforce against the
Stockholder (as such term is defined in the AXCES Acquisition Agreement) the
provisions of Section 12.2 of the AXCES Acquisition Agreement, and the
Company shall not release any such Stockholder or any of that Stockholder's
Related Persons (as such term is defined in the AXCES Acquisition Agreement)
from the restrictions set forth in said Section without the prior written
consent of the Representative.
(dd) The Company shall uphold and strictly enforce against the
Stockholders (as such term is defined in the InfoHighway Acquisition
Agreement) the provisions of Section 12.02 of the InfoHighway Acquisition
Agreement, and the Company shall not release any of the Stockholders or any
of the Stockholders' Related Persons (as such term is defined in the
InfoHighway Acquisition Agreement) from the restrictions set forth in said
Section without the prior written consent of the Representative.
(ee) The Company shall uphold and strictly enforce against the
Stockholders (as such term is defined in the ARC Acquisition Agreement) the
provisions of Section 10.2 of the ARC Acquisition Agreement, and the Company
shall not release any of the Stockholders or any of the Stockholders' Related
Persons (as such term is defined in the InfoHighway Acquisition Agreement)
from the restrictions set forth in said Section without the prior written
consent of the Representative.
7. EXPENSES
(a) The Company shall pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the IPO
is consummated or this Agreement is terminated, including all costs and
expenses incident to (i) the preparation, printing, and filing and other
reproduction of documents with respect to the IPO, including any costs of
printing the Registration Statement, any Preliminary Prospectus, and the
Prospectus and any amendment or supplement thereto, this Agreement, the
selected dealer agreement, and the other agreements and documents governing
the underwriting arrangements relating to the IPO, (ii) all reasonable and
necessary arrangements relating to the delivery to the Underwriters of copies
of the foregoing documents, (iii) the fees and disbursements of the counsel,
the accountants, and any other experts or advisors retained by the Company,
(iv) the preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Shares, including registrar's and Transfer
Agent's fees and any transfer or other taxes payable thereon, (v) the
qualification of the Shares under state blue sky or securities laws,
including filing fees and reasonable legal fees and disbursements of counsel
for the Underwriters relating thereto, (vi) the filing fees of the Commission
and the NASD relating to the Shares, (vii) the listing of the Shares on the
American Stock Exchange or the inclusion of the Shares on any other exchange,
and the listing of the Shares in the Standard and Poor's Corporation
Descriptions Manual or such other comparable manual, (viii) any "road shows"
or other meetings with prospective investors desired by the Underwriters,
including transportation, accommodation, meal, conference room, audio-visual
presentation and
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similar expenses of the Underwriters or their designees (other than as shall
have been specifically approved in advance by the Underwriters to be paid for
by the Underwriters) and (ix) the publication of "tombstone" advertisements
in newspapers and other publications selected by the Underwriters and the
manufacture of Prospectus memorabilia.
In addition to the foregoing, the Company shall reimburse the
Underwriters for their expenses incurred in connection with the IPO on a
non-accountable basis in the amount of two (2.6%) percent of the gross
proceeds from the sale of the Shares (the "Allowance.") The Representative
hereby acknowledges receipt of the sum of $100,000 from the Company, which
shall be credited against the Allowance to be paid by the Company. The
unpaid portion of the Allowance from the sale of the Firm Shares, shall be
deducted from the funds to be paid by the Underwriters in payment for the
Firm Shares on the Firm Closing Date. To the extent any Option Shares are
sold, any additional Allowance based on the gross proceeds from the sale of
the Option Shares shall be deducted from the funds to be paid by the
Underwriters in payment for the Option Shares on the Option Closing Date.
The Company warrants, represents, and agrees that all such payments and
reimbursements will be promptly and fully made.
(b) Notwithstanding any other provision of this Agreement, if the IPO
is terminated for any reason, the Company agrees that, in addition to the
Company paying its own expenses as described above, (i) the Company shall
reimburse the Representative for its actual accountable out-of-pocket
expenses (in addition to blue sky legal fees and expenses referred to above),
and (ii) the Representative shall be entitled to retain the Allowance paid by
the Company through the date of termination, in accordance with this
Agreement; PROVIDED, HOWEVER, that the amount retained pursuant to this
clause (ii) shall not exceed the Representative's expenses on an accountable
basis to the date of termination and that any unaccounted amount shall be
refunded to the Company. Such expenses shall include, but are not to be
limited to, fees for the legal services and time of counsel for the
Underwriters for all matters relating to the Company and the IPO to the
extent not covered by clause (i) above, plus any additional expenses and
fees, including, but not limited to, travel expenses, postage expenses,
duplication expenses, long-distance telephone expenses, and other expenses
incurred by the Representative and its counsel in connection therewith.
8. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of
each Underwriter to purchase and pay for the Firm Shares shall be subject, in
each Underwriter's sole discretion, to the accuracy of the representations
and warranties of the Company contained herein as of the date hereof, as of
the Firm Closing Date as if made on and as of the Firm Closing Date, and as
of each Option Closing Date as if made on and as of each Option Closing Date,
to the accuracy of the statements of the Company's directors and officers
made pursuant to the provisions hereof and otherwise, to the performance by
the Company of its covenants and agreements hereunder, and to the following
additional conditions:
(a) If the Registration Statement has not been declared effective as of
the time of execution hereof, the Registration Statement, as heretofore
amended or as amended by an amendment thereto to be filed prior to the Firm
Closing Date, shall have been declared
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effective not later than 5:30 P.M., New York City time, on the date on which
the amendment to such registration statement containing information regarding
the IPO price of the Shares has been filed with the Commission, or such later
time and date as shall have been consented to by the Underwriters, if
required, the Prospectus and any amendment or supplement thereto shall have
been filed with the Commission in the manner and within the time period
required by Rule 424(b) under the Securities Act (or any successor rule), no
stop order suspending the effectiveness of the Registration Statement shall
have been issued, and no proceedings for that purpose shall have been
instituted or threatened or, to the knowledge of the Company or the
Underwriters, shall be contemplated by the Commission; and the Company shall
have complied with all requests of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or otherwise).
