EXHIBIT 1.1
SERIES B COMMON STOCK
(par value $.0001 per share)
UNDERWRITING AGREEMENT
[__________], 2000
[_____________],2000
▇▇▇▇▇▇ Brothers Inc.
Bear ▇▇▇▇▇▇▇ & Co. Inc.
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Fidelity Capital Markets
c/▇ ▇▇▇▇▇▇ Brothers Inc.
3 World Financial Center
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Brothers International (Europe)
Bear ▇▇▇▇▇▇▇ International Limited
Deutsche Bank AG London
PaineWebber International Inc.
c/o Bear ▇▇▇▇▇▇▇ International Limited
▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Dear Sirs and Mesdames:
FIRSTWORLD COMMUNICATIONS, INC., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters (as defined below)
[________________] shares of its Series B Common Stock, par value $.0001 per
share (the "Firm Shares").
It is understood that, subject to the conditions hereinafter stated,
[____________] Firm Shares (the "U.S. Firm Shares") will be sold to the several
U.S. Underwriters named in Schedule I hereto (the "U.S. Underwriters") in
connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and [__________] Firm Shares (the "International Shares") will
be sold to the several International Underwriters named in Schedule II hereto
(the "International Underwriters") in
connection with the offering and sale of such International Shares outside the
United States and Canada to persons other than United States and Canadian
Persons. ▇▇▇▇▇▇ Brothers Inc., Bear ▇▇▇▇▇▇▇ & Co. Inc., Deutsche Bank Securities
Inc., PaineWebber Incorporated and Fidelity Capital Markets shall act as
representatives (the "U.S. Representatives") of the several U.S. Underwriters,
and ▇▇▇▇▇▇ Brothers International (Europe), Bear ▇▇▇▇▇▇▇ International Limited,
Deutsche Bank AG London and PaineWebber International Inc. shall act as
representatives (the "International Representatives") of the several
International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the Underwriters.
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional [__________] shares of its Series B
Common Stock, par value $.0001 per share (the "Additional Shares"), if and to
the extent that the U.S. Representatives shall have determined to exercise, on
behalf of the U.S. Underwriters, the right to purchase such shares of common
stock granted to the U.S. Underwriters in Section 2 hereof. The Firm Shares and
the Additional Shares are hereinafter collectively referred to as the "Shares".
The shares of Series B Common Stock, par value $.0001 per share, and the shares
of Series A Common Stock, par value $.0001 per share, of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
collectively referred to as the "Common Stock".
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sale of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of Shares in the United States and Canada to United States and
Canadian Persons, and the international prospectus, to be used in connection
with the offering and sale of Shares outside the United States and Canada to
persons other than United States and Canadian Persons. The international
prospectus is identical to the U.S. prospectus except for the outside front
cover page. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the "Prospectus". If the
Company has filed an abbreviated registration statement to register additional
shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement.
▇▇▇▇▇▇ Brothers Inc. ("▇▇▇▇▇▇ Bothers") has agreed to reserve up to
[______] Shares to be purchased by it under this Agreement for sale to the
Company's directors, officers,
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employees and business associates and other parties related to the Company
(collectively, "Participants"), as set forth in the Prospectus under the heading
"Underwriters" (the "Directed Share Program"). The Shares to be sold by ▇▇▇▇▇▇
Brothers and its affiliates pursuant to the Directed Share Program are referred
to hereinafter as the "Directed Shares". Any Directed Shares not orally
confirmed for purchase by any Participant by the end of the business day on
which this Agreement is executed will be offered to the public by the
Underwriters as set forth in the Prospectus.
1. Representations and Warranties. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
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(d) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken
as a whole; all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly issued,
fully paid and nonassessable and the issuance of the shares of Common Stock
outstanding prior to the issuance of the Shares were not subject to any
rights of first refusal, preemptive rights or similar rights.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable, and the issuance of such Shares will
not be subject to any rights of first refusal, preemptive rights or similar
rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or bylaws of the Company or any agreement or other instrument
binding upon the Company or any of its subsidiaries, or any judgment, order
or decree of any governmental body, agency or court having jurisdiction
over the Company or any subsidiary, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Shares.