(b) The Underwriter shall have received an opinion, dated the Firm
Closing Date and each Option Closing Date, of Xxxxxx & Xxxxxx, L.L.P.,
counsel to the Company, to the effect that:
(i) the Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
organization;
(ii) the Company is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of each other
jurisdiction in which its ownership or leasing of any properties or the
conduct of its business requires such qualification, except where the failure
to qualify would not have a Materially Adverse Effect upon the Company;
(iii) the Company has full corporate power and authority to own or
lease its property and conduct its business as now being conducted and as
proposed to be conducted, as described in the Registration Statement and the
Prospectus, and the Company has full corporate power and authority to enter
into this Agreement and the Underwriters' Warrant Agreement and to carry out
all the terms and provisions hereof and thereof to be carried out by it;
(iv) to the best knowledge of such counsel after inquiry, there
are no outstanding options, warrants, or other rights granted by the Company
to purchase shares of its Common Stock, preferred stock, or other securities
other than as described in the Prospectus;
(v) the Shares have been duly authorized, and the Underwriters'
Warrant Shares have been duly reserved for issuance, by all necessary
corporate action on the part of the Company; the Shares, when issued,
delivered to and paid for by the Underwriters, pursuant to this Agreement,
will be validly issued, fully paid, nonassessable, and free of preemptive
rights and will conform to the description thereof in the Prospectus; the
Underwriters' Warrant Shares, when issued delivered to and paid for by the
Underwriters pursuant to the Underwriters' Warrant Agreement; will be validly
issued, fully paid, nonassessable, and free of preemptive rights and will
conform to the description thereof in the Prospectus;
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(vi) to the best knowledge of such counsel after inquiry, no
holder of outstanding securities of the Company is entitled to any preemptive
or other right to subscribe for any of the Shares or any other securities of
the Company except as described in the Prospectus;
(vii) to the best knowledge of such counsel after inquiry, no
person is entitled to have securities registered by the Company under the
Registration Statement or otherwise other than as described in the Prospectus;
(viii) the execution and delivery of this Agreement, the
Underwriters' Warrant, and the Underwriters' Warrant Agreement have each been
duly authorized by all necessary corporate action on the part of the Company;
(ix) this Agreement and the Underwriters' Warrant Agreement
have each been duly executed and delivered by the Company, and each is a
valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium,
and other similar laws affecting creditors' rights generally and by general
principles of equity (except to the extent that the indemnification
obligations of the Company set forth in this Agreement and in the
Underwriters' Warrant Agreement are held to be unenforceable because of
public policy by a court having competent jurisdiction);
(x) the Underwriters' Warrants conform to the description
thereof in the Registration Statement and the Prospectus and are duly
authorized and, upon payment of the purchase price, will be validly issued
and constitute valid and binding obligations of the Company;
(xi) the certificates representing the Shares are in due and
proper form under law;
(xii) the statements set forth in the Prospectus under the
caption "Description of Capital Stock" insofar as those statements purport to
summarize the terms of the capital stock, options, warrants, convertible
securities, derivative securities and other securities of the Company have
been reviewed by them and are correct and complete in all material respects
and not misleading in any material respect.
(xiii) the statements set forth in the Prospectus describing
statutes and regulations and the descriptions of the consequences to the
Company under such statutes and regulations have been reviewed by them and
are correct and complete in all material respects and not misleading in any
material respect
(xiv) the statements in the Prospectus, describing the
contracts, instruments, leases, licenses, and other agreements of the Company
have been reviewed by them and are correct and complete in all material
respects and not misleading in any material respect and include all material
terms thereof;
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(xv) none of (A) the execution and delivery of this Agreement,
the Underwriters' Warrants, and the Underwriters' Warrant Agreement, (B) the
issuance, offering, and sale by the Company to the Underwriters of the Shares
pursuant to this Agreement and the Underwriters' Warrant Shares pursuant to
the Underwriters' Warrant Agreement, nor (C) the compliance by the Company
with the other provisions of this Agreement and the Underwriters' Warrant
Agreement and the consummation of the transactions contemplated hereby and
thereby:
(1) requires the consent, approval, authorization,
registration, or qualification of or with any court or governmental
authority, except such as have been obtained and such as may be required
under state blue sky or securities laws and federal or state communications
laws, rules, and regulations, or
(2) conflicts with or results in a breach or violation of,
or constitutes a default under, any material contract, indenture, mortgage,
deed of trust, loan agreement, note, lease, or other material agreement or
instrument to which the Company is a party or by which the Company or any of
its property is bound or subject, or the certificate of incorporation or
by-laws of the Company, or any statute, judgment, decree, order, rule, or
regulation of any court or other governmental or regulatory authority or
arbitrator or tribunal applicable to the Company;
(xvi) no material legal or governmental proceedings are pending
or, to the best knowledge of such counsel after inquiry, are threatened to
which the Company is a party or to which the property of the Company is
subject except: (A) as described in the Registration Statement and
Prospectus; and (B) those arising in the ordinary course of business and
fully covered by insurance;
(xvii) to the best knowledge of such counsel after inquiry, no
contract or other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein or filed as required;
(xviii) to the best knowledge of such counsel after inquiry, the
Company is not:
[a] in violation or breach of, or in default with
respect to, any term of its certificate of incorporation or by-laws, or
[b] except as disclosed in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the
Preliminary Prospectus), in violation or breach of, or in default with
respect to, any law, statute, regulation, ordinance, rule, order, judgment,
or decree of any court or any governmental or regulatory authority applicable
to it, or
[c] except as disclosed in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the
Preliminary Prospectus), in default in the performance or observance of any
obligation, agreement, covenant, or condition contained in any material
contract, indenture, mortgage, deed of trust, loan agreement, note, lease, or
other agreement or instrument to which it is a party or by
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which it or any of its property may be bound or subject, and no event has
occurred which with notice (whether or not notice shall have or may be
given), lapse of time (or both) would constitute such a default;
(xix) the Shares have been approved for listing on the American
Stock Exchange;
(xx) the Registration Statement is effective under the
Securities Act; any required filing of the Prospectus pursuant to Rule 424(b)
or any successor rule has been made in the manner and within the time period
required by Rule 424(b) or any successor rule; and, to the best knowledge of
such counsel after inquiry, no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the
best knowledge of such counsel after inquiry, are contemplated by the
Commission;
(xxi) the Registration Statement and each amendment thereto and
the Prospectus (in each case, other than the financial statements and
schedules and other financial and statistical information contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission thereunder;
(xxii) the Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act and, if the Company conducts its
business as set forth in the Prospectus, it will not become an "investment
company," and it will not be required to register under the Investment
Company Act;
(xxiii) (A) the Company, through ARC, has good and
indefeasable title to all of the assets of ARC, subject to and in accordance
with that certain Agreement and Plan of Reorganization dated June 30, 1999,
by and among ARC, ARC Acquisition, Inc. and the Company;
(B) upon closing of the IPO, the Company, through
AXCES, has good and indefeasible title to all of the assets of AXCES, subject
to and in accordance with that certain Agreement and Plan of Reorganization
dated June 24, 1999, by and among AXCES, AXCES Acquisition, Inc. and the
Company;
(C) upon closing of the IPO, the Company, through
InfoHighway, has good and indefeasible title to all of the assets of
InfoHighway, subject to and in accordance with that certain Agreement and
Plan of Reorganization dated June 30, 1999, by and among InfoHighway, Info
Acquisition, Inc. and the Company;
(xxiv) Although we are not passing upon and do not assume
any responsibility for the accuracy, completeness, or fairness of the
statements contained in the Registration Statement or the Prospectus (or, if
the Prospectus is not in existence, the Preliminary Prospectus), except as
specified in the foregoing opinion, nothing has come to our attention that
would lead us to believe that:
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[a] the Registration Statement (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need to make no statement), at the time the
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or
[b] the Prospectus (except for financial statements and
schedules and other financial data included therein or omitted therefrom, as
to which we need make no statement), at the time the Prospectus was issued or
distributed, or at the time any such amended or supplemented prospectus was
issued or distributed, or on the Firm Closing Date, or on any Option Closing
Date, included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(xxv) The Company owns all capital stock of the Founding
Companies, and such capital stock is validly issued, fully paid,
nonassessable and free of preemptive rights.
In rendering any such opinion, Xxxxxx & Xxxxxx, L.L.P. may rely, as
to matters of fact, to the extent such counsel deems proper, on certificates
of responsible officers of the Company and public officials, copies of which
certificates will be provided to the Underwriters.
(c)(i) The Underwriters shall have received an opinion, dated the
Firm Closing Date and each Option Closing Date, from Xxxxxx, Xxxxxxx, Xxxxxx,
Leader and Zaragoz, regulatory counsel to the Company and ARC, to the effect
that:
[a] the Company and ARC possess adequate licenses,
orders, authorizations, approvals, certificates or permits issued by the
appropriate federal, state or local regulatory agencies or bodies necessary
to conduct their business as described in the Registration Statement and the
Prospectus;
[b] there are no pending or, to the best knowledge of
such counsel after inquiry, threatened proceedings relating to the revocation
or modification of any such license, order, authorization, approval,
certificate or permit;
[c] the statements set forth in the Prospectus
describing statutes and regulations and the descriptions of the consequences
to the Company and ARC under such statutes and regulations are fair summaries
of the information set forth therein and are accurate in all material
respects;
[d] it has read the portions of the Registration
Statement and the Prospectus entitled "Business," "Risk Factors,"
"Management's Discussion and Analysis of Pro Forma Financial Condition and
Results of Operations," together with all descriptions contained therein of
regulatory approvals and regulatory matters, and nothing has come to its
attention that has caused it to believe that such portions of the
Registration Statement, as of the Effective Date (including the information
deemed to be
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a part of the Registration Statement at the time of effectiveness pursuant to
Rule 430A(b), if applicable), contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus, as of its date and as of the Firm Closing Date and as of any
Option Closing Date, contained an untrue statement of material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
In rendering any such opinion, Xxxxxx, Xxxxxxx, Xxxxxx, Leader and
Zaragoz may rely, as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Company and ARC and
public officials, copies of which certificates will be provided to the
Underwriters.
(c)(ii) The Underwriters shall have received an opinion, dated the
Firm Closing Date and each Option Closing Date, from Nowalsky, Bronston &
Xxxxxxx, regulatory counsel to AXCES, to the effect that:
[a] AXCES possesses adequate licenses, orders,
authorizations, approvals, certificates or permits issued by the appropriate
federal, state or local regulatory agencies or bodies necessary to conduct
its business as described in the Registration Statement and the Prospectus;
[b] there are no pending or, to the best knowledge of
such counsel after inquiry, threatened proceedings relating to the revocation
or modification of any such license, order, authorization, approval,
certificate or permit;
[c] the statements set forth in the Prospectus
describing statutes and regulations and the descriptions of the consequences
to AXCES under such statutes and regulations are fair summaries of the
information set forth therein and are accurate in all material respects;
[d] it has read the portions of the Registration
Statement and the Prospectus entitled "Business," "Risk Factors,"
"Management's Discussion and Analysis of Pro Forma Financial Condition and
Results of Operations," together with all descriptions contained therein of
regulatory approvals and regulatory matters, and nothing has come to its
attention that has caused it to believe that such portions of the
Registration Statement, as of the Effective Date (including the information
deemed to be a part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable), contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
or that the Prospectus, as of its date and as of the Firm Closing Date and as
of any Option Closing Date, contained an untrue statement of material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
In rendering any such opinion, Nowalsky, Bronston & Xxxxxxx may
rely, as to matters of fact, to the extent such counsel deems proper, on
certificates of responsible
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officers of AXCES and public officials, copies of which certificates will be
provided to the Underwriters.
(d)(i) At the time this Agreement is executed, at the Firm
Closing Date, and at each Option Closing Date, the Underwriters shall receive
a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory (including the non-material nature of the changes,
decreases or increases, if any, referred to in clause [c] below) in all
respects to the Representative and the Representative's counsel, from BDO
Xxxxxxx, LLP:
[a] confirming that it is the independent certified
public accountant with respect to the Company within the meaning of the
Securities Act and the applicable rules and regulations;
[b] stating that it is its opinion that the financial
statements of the Company included in the Registration Statement comply as to
form in all material respects with the applicable accounting requirements of
the Securities Act and the rules and regulations thereunder and that the
Underwriters may rely upon the opinion of BDO Xxxxxxx, LLP with respect to
the financial statements included in the Registration Statement;
[c] stating that nothing has come to its attention which
would lead it to believe that:
(A) the unaudited pro forma combined financial
statements of the Company included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the rules and regulations thereunder
or are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements of the Company included in the Registration
Statement,
(B) at a specified date not more than five (5) days
prior to the Effective Date, there has not been any change in the Company's
capital stock or increase in the Company's debt, or any decrease in the
Company's stockholders' equity, net current assets, or net assets as compared
with amounts shown in the December 31, 1998 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change, decrease, or increase
setting forth the amount of such change, decrease; or increase, or
(C) during the period from January 1, 1999 to a
specified date not more than five (5) days prior to the Effective Date, there
has not been any decrease (increase) in net revenues, net income (loss) or in
net earnings (loss) per common share of the Company, other than as set forth
in or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
[d] setting forth, at a date not later than five (5)
days prior to the Effective Date, the amount of liabilities of the Company;
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[e] stating that it has compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of 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 (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement;
[f] statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
At the Firm Closing Date and each Option Closing Date, if any, the
Representative shall have received from BDO Xxxxxxx, LLP a letter, dated as
of the Closing Date or the Option Closing Date, as the case may be, to the
effect that it reaffirms that statements made in the letter furnished
pursuant to subsection 8(d), except that the specified date referred to shall
be a date not more than five (5) days prior to the Firm Closing Date or the
Option Closing Date, as the case may be, and, if the Company has elected to
rely on Rule 430A of the Rules and Regulations, to the further effect that it
has carried out procedures as specified in this subsection 8(d) with respect
to certain amounts, percentages, and financial information as specified by
the Representative and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause [e].