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(j) There has not occurred any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act, complied
when so filed in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds thereof
as described in the Prospectus, will not be an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permit, license or approval,
except where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for cleanup, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
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parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(p) The Company has reviewed its operations and those of its
subsidiaries to evaluate the extent to which the business or operations of
the Company or any of its subsidiaries will be affected by the Year 2000
Problem (that is, any significant risk that computer hardware or software
applications used by the Company and its subsidiaries will not, in the case
of dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000); as a result of such review, (i) the Company has
no reason to believe, and does not believe, that (A) there are any issues
related to the Company's preparedness to address the Year 2000 Problem that
are of a character required to be described or referred to in the
Registration Statement or Prospectus which have not been accurately
described in the Registration Statement or Prospectus and (B) the Year 2000
Problem will have a material adverse effect on the condition, financial or
otherwise, or on the earnings, business or operations of the Company and
its subsidiaries, taken as a whole, or result in any material loss or
interference with the business or operations of the Company and its
subsidiaries, taken as a whole; and (ii) the Company reasonably believes,
after due inquiry, that the suppliers, vendors, customers or other material
third parties used or served by the Company and such subsidiaries are
addressing or will address the Year 2000 Problem in a timely manner, except
to the extent that a failure to address the Year 2000 Problem by any
supplier, vendor, customer or material third party would not have a
material adverse effect on the condition, financial or otherwise, or on the
earnings, business or operations of the Company and its subsidiaries, taken
as a whole.
(q) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company (i) to file a registration statement under the
Securities Act with respect to any securities of the Company except as
described in the Prospectus, or (ii) to include such securities with the
Shares registered pursuant to the Registration Statement except such rights
which have been validly waived.
(r) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, (i)
the Company and its subsidiaries have not incurred any material liability
or obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business; (ii) the Company has
not purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock other than ordinary and customary dividends; and (iii) there has not
been any material change in the capital stock, short-term
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debt or long-term debt of the Company and its subsidiaries, except in each
case as described in the Prospectus.
(s) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them which is material to the business of
the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as, individually or in the aggregate, do not materially affect the
value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and its subsidiaries; and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions, individually or in the aggregate, as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries, in each
case except as described in the Prospectus.
(t) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(u) No material labor dispute with the employees of the
Company or any of its subsidiaries exists, except as described in the
Prospectus, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(v) The Company and its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the businesses in which they
are engaged; neither the Company nor any of its subsidiaries has been
refused any insurance coverage sought or applied for; and neither the
Company nor any of its subsidiaries has any 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
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that would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, except as described in the Prospectus.
(w) The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their
respective business, and neither the Company nor any of its subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a material adverse effect on the Company and its
subsidiaries, taken as a whole, except as described in the Prospectus.
(x) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(y) The historical financial statements (including the
related notes and supporting schedules) filed as part of the Registration
Statement or included in the Prospectus present fairly in all material
respects the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods indicated,
and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved.
The unaudited pro forma financial information set forth in the Prospectus
presents fairly, on the basis stated in the Prospectus, the information set
forth therein, has been prepared in accordance with the applicable rules
and regulations and the guidelines of the Commission with respect to pro
forma financial statements, has been properly compiled on the pro forma
bases set forth therein and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
Furthermore, the Company represents and warrants to the Underwriters and
their respective affiliates that (i) the Registration Statement, the Prospectus
and any preliminary prospectus comply, and any further amendments or supplements
thereto will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary
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prospectus, as amended or supplemented, if applicable, are distributed in
connection with the Directed Share Program, and (ii) no authorization, approval,
consent, license, order, registration or qualification of or with any
government, governmental instrumentality or court, other than such as have been
obtained, is necessary under the securities laws and regulations of foreign
jurisdictions in which the Directed Shares are offered outside the United
States.
The Company has not offered, or caused the Underwriters or any of
their respective affiliates to offer, Shares to any person pursuant to the
Directed Share Program with the specific intent to unlawfully influence (i) a
customer or supplier of the Company to alter the customer's or supplier's level
or type of business with the Company, or (ii) a trade journalist or publication
to write or publish favorable information about the Company or its products.