(d)(ii) At the time this Agreement is executed, at the Firm
Closing Date, and at each Option Closing Date, the Underwriters shall receive
a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory (including the non-material nature of the changes,
decreases or increases, if any, referred to in clause [c] below) in all
respects to the Representative and the Representative's counsel, from Pannel
Xxxx Xxxxxxx of Texas, P.C.:
[a] confirming that it is the independent certified
public accountant with respect to AXCES within the meaning of the Securities
Act and the applicable rules and regulations;
[b] stating that it is its opinion that the financial
statements of AXCES included in the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Securities Act and the rules and regulations thereunder and that the
Underwriters may rely upon the opinion of Pannel Xxxx Xxxxxxx of Texas, P.C.
with respect to the financial statements included in the Registration
Statement;
[c] stating that nothing has come to its attention which
would lead it to believe that:
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(A) at a specified date not more than five (5) days
prior to the Effective Date, there has not been any change in AXCES' capital
stock or increase in AXCES' debt, or any decrease in AXCES' stockholders'
equity, net current assets, or net assets as compared with amounts shown in
the December 31, 1998 balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration Statement, or,
if there was any change, decrease, or increase setting forth the amount of
such change, decrease; or increase, or
(B) during the period from January 1, 1999 to a
specified date not more than five (5) days prior to the Effective Date, there
has not been any decrease (increase) in net revenues, net income (loss) or in
net earnings (loss) per common share of AXCES, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
[e] statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
At the Firm Closing Date and each Option Closing Date, if any, the
Representative shall have received from Pannel Xxxx Xxxxxxx of Texas, P.C.. a
letter, dated as of the Closing Date or the Option Closing Date, as the case
may be, to the effect that it reaffirms that statements made in the letter
furnished pursuant to subsection 8(d), except that the specified date
referred to shall be a date not more than five (5) days prior to the Firm
Closing Date or the Option Closing Date, as the case may be.
(d)(iii) At the time this Agreement is executed, at the Firm
Closing Date, and at each Option Closing Date, the Underwriters shall receive
a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory (including the non-material nature of the changes,
decreases or increases, if any, referred to in clause [c] below) in all
respects to the Representative and the Representative's counsel, from KPMG,
LLP:
[a] confirming that it is the independent certified
public accountant with respect to InfoHighway within the meaning of the
Securities Act and the applicable rules and regulations;
[b] stating that it is its opinion that the financial
statements of InfoHighway included in the Registration Statement comply as to
form in all material respects with the applicable accounting requirements of
the Securities Act and the rules and regulations thereunder and that the
Underwriters may rely upon the opinion of KPMG, LLP with respect to the
financial statements included in the Registration Statement;
[c] stating that nothing has come to its attention which
would lead it to believe that:
(A) at a specified date not more than five (5) days
prior to the Effective Date, there has not been any change in InfoHighway's
capital stock or increase in InfoHighway's debt, or any decrease in
InfoHighway's stockholders' equity, net
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InfoHighway Communications Corporation Page 29
current assets, or net assets as compared with amounts shown in the December
31, 1998 balance sheet included in the Registration Statement, other than as
set forth in or contemplated by the Registration Statement, or, if there was
any change, decrease, or increase setting forth the amount of such change,
decrease; or increase, or
(B) during the period from January 1, 1999 to a
specified date not more than five (5) days prior to the Effective Date, there
has not been any decrease (increase) in net revenues, net income (loss) or in
net earnings (loss) per common share of InfoHighway, other than as set forth
in or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
[d] statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
At the Firm Closing Date and each Option Closing Date, if any, the
Representative shall have received from KPMG, LLP a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect
that it reaffirms that statements made in the letter furnished pursuant to
subsection 8(d), except that the specified date referred to shall be a date
not more than five (5) days prior to the Firm Closing Date or the Option
Closing Date, as the case may be.
(d)(iv) At the time this Agreement is executed, at the Firm
Closing Date, and at each Option Closing Date, the Underwriters shall receive
a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory (including the non-material nature of the changes,
decreases or increases, if any, referred to in clause [c] below) in all
respects to the Representative and the Representative's counsel, from Xxxxx
Xxxxxxxx, P.C.:
[a] confirming that it is the independent certified
public accountant with respect to ARC within the meaning of the Securities
Act and the applicable rules and regulations;
[b] stating that it is its opinion that the financial
statements of ARC included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the rules and regulations thereunder and that the
Underwriters may rely upon the opinion of Xxxxx Xxxxxxxx, P.C. with respect
to the financial statements included in the Registration Statement;
[c] stating that nothing has come to its attention which
would lead it to believe that:
(A) at a specified date not more than five (5) days
prior to the Effective Date, there has not been any change in ARC's capital
stock or increase in ARC's debt, or any decrease in ARC's stockholders'
equity, net current assets, or net assets as compared with amounts shown in
the December 31, 1998 balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration Statement, or,
if there was any change, decrease, or increase setting forth the amount of
such change, decrease; or increase, or
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InfoHighway Communications Corporation Page 30
(B) during the period from January 1, 1999 to a
specified date not more than five (5) days prior to the Effective Date, there
has not been any decrease (increase) in net revenues, net income (loss) or in
net earnings (loss) per common share of ARC, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
[d] statements as to such other matters incident to the
transaction contemplated hereby as the Representative may request.
At the Firm Closing Date and each Option Closing Date, if any, the
Representative shall have received from Xxxxx Xxxxxxxx, P.C. a letter, dated
as of the Closing Date or the Option Closing Date, as the case may be, to the
effect that it reaffirms that statements made in the letter furnished
pursuant to subsection 8(d), except that the specified date referred to shall
be a date not more than five (5) days prior to the Firm Closing Date or the
Option Closing Date, as the case may be.
(e) The representations and warranties of the Company
contained in this Agreement shall be true and correct as if made on and as of
the Firm Closing Date and each Option Closing Date, if any.
(f) The Registration Statement shall not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Firm Closing Date
and each Option Closing Date, if any, shall not include any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(g) The Company shall have performed all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied pursuant to this Agreement and the Warrant Agreement, at or prior
to the Firm Closing Date.
(h) No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued, and
no proceedings for that purpose shall have been instituted, threatened, or
contemplated by the Commission.
(i) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there shall not
have been any Material Adverse Effect, or any development involving a
prospective Material Adverse Effect, in the business, operations, condition
(financial or otherwise), earnings or prospects of the Company, except in
each case as described in or contemplated by the Prospectus (exclusive of any
amendment or supplement thereto).