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedules I and II
hereto opposite its name at U.S.$[_____] a share ("Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to [__________]
Additional Shares at the Purchase Price. If the U.S. Representatives, on behalf
of the U.S. Underwriters, elect to exercise such option, the U.S.
Representatives shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
overallotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares.
The Company hereby agrees that, without the prior written consent of
▇▇▇▇▇▇ Brothers on behalf of the Underwriters, it will not, during the period
ending 180 days after the date of the Prospectus, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
9
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to
be sold hereunder or (B) the issuance by the Company of shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof of which the Underwriters have been advised in
writing.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
U.S.$[_____] a share (the "Public Offering Price") and to certain dealers
selected by you at a price that represents a concession not in excess of
U.S.$[____] a share under the Public Offering Price, and that any Underwriter
may allow, and such dealers may reallow, a concession, not in excess of
U.S.$[____] a share, to any Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made
to the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at a closing to be held at the offices of Shearman & Sterling, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m., New York City time, on
[____________], 2000, or at such other time on the same or such other date, not
later than [_________], 2000, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "Closing Date".
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at a closing to be held at the offices of Shearman & Sterling, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m., New York City time, on the
date specified in the notice described in Section 2 or at such other time on the
same or on such other date, in any event not later than [_______], 2000, as
shall be designated in writing by the U.S. Representatives. The time and date
of such payment are hereinafter referred to as the "Option Closing Date".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you
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on the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than [_______] (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
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The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of ▇▇▇▇▇▇ Godward LLP, outside counsel for the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(iii) the authorized capital stock of the Company conforms
as to legal matters to the description thereof contained in the
Prospectus;
(iv) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and nonassessable and the issuance of the shares of
Common Stock outstanding prior to the issuance of the Shares were not
subject to any rights of first refusal, preemptive rights or similar
rights;
(v) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly by
the Company, free and clear of all liens, encumbrances, equities or
claims;
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(vi) the Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, and the issuance
of such Shares will not be subject to any rights of first refusal,
preemptive rights or similar rights;
(vii) this Agreement has been duly authorized, executed
and delivered by the Company;
(viii) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement will not contravene any provision of applicable law or the
certificate of incorporation or bylaws of the Company or, to the best
of such counsel's knowledge, any agreement or other instrument binding
upon the Company or any of its subsidiaries, or, to the best of such
counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for
the performance by the Company of its obligations under this
Agreement, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale
of the Shares by the U.S. Underwriters;
(ix) the statements (A) in the Prospectus under the
captions "Description of Capital Stock", "Certain United States Tax
Consequences for Non- U.S. Investors" and "Underwriters" and (B) in
the Registration Statement in Items 14 and 15, in each case insofar as
such statements constitute summaries of the legal matters, documents
or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein;
(x) after due inquiry, such counsel does not know of any
legal or governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required;
13
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
(xii) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included
therein as to which such counsel need not express any opinion) comply
as to form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder, (B) has
no reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the Registration Statement and
the prospectus included therein at the time the Registration Statement
became effective contained any 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 and (C) has no
reason to believe that (except for financial statements and schedules
and other financial and statistical data as to which such counsel need
not express any belief) the Prospectus when issued contained, or as of
the date such opinion is delivered, contains, any 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.
With respect to Section 5(c)(xii) above, ▇▇▇▇▇▇ Godward LLP may
state that their opinion and belief are based upon their participation in
the preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto and review and discussion of the contents
thereof, but are without independent check or verification, except as
specified.
The opinion of ▇▇▇▇▇▇ Godward LLP described in Section 5(c) above
shall be rendered to the Underwriters at the request of the Company and
shall so state therein.