(j) The Underwriters shall have received a certificate, dated
the Firm Closing Date and each Option Closing Date, if any, of the Chief
Executive Officer and the Secretary of the Company to the effect set forth in
subparagraphs (e) through (i) above.
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(k) The Common Stock shall be qualified in such jurisdictions as the
Underwriters may request, and each such qualification shall be in effect and
not subject to any stop order or other proceeding on the Firm Closing Date
and each Option Closing Date, if any.
(l) The Company shall have executed and delivered to the Underwriters
the Underwriters' Warrant Agreement and a certificate or certificates
evidencing the Underwriters' Warrants, in each case in a form acceptable to
the Underwriters.
(m) The Company has obtained and delivered to the Representative the
agreements (the "Lock-Up Agreements"), in the form annexed hereto as Exhibit
A, with the officers, directors, and other security holders of the Company,
set forth on Schedule 2 hereof, owning or having rights to acquire shares of
Common Stock or the Company's preferred stock.
(n) On or before the Firm Closing Date, the Underwriters and counsel
for the Underwriters shall have received such further certificates,
documents, letters or other information as they may have reasonably requested
from the Company and other security holders of the Company.
All opinions, certificates, letters, and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
satisfactory in all respects to the Underwriters and counsel for the
Underwriters. The Company shall furnish to the Underwriters such conformed
copies of such opinions, certificates, letters, and documents in such
quantities as the Underwriters and counsel for the Underwriters shall request.
The obligation of the Underwriters to purchase and pay for any Option
Shares shall be subject, in its discretion, to each of the foregoing
conditions to purchase the Firm Shares, except that all references to the
Firm Shares and the Firm Closing Date shall be deemed to refer to such Option
Shares and the related Option Closing Date, respectively.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, each of their respective directors, officers, employees, agents
and each person, if any, who controls either of the Underwriters within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(the "Underwriter Indemnified Parties" or, individually, "Underwriter
Indemnified Party"), against any losses, claims, damages, or liabilities,
joint or several, to which such Underwriter Indemnified Parties, may become
subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in (1) the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or (2), any Application; or
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(ii) the omission or alleged omission to state, in such
Registration Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or any Application,
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
The Company will reimburse, as incurred, the Underwriter Indemnified
Parties for any amounts reasonably incurred by the Underwriter Indemnified
Parties in connection with investigating, defending against, or appearing as
a third-party witness in connection with any loss, claim, damage, liability,
action, investigation, litigation, or proceeding, including legal fees,
accounting, investigative or other expenses; PROVIDED, HOWEVER, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or any
Application in reliance upon and in conformity with written information
furnished to the Company by the Underwriters specifically for use therein.
Solely with respect to any Preliminary Prospectus, the foregoing indemnity
agreement shall not inure to the benefit of any Underwriter from whom the
person asserting any loss, claim, damage, or liability purchased Shares, or
any person controlling such Underwriter, if copies of the Prospectus were
timely delivered by the Company to the Underwriter pursuant to this Agreement
and a copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability, or expense. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have to each of the Underwriter Indemnified Parties.
The Company will not, without the prior written consent of the
Underwriters, settle, compromise, or consent to the entry of any judgment in
any pending or threatened claim, action, suit, or proceeding in respect of
which any liability could be asserted against any Underwriter Indemnified
Party or indemnification could be sought hereunder (whether or not the
Underwriter Indemnified Party is a party to such claim, action, suit, or
proceeding), unless such settlement, compromise, or consent includes an
unconditional general release of the Underwriter Indemnified Party from all
liability arising out of such claim, action, suit, or proceeding.
(b) Each of the Underwriters will indemnify and hold harmless the
Company, its directors, officers, employees, agents and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (the "Company Indemnified Parties")
against, any losses, claims, damages, or liabilities to which the Company
Indemnified Parties may become subject under the Securities Act or otherwise,
but only insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application, or
(ii) the omission or the alleged omission to state therein a material fact
required to be stated in the Registration Statement or any
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amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application, or necessary to make the
statements therein not misleading, in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Company by the Underwriters specifically for use therein.
Subject to the limitation set forth immediately preceding this clause, the
Underwriters will reimburse, as incurred, any amounts reasonably incurred by
the Company Indemnified Parties in connection with investigating or defending
any such loss, claim, damage, liability, or any action in respect thereof,
including legal fees, accounting, investigative or other expenses. This
indemnity agreement will be in addition to any liability which the
Underwriters may otherwise have to each of the Company Indemnified Parties.
(c) Promptly after receipt by an indemnified party under subsection
9(a) or 9(b) hereof of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under subsection 9(a) or 9(b), notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have
to any indemnified party otherwise than under such subsection, unless and to
the extent that such indemnifying party did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party
of substantial rights or defenses. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; PROVIDED, HOWEVER, that if
the defendants in any such action include both the indemnified party and the
indemnifying party, and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it which are
different from, additional to, or inconsistent with those available to the
indemnifying party, such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties, and the indemnifying party shall bear the cost of any legal
fees or other expenses subsequently incurred by the indemnified party in
connection with its defense.
If the indemnified party may not reasonably conclude that there may be
one or more legal defenses available to it which are different from,
additional to, or inconsistent with those available to the indemnifying
party, after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
section 9 for any legal fees or other expenses, other than reasonable costs
of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall
have employed separate counsel and (ii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party has been given, the indemnifying party will not be liable
for the costs and expenses of any settlement of such action effected by such
indemnified party without the consent of the indemnifying party.
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(d) In circumstances in which the indemnification provided for in
subsection 9(a) or 9(b) is unavailable or insufficient to hold harmless an
indemnified party in respect of the losses, claims, damages, or liabilities
(or actions in respect thereof), each indemnifying party, in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, or liabilities (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other from the offering of the
Shares. If, however, the allocation provided for in the foregoing sentence
is not permitted by applicable law, then each party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits, but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total proceeds from the IPO (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by
the Underwriters. The relative fault of the parties 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, the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and the
other equitable considerations appropriate i the circumstances. The Company
and each of the Underwriters agree that it would not be equitable if the
amount of such contribution were determined by PRO RATA or PER CAPITA
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of
this paragraph. Notwithstanding any other provision of this paragraph, the
Underwriters shall not be obligated to make contributions hereunder that in
the aggregate exceed the total IPO price of the Shares purchased by the
Underwriters under this Agreement, less the aggregate amount of any damages
that the Underwriters have otherwise been required to pay in respect of the
same or any substantially similar claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