(d) The Underwriters shall have received on the Closing Date an
opinion of ▇▇▇▇▇▇▇ Phleger & ▇▇▇▇▇▇▇▇ LLP, special litigation counsel for
the Company, dated the Closing Date, to the effect that the descriptions in
the Prospectus relating to the pending litigation between the Company and
the City of Anaheim, including, without limitation, those under the caption
"Business--Legal Proceedings" and "Risk Factors--[Litigation]", to the
extent that they constitute matters of law or legal conclusions, have been
reviewed by them and fairly present the information disclosed therein in
all material respects, and
14
nothing has come to their attention which leads them to believe that (A)
the information set forth in the Registration Statement under the captions
referred to above as of the time the Registration Statement became
effective under the Securities Act, and as of the Closing Date, contained
an untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading and (B) the
information set forth in the Prospectus under the captions referred to
above as of its date and as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact, necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(e) The Underwriters shall have received on the Closing Date an
opinion of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, special regulatory counsel for the Company,
dated the Closing Date, to the effect that:
(i) (1)the execution and delivery of the Underwriting
Agreement by the Company and the consummation of the transactions
contemplated thereby do not violate (ii) the Communications Act
of 1934, as amended, including amendments made by the
Telecommunications Act of 1996, 47 U.S.C. (S) 151 et seq.
("Communications Act"); any laws governing the telecommunications
of any state where the Company offers its services or is
otherwise subject to regulation; (iii) any rules, regulations and
orders of state regulatory commissions ("State
Telecommunications Laws") applicable to the Company and it's
subsidiaries, or (iv) to their knowledge, any decree from any
court; and (2) no authorization of the Federal Communications
Commission ("FCC") or any State regulatory commission ("State
Commission") that has not already been received from, or prior
filing that has not already been made with, such agency is
necessary for the execution and delivery of the Underwriting
Agreement by the Company and the consummation of the transactions
contemplated thereby in accordance with the terms thereof;
(ii) to their knowledge: (1) each of the Company and its
subsidiaries has made all reports and filings, and paid all fees,
required by the FCC and the State Commissions, and has all
certificates, orders, permits, licenses, authorizations,
consents, and approvals of and from, and has made all filings and
registrations, with the FCC and the State Commissions necessary
to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus;
and (2) neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the violation,
revocation or modification of
15
any such certificates, orders, permits, licenses, authorizations,
consents, or approvals, or the qualification or rejection of any
such filing or registration, the effect of which, singly or in
the aggregate, would have a material adverse effect on the
prospects or condition, financial or otherwise, or on the
earnings, business or operations of the Company and its
subsidiaries, taken as a whole;
(iii) to their knowledge, neither the Company nor any of
its subsidiaries is in violation of, or in default under, any
provision of the Communications Act or State Telecommunications
Laws, the effect of which, singly or in the aggregate, would have
a material adverse effect on the condition, financial or
otherwise, or on the earnings, business or operations of the
Company and its subsidiaries, taken as a whole;
(iv) to their knowledge: (i) no adverse judgment,
decree or order of the FCC or any State Commission has been
issued against the Company or any of its subsidiaries and (ii) no
litigation, proceeding (other than application proceedings
initiated by the Company or its subsidiaries), inquiry or
investigation has been commenced or threatened against the
Company or any of its subsidiaries before or by the FCC or any
State Commission which, if decided adversely to the Company's
interest, would, singly or in the aggregate, have a material
adverse effect on the condition, financial or otherwise, or on
the earnings, business or operations of the Company and its
subsidiaries, taken as a whole; and
(v) the statements in the Prospectus under the captions
"Risk Factors -- We Are Dependent on the Incumbent Local Exchange
Carrier for Copper and Fiber Optic Telephone Lines, Co-Location
Space and Transmission Facilities, and the Incumbent Telephone
Companies' Reluctance to Corporate with Us or Inability to
Provide the Services or Facilities We Need Could Adversely Affect
Our Business; Interference or Claims of Interference Could Delay
our Rollout or Harm our Services; We Are Unable to Control the
Terms and Conditions under which We Gain Access to the Incumbent
Local Carriers Co-Location and Transmission Facilities; We Are
Unable to Control the Terms or Timing of Extending Our
Interconnection Agreements; Our Services Are Subject to
Government Regulation, and Changes in Current or Future Laws or
Regulations Could Restrict the Way We Operate Our Business;
Challenges to Governmental Regulation Could Increase Our
Operating Costs; A Recent U.S. Supreme Court Decision Has Raised
Questions About Our Ability to Obtain Essential
16
Facilities From Incumbent Local Carriers, Which May Hurt Our
Business; We May Be Liable for Information Disseminated through
Our Network and Business - Government Regulation", to the extent
that they discuss federal, state, and local statutes, regulations
and proceedings with respect to telecommunications regulatory
matters, have been reviewed by them and fairly present the
information disclosed therein in all material respects, and
nothing has come to their attention which leads them to believe
that (A) the information set forth in the Registration Statement
under the captions referred to above as of the time the
Registration Statement became effective under the Securities Act,
and as of the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact necessary to
make the statements therein not misleading and (B) the
information set forth in the Prospectus under the captions
referred to above as of its date and as of the Closing Date,
contained an untrue statement of a material fact or omitted to
state a material fact, necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(vi) except as disclosed in the Prospectus, there are no
rulemakings or other administrative proceedings pending before
the FCC or the State Commissions which (x) are generally
applicable to telecommunications services and (y) if decided
adversely to the interests of the Company, would have a material
adverse effect on the Company and its subsidiaries, taken as a
whole; and
(f) The Underwriters shall have received on the Closing Date an
opinion of Shearman & Sterling, counsel for the Underwriters, dated the
Closing Date, in form and substance satisfactory to you.
(g) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the
Underwriters, from PricewaterhouseCoopers LLP, independent public
accountants, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier than
the date hereof.
(h) The "lockup" agreements, each substantially in the form of
Exhibit A hereto, between you and certain shareholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Common Stock or certain other
17
securities, delivered to you on or before the date hereof, shall be in full
force and effect on the Closing Date.
(i) The Common Stock shall have been approved for listing on the
Nasdaq National Market, subject only to official notice of issuance.
(j) You shall have received such other documents and
certificates as are reasonably requested by you or your counsel.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the U.S.
Representatives on the Option Closing Date of such documents as they may
reasonably request with respect to the good standing of the Company, the due
authorization and issuance of the Additional Shares and other matters related to
the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, [_____] signed copies of
the Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed amendment
or supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own
18
expense, to the Underwriters and to the dealers (whose names and addresses
you will furnish to the Company) to which Shares may have been sold by you
on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering the
twelve-month period ending , 2000 that satisfies the provisions
of Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause
to be paid all expenses incident to the performance of its obligations
under this Agreement, including: (i) the fees, disbursements and expenses
of the Company's counsel and the Company's accountants in connection with
the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of
the Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and delivery
of the Shares to the Underwriters, including any transfer or other taxes
payable thereon, (iii) the cost of printing or producing any Blue Sky or
Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws
as provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or
Legal Investment memorandum, (iv) all filing fees and the reasonable fees
and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the
National Association of Securities Dealers, Inc., (v) all fees and expenses
in connection with the preparation and filing of the registration statement
on Form 8-A relating to the Common Stock and all costs and expenses
incident to listing the Shares on the Nasdaq National Market (vi) the cost
of printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the costs
and expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of
19
the offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the
road show, and (ix) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section. It is understood, however, that
except as provided in this Section, Section 7 entitled "Indemnity and
Contribution", and the last paragraph of Section 9 below, the Underwriters
will pay all of their costs and expenses, including fees and disbursements
of their counsel, stock transfer taxes payable on resale of any of the
Shares by them and any advertising expenses connected with any offers they
may make.
(g) that in connection with the Directed Share Program, the
Company will ensure that the Directed Shares will be restricted to the
extent required by the National Association of Securities Dealers, Inc.
(the "NASD") or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement. ▇▇▇▇▇▇ Brothers will notify
the Company as to which Participants will need to be so restricted. The
Company will direct the transfer agent to place stop transfer restrictions
upon such securities for such period of time.
(h) to pay all fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and stamp
duties, similar taxes or duties or other taxes, if any, incurred by the
Underwriters in connection with the Directed Share Program.
Furthermore, the Company covenants with ▇▇▇▇▇▇ Brothers and its affiliates
that the Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in
which the Directed Shares are offered in connection with the Directed Share
Program.