10. SUBSTITUTION OF UNDERWRITERS.
If any Underwriter shall for any reason not permitted hereunder cancel
its obligations to purchase the Firm Shares hereunder, or shall fail to take
up and pay for the Firm Shares set forth opposite its name on Schedule I
hereto upon tender of such Firm Shares in accordance with the terms hereof,
then the remaining Underwriter shall have the right to take up and pay for
the Firm Shares which the defaulting Underwriter agreed but failed to
purchase. If such remaining Underwriter does not, at the Firm Closing Date,
take up and pay for the Firm Shares which the defaulting Underwriter agreed
but failed to purchase, the time for delivery of the Firm Shares shall be
extended to the next business day to allow the remaining Underwriter the
privilege of substituting within 24 hours
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InfoHighway Communications Corporation Page 35
another underwriter or underwriters satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid, within
such 24 hour period, the time of delivery of the Firm Shares may, at the
option of the Company, be again extended to the next following business day,
if necessary, to allow the Company the privilege of finding within 24 hours
another underwriter or underwriters to purchase the Firm Shares which the
defaulting Underwriter agreed but failed to purchase. If it shall be
arranged for the remaining Underwriter or substituted Underwriter to take up
the Firm Shares of the defaulting Underwriter, (i) the Company or the
Underwriter shall have the right to postpone the time of delivery for a
period of not more than 7 business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or Prospectus, or
in any other document or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus which may thereby be made necessary, and (ii) respective numbers
of Firm Shares to be purchased by the remaining Underwriter or substituted
Underwriter shall be taken as the basis of the underwriting obligatin for all
purposes of this Agreement.
If in the event of a default by any Underwriter and the remaining
Underwriter shall not take up and pay for all the Firm Shares agreed to be
purchased by the defaulting Underwriter or substitute another underwriter as
aforesaid, the Company shall not find or shall not elect to seek another
underwriter for such Firm Shares, then this Agreement shall terminate.
If, following exercise of the Option, any Underwriter shall for any
reason not permitted hereunder cancel its obligation to purchase the Option
Shares at the Option Closing Date, or shall fail to take up and pay for the
number of Option Shares, which it became obligated to purchase at the Option
Closing Date upon tender of such Option Shares, then the remaining
Underwriter or substituted Underwriter may take up and pay for the Option
Shares of the defaulting Underwriter. If the remaining Underwriter or
substituted Underwriter shall not take up and pay for the all such Option
Shares, the Underwriters shall be entitled to purchase the number of Option
Shares for which there is not a default or, at their election, the Option
shall terminate, the exercise thereof shall be of no effect.
11. SURVIVAL. The respective representations, warranties, agreements,
covenants, indemnities, and other statements and obligations of the Company,
any of its officers or directors, and of the Underwriters set forth in this
Agreement or made by or on behalf of any of them, respectively, pursuant to
this Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, the Underwriters or any controlling person referred to herein and
(ii) delivery of and payment for the Shares. The obligations of the Company
and the Underwriters contained in Section 9 of this Agreement shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement.
12. TERMINATION.
(a) This Agreement may be terminated with respect to the Firm Shares
or any Option Shares in the sole discretion of the Representative by notice
to the Company
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InfoHighway Communications Corporation Page 36
given prior to the Firm Closing Date or the related Option Closing Date,
respectively, in the event that the Company shall have failed, refused, or
been unable to perform all obligations and satisfy all conditions on its part
to be performed or satisfied hereunder at or prior thereto or if at or prior
to the Firm Closing Date or such Option Closing Date, respectively:
(i) the Company sustains a loss by reason of explosion, fire,
flood, accident, or other calamity, which, in the sole opinion of the
Representative, materially affects the value of the properties of the Company
or materially interferes with the operation of the business of the Company
regardless, of whether such loss shall have been insured;
(ii) there shall have been any Material Adverse Effect, or any
development involving a prospective Material Adverse Effect (including,
without limitation, a change in management or control of the Company), in the
business, operations, condition (financial or otherwise), earnings or
prospects of the Company, except in each case as described in or contemplated
by the Prospectus (exclusive of any amendment or supplement thereto);
(iii) any action, suit or proceeding shall be threatened,
instituted, or pending, at law or in equity, against the Company or any of
its properties, by any person or by any federal, state, foreign or other
governmental or regulatory commission, board, or agency wherein any likely
unfavorable result or decision could, in the sole opinion of the
Representative, have a Material Adverse Effect on the business, operations,
condition (financial or otherwise), earnings, or prospects of the Company;
(iv) trading in the Common Stock shall have been suspended by the
Commission, the NASD, or the American Stock Exchange, or minimum or maximum
prices shall have been established on either such exchange or quotation
system;
(v) a banking moratorium shall have been declared by New York or
United States authorities;
(vi) there shall have been (A) an outbreak of hostilities between
the United States and any foreign power (or, in the case of any ongoing
hostilities, a material escalation thereof), (B) an outbreak of any other
insurrection or armed conflict involving the United States or (C) any other
calamity or crisis or material change in financial, political or economic
conditions, having an effect on the financial markets that, in the sole
judgment of the Representative, makes it impracticable or inadvisable to
proceed with the IPO or the delivery of the Shares as contemplated by the
Registration Statement.
(b) Termination of this Agreement pursuant to this Section 12 shall be
without liability of any party to any other party, except as provided in
Section 7 and Section 9 hereof.
13. INFORMATION SUPPLIED BY THE UNDERWRITERS. The statements set forth
under the heading "Underwriting" in any Preliminary Prospectus or the
Prospectus (to the
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InfoHighway Communications Corporation Page 37
extent such statements relate to the Underwriters) constitute the only
information furnished by the Underwriters to the Company.
14. NOTICES. All notices hereunder to or upon either party hereto
shall be deemed to have been duly given for all purposes if in writing and
(i) delivered in person or by messenger or an overnight courier service
against receipt, or (ii) sent by certified or registered mail, postage paid,
return receipt requested, or (iii) sent by telegram, facsimile, telex or
similar means, provided that a written copy thereof is sent on the same day
by postage paid first-class mail, to such party at the following address: a)
if to the Company, InfoHighway Communications Corporation, 0000 Xxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx, 00000, Attn: Xxxxxx Xxxxxxx; fax
number (000) 000-0000; (b) if to the Underwriters, then to the
Representative, Xxxxxxxxx Securities Corporation, Xxx Xxxxx Xxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, New York, 10048, Attn: Xxxx X. Xxxxxxxx; fax number
(000) 000-0000, or such other address as either party hereto may at any time,
or from time to time, direct by notice given to the other party in accordance
with this Agreement. The date of giving of any such notice shall be, in the
case of clause (i), the date of the receipt; in the case of clause (ii), five
business days after such notice or demand is sent; and, in the case of clause
(iii), the business day next following the date such notice is sent.
15. AMENDMENT. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective, unless in writing and signed by
or on behalf of the parties hereto.