7. Indemnity and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) which
arise out of, or are based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in the Registration Statement or any
amendment thereof, any preliminary prospectus or the
20
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or(B) in any materials or information
provided to investors by, or with the approval of, the Company in connection
with the marketing of the offering of the Shares, including any "roadshow" or
other presentation made to investors by the Company (whether in person or
electronically) ("Roadshow materials"), (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or (iii) any act or failure to act or any
alleged act or failure to act by any underwriter in connection with, or relating
in any manner to, the Shares or the offering thereof, and which is included as
part of or referred to in any loss, claim, damage liability or action arising
out of or based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable under this clause (iii) to the extent that it is
determined in a final judgment by a court of competent jurisdiction that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or wilful misconduct) except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity in clauses (a)(i) and
(a)(ii) above from the Company to such Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a) or 7(b), such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests
21
between them. It is understood that the indemnifying party shall not, in respect
of the legal expenses of any indemnified party in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all such indemnified parties and that all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
▇▇▇▇▇▇ Brothers in the case of parties indemnified pursuant to Section 7(a), and
by the Company, in the case of parties indemnified pursuant to Section 7(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 7(a) or
7(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) 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 hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the
22
Shares. The relative fault of the Company on the one hand and the Underwriters
on the other hand 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 by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective number of
Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 7(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. 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 was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. Directed Share Program Indemnification. (a) The Company agrees
to indemnify and hold harmless ▇▇▇▇▇▇ Brothres and its affiliates and each
person, if any, who controls ▇▇▇▇▇▇ Brothers or its affiliates within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act ("▇▇▇▇▇▇ Brothers Entities"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any
23
material prepared by or with the consent of the Company for distribution to
Participants in connection with the Directed Share Program or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (ii)
caused by the failure of any Participant to pay for and accept delivery of
Directed Shares that the Participant agreed to purchase; or (iii) related to,
arising out of, or in connection with the Directed Share Program, other than
losses, claims, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of ▇▇▇▇▇▇ Brothers Entities.
(b) In case any proceeding (including any governmental investigation)
shall be instituted involving any ▇▇▇▇▇▇ Brothers Entity in respect of which
indemnity may be sought pursuant to Section 8(a), the ▇▇▇▇▇▇ Brothres Entity
seeing indemnity, shall promptly notify the Company in writing and the Company,
upon request of the ▇▇▇▇▇▇ Brothers Entity, shall retain counsel reasonably
satisfactory to the ▇▇▇▇▇▇ Brothers Entity to represent the ▇▇▇▇▇▇ Brothers
Entity and any others the Company may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such proceeding. In any
such proceeding, any ▇▇▇▇▇▇ Brothers Entity shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such ▇▇▇▇▇▇ Brothers Entity unless (i) the Company shall have agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Company and the ▇▇▇▇▇▇
Brothers Entity and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
Company shall not, in respect of the legal expenses of the ▇▇▇▇▇▇ Brothers
Entities in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all ▇▇▇▇▇▇ Brothers Entities. Any such
separate firm for the ▇▇▇▇▇▇ Brothers Entities shall be designated in writing by
▇▇▇▇▇▇ Brothers. The Company shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Company agrees to
indemnify the ▇▇▇▇▇▇ Brothers Entities from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time a ▇▇▇▇▇▇ Brothers Entity shall have requested the Company to
reimburse it for fees and expenses of counsel as contemplated by the second and
third sentences of this paragraph, the Company agrees that it shall be liable
for any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by the Company
of the aforesaid request and (ii) the Company shall not have reimbursed the