16. WAIVER. No course of dealing or omission or delay on the part of
either party hereto in asserting or exercising any right hereunder shall
constitute or operate as a waiver of any such right. No waiver of any
provision hereof shall be effective, unless in writing and signed by or on
behalf of the party to be charged therewith. No waiver shall be deemed a
continuing waiver or waiver in respect of any other or subsequent breach or
default, unless expressly so stated in writing.
17. APPLICABLE LAW. This agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New
York without regard to principles of choice of law or conflict of laws.
18. JURISDICTION. Each of the parties hereto hereby (i) irrevocably
consents and submits to the exclusive jurisdiction of the Supreme Court of
the State of New York, County of New York, and the United States District
Court for the Southern District of New York in connection with any suit,
action or other proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby, and (ii) waives any objection to venue
in the County of New York, State of New York, or such District.
19. REMEDIES. In the event of any actual or prospective breach or
default by either party hereto, the other party shall be entitled to
equitable relief, including remedies in the nature of rescission, injunction,
and specific performance. The parties waive any requirement for the posting
of a bond in connection with such equitable relief. All remedies hereunder
are cumulative and not exclusive, and nothing herein shall be deemed to
prohibit or limit either party from pursuing any other remedy or relief
available at law
Xxxxxxxxx Securities Underwriting Agreement
InfoHighway Communications Corporation Page 38
or in equity for such actual or prospective breach or default, including the
recovery of damages.
20. ATTORNEYS' FEES. The prevailing party in any suit, action, or other
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, shall be entitled to recover its costs and reasonable
attorneys' fees.
21. SEVERABILITY. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the
remaining provisions hereof shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect, and any invalid or
unenforceable provision shall be deemed, without further action on the part
of the parties hereto, amended and limited to the extent necessary to render
the same valid and enforceable.
22. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and which together shall constitute one
and the same agreement.
23. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriters, the Company and their respective successors
and assigns. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any other person any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provisions
herein contained, this Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
indemnities of the Company contained in this Agreement shall also be for the
benefit of any person or persons who control any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Underwriters contained in this Agreement
shall also be for the benefit of the directors of the Company, the officers
of the Company who have signed the Registration Statement and any person or
persons who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act. No purchaser of Shares
shall be deemed a successor because of such purchase.
24. TITLES, CAPTIONS, GRAMMATICAL CONVENTIONS. The titles and captions
of the articles and sections of this Agreement are for convenience of
reference only and do not in any way define or interpret the intent of the
parties or modify or otherwise affect any of the provisions hereof. Whenever
the context so requires, each pronoun or verb used herein shall be construed
in the singular or the plural sense and each capitalized term defined herein
and each pronoun used herein shall be construed in the masculine, feminine or
neuter sense.
25. ENTIRE AGREEMENT. This Agreement embodies the entire Agreement of
the parties hereto with respect to the subject matter hereof and supersedes
any prior agreement, commitment or arrangement relating thereto.
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InfoHighway Communications Corporation Page 39
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company and
the Underwriters.
Very truly yours,
INFOHIGHWAY COMMUNICATIONS CORPORATION
By:
-------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written:
XXXXXXXXX SECURITIES CORPORATION
as Representative of the Underwriters
By:
----------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer
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SCHEDULE 1
UNDERWRITERS
UNDERWRITERS FIRM SHARES TO BE PURCHASED
------------ ---------------------------
Xxxxxxxxx Securities Corporation 1,050,000
Westport Resources Investment 550,000
Services, Inc. ---------
TOTAL 1,600,000
---------
---------
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SCHEDULE 2
SHAREHOLDERS SUBJECT TO LOCK-UP AGREEMENTS
SHAREHOLDERS AMOUNT TYPE
------------ ------ ----
Benchmark Equity Group 579,886 Common Stock
158,363 Contingent Common Stock Issue
Rights
Emerging Ventures LLC 97,260 Common Stock
38,067 Contingent Common Stock Issue
Rights
Pound Capital 52,371 Common Stock
20,497 Contingent Common Stock Issue
Rights
Xxxxxxxxxxx X. Xxxxx 115,429 Common Stock
67,243 Contingent Common Stock Issue
Rights
Xxxxxxxxxx X. Xxxxxx 40,614 Common Stock
23,660 Contingent Common Stock Issue
Rights
Xxxxxxx X. Xxxx 23,514 Common Stock
13,699 Contingent Common Stock Issue
Rights
Xxxx Xxxxx 14,963 Common Stock
8,716 Contingent Common Stock Issue
Rights
Xxx Xxxxxxxxx 14,963 Common Stock
8,716 Contingent Common Stock Issue
Rights
Xxxxxx Xxxxxxx 480,000 Options for Common Stock
Xxxxx Xxxxxxxxxx 375,000 Options for Common Stock
Trident III, L.L.C. 150,000 Warrants for Common Stock
Xxxxx Xxxxxxx 10,000 Options for Common Stock
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InfoHighway Communications Corporation Page ii
Xxxxxx Xxxxxxxxxx 10,000 Options for Common Stock
Founder's Equity Group 83,333 Warrants for Common Stock
Xxxxxxxxx Warrant Holders 300,000 Warrants for Common Stock
Halcyon Investment Company 40,000 Warrants for Common Stock
Xxxx X. Xxxxxxxxxxx 36,185 Warrants for Common Stock
Underwriter Warrants 184,000 Warrants for Common Stock
Xxxxxxx Avignon 100,000 Options for Common Stock
Xxxxxxx Till 75,000 Options for Common Stock
Xxxxx Xxxxxxxxx 225,000 Options for Common Stock
Xxxxxxx Xxxxxx 100,000 Options for Common Stock
Xxxxxxxx Xxxxx 20,000 Options for Common Stock
Xxx Xxxxxxxxx 25,000 Options for Common Stock
Isset Haci 10,000 Options for Common Stock
Xxxx Xxxxx 10,000 Options for Common Stock
Xxxx Xxxxxxxxxx 20,000 Options for Common Stock
Xxx Xxxxxxxx 20,000 Options for Common Stock
Xxxxxxx Xxx 5,000 Options for Common Stock
Xxxx Xxxxxxxxx 3,750 Options for Common Stock
Xxxx Shkrell 5,000 Options for Common Stock
Xxxx Xxxxxxx 3,750 Options for Common Stock
Xxxx Xxxxx 2,500 Options for Common Stock
---------
3,571,479
---------
---------
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InfoHighway Communications Corporation Page i
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
_____________, 1999
Xxxxxxxxx Securities Corporation
Xxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In order to induce Xxxxxxxxx Securities Corporation, as the
representative ("Representative") of the several underwriters, named in
Schedule 1 hereto (the "Underwriters"), to enter into that certain
Underwriting Agreement, dated ___________, 1999, with InfoHighway
Communications Corporation ("Company") with respect to the proposed initial
public offering (the "IPO") of 1,600,000 shares of common stock, par value
$.0001 per share ("Common Stock") of the Company pursuant to a registration
statement on Form S-1, File No. 333-82151 ("Registration Statement"), with
respect to (i) all shares of common stock the undersigned owns (the "Common
Securities"), (ii) all shares of preferred stock, all options, all warrants
and all other derivative securities of the Company which the undersigned owns
(the "Derivative Securities"), and (iii) all shares issuable upon exercise or
conversion of the Derivative Securities (the "Underlying Securities," and
together with the Common Securities and the Derivative Securities, the
"Securities"), the undersigned covenants and agrees for the benefit of the
Company and the Underwriters to abide by the following terms and conditions
of this Lock-Up Agreement:
1. The undersigned will not, directly or indirectly, offer, sell,
contract to sell, grant any option to purchase, pledge, assign, hypothecate,
or otherwise dispose of, encumber, or transfer (collectively, a "Transfer")
all or any portion of the economic consequences associated with the ownership
of any Securities beneficially owned by the undersigned for a period of 24
months after the date on which the Securities and Exchange Commission
declares the Registration Statement effective, without the prior written
consent of the Representative. Notwithstanding the foregoing, if the average
of the closing prices for the Company's Common Stock during the last ten
trading days of any measurement period set forth below (each a "Measurement
Period") following the closing date of the IPO, is at least $17.00 per share,
then the designated percentage for such Measurement Period of all of the
Securities subject to this Lock-Up Agreement outstanding at the time shall be
irrevocably released from such restrictions:
MEASUREMENT PERIOD PERCENTAGE RELEASED
------------------ -------------------
12 months 10%
15 months 20%
18 months 30%
21 months 40%
24 months All shares not previously released.
i
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In calculating the number of Securities to be released upon any Measurement
Period, the designated percentage shall be multiplied by the sum of (a) all
of the Securities subject to the Lock-Up Agreement, and (b) all Securities
previously released from such restrictions pursuant to this Lock-Up
Agreement. Notwithstanding the foregoing, nothing in this agreement shall
restrict the Transfer by the undersigned of any Securities to a Related
Person as defined on Exhibit A-1 hereto.
2. To comply with any additional restriction or condition on the
disposition of such Securities which may be required to qualify the offering
of such Securities in any jurisdiction in accordance with the blue sky or
securities laws of such jurisdiction.
3. To enable the Representative to enforce the foregoing, the
undersigned hereby consents to the placing of restrictive legends consistent
with this Lock-Up Agreement upon the certificates evidencing the Securities
and to the entry of stop-transfer orders consistent with this Lock-Up
Agreement on the books and records of the transfer agent of the Securities
with respect to any Securities registered in the name of the undersigned or
beneficially owned by the undersigned. The Company agrees to instruct the
transfer agent to place such legends and enter such stop-transfer orders and
not to transfer any Securities unless consistent with this Lock-Up Agreement
without the consent of the Representative as set forth herein.
4. The undersigned understands that the Company and the Representative
will rely upon this Lock-Up Agreement in agreeing to consummate the IPO. The
provisions of this Lock-Up Agreement shall be binding upon the undersigned
and his successors, assigns, heirs and legal representatives, and shall inure
to the benefit of the Company and the Representative and their respective
successors and assigns.
5. This Lock-Up Agreement shall be governed by, and interpreted and
enforced in accordance with, the laws of the State of New York without regard
to principles of choice of law or conflict of laws.
6. Each of the parties hereto hereby irrevocably consents and submits
to the exclusive jurisdiction of the Supreme Court of the State of New York,
County of New York, and the United States District Court for the Southern
District of New York in connection with any suit, action or other proceeding
arising out of or relating to this Lock-Up Agreement, and waives any
objection to venue in the County of New York, State of New York, or such
District.
7. In the event of any actual or prospective breach or default of this
Lock-Up Agreement by either party hereto, the other party shall be entitled
to equitable relief, including remedies in the nature of rescission,
injunction, and specific performance. The parties waive any requirement for
the posting of a bond in connection with such equitable relief. All remedies
hereunder are cumulative and not exclusive, and nothing herein shall be
deemed to prohibit or limit either party from pursuing any other remedy or
relief available at law or in equity for such actual or prospective breach or
default, including the recovery of damages.
ii
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8. The prevailing party in any suit, action, or other proceeding
arising out of or relating to this Lock-Up Agreement or the transactions
contemplated hereby, shall be entitled to recover its costs and reasonable
attorneys' fees.
[Name of Shareholder or Contingent Shareholder]
By: _______________________________
Accepted and Agreed to:
Xxxxxxxxx Securities Corporation
By:
------------------------
Xxxx X. Xxxxxxxx
Chief Executive Officer
iii
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EXHIBIT A-1
LOCK-UP DEFINITIONS
"ENTITY" means any sole proprietorship, corporation, partnership of any
kind having a separate legal status, limited liability company, business
trust, unincorporated organization or association, mutual company, joint
stock company or joint venture.
"ESTATE" means, as to any natural person who has died or been
adjudicated mentally incompetent by a court of competent jurisdiction, (i)
that person's estate or (ii) the administrator, conservator, executor,
guardian or representative of that person's estate.
"IMMEDIATE FAMILY MEMBER" of the undersigned means at any time: (a) if
the undersigned is a natural person, any child or grandchild (by blood or
legal adoption) or spouse of the undersigned at that time, or any child of
the undersigned's spouse; and (b) if the undersigned is an Entity which has
as an ultimate beneficial owner one or more natural persons, or a natural
person and his spouse, any child or grandchild (by blood or legal adoption)
or spouse at that time (if not then an ultimate beneficial owner of the
Entity), or any child of the spouse, of the ultimate beneficial owner or
owners of the Entity.
"PERSON" means any natural person, Entity, estate or trust
"RELATED PERSON" of the undersigned means: (a) if the undersigned is a
natural person, (i) any Immediate Family Member of the undersigned, (ii) any
Estate of the undersigned or any Immediate Family Member of the undersigned,
(iii) the trustee of any inter vivos or testamentary trust of which all the
beneficiaries are Immediate Family Members of the undersigned, and (iv) any
Entity the entire equity interest in which is owned by any one or more of the
undersigned and Immediate Family Members of the undersigned; and (b) if the
undersigned is an Entity, Estate or trust, (i) any Person who owns an equity
interest in the undersigned on the date hereof, (ii) any Person who would be
a Related Person under clause (a) of this definition of a natural person who
is an ultimate beneficial owner of the undersigned, or (iii) any other Entity
the entire equity interest in which is owned by any one or more of the
undersigned and Immediate Family Members of the undersigned.
iv