▇▇▇▇▇▇ Brothers Entity in accordance with such request prior to the date of
such settlement. The Company shall not, without the prior written consent of
▇▇▇▇▇▇ Brothers effect any settlement of any pending or threatened proceeding in
respect of which any ▇▇▇▇▇▇ Brothers Entity is or could have been a party and
indemnity could have been sought hereunder by such ▇▇▇▇▇▇ Brothers Entity,
unless such settlement includes an unconditional
24
release of the ▇▇▇▇▇▇ Brothers Entitites from all liability on claims that are
the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section 8(a) is
unavailable to a ▇▇▇▇▇▇ Brothers Entity or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then the Company in
lieu of indemnifying the ▇▇▇▇▇▇ Brothers Entity thereunder, shall contribute to
the amount paid or payable by the ▇▇▇▇▇▇ Brothers Entity as a result of such
losses, claims, damages or liabilities (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and the
▇▇▇▇▇▇ Brothers Entities on the other hand from the offering of the Directed
Shares or (ii) if the allocation provided by clause 8(c)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(c)(i) above but also the
relative fault of the Company on the one hand and of the ▇▇▇▇▇▇ Brothers
Entities on the other hand in connection with any statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the ▇▇▇▇▇▇ Brothers Entities on the other hand in
connection with the offering of the Directed Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Directed Shares (before deducting expenses) and the total underwriting discounts
and commissions received by the ▇▇▇▇▇▇ Brothers Entities for the Directed
Shares, bear to the aggregate Public Offering Price of the Directed Shares. If
the loss, claim, damage or liability is caused by an untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact, the relative fault of the Company on the one hand and the ▇▇▇▇▇▇
Brothers Entities on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement or the omission or
alleged omission relates to information supplied by the Company or by the ▇▇▇▇▇▇
Brothers Entities and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(d) The Company and the ▇▇▇▇▇▇ Brothers Entities agree that it would
not be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the ▇▇▇▇▇▇ Brothers Entities were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 8(c). The amount paid or payable by the ▇▇▇▇▇▇ Brothers Entities as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
the ▇▇▇▇▇▇ Brothers Entities in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 8, no
▇▇▇▇▇▇ Brothers Entity shall be required to contribute any amount in excess of
the amount by which the total price at which the Directed Shares distributed to
the public were offered to the public exceeds the amount of any damages that
such ▇▇▇▇▇▇ Brothers Entity has otherwise been required to pay. The remedies
25
provided for in this Section 8 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
(e) The indemnity and contribution provisions contained in this
Section 8 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any ▇▇▇▇▇▇ Brothers Entity or the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Directed Shares.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over the counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I or Schedule
II bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 10 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which
26
such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you and the Company for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
27
13. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
FIRSTWORLD COMMUNICATIONS, INC.
By:_______________________
Name:
Title:
Accepted as of the date hereof
▇▇▇▇▇▇ BROTHERS INC.
Bear ▇▇▇▇▇▇ & Co. Inc.
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Fidelity Capital Markets
Acting severally on behalf of themselves
and the several U.S. Underwriters
named in Schedule I hereto.
By: ▇▇▇▇▇▇ Brothers Inc.
By:___________________________
Name:
Title:
▇▇▇▇▇▇ BROTHERS INTERNATIONAL (EUROPE)
Bear ▇▇▇▇▇▇ International Limited
Deutsche Bank AG London
PaineWebber International Inc.
Acting severally on behalf of themselves
and the several International Underwriters
named in Schedule II hereto.
By:▇▇▇▇▇▇ Brothers International (Europe)
By: ____________________________
Name:
Title:
28
SCHEDULE I
U.S. UNDERWRITERS
Number of
Firm Shares
Underwriter To Be Purchased
---------------
▇▇▇▇▇▇ Brothers Inc.
Bear ▇▇▇▇▇▇ & Co. Inc.
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Fidelity Capital Markets
_______________
Total U.S. Firm Shares ..............
======================
SCHEDULE II
INTERNATIONAL UNDERWRITERS
Number of
Firm Shares
Underwriter To Be Purchased
---------------
▇▇▇▇▇▇ Brothers International (Europe)
Bear ▇▇▇▇▇▇▇ International Limited
Deutsche Bank AG London
PaineWebber International Inc.
_______________
Total International Firm Shares ......
===============================
EXHIBIT A
[FORM OF LOCK-UP LETTER]
[____________], 1999
▇▇▇▇▇▇ Brothers Inc.
Bear ▇▇▇▇▇▇▇ & Co. Inc.
Deutsche Bank Securities Inc.
PaineWebber Incorporated
Fidelity Capital Markets
c/▇ ▇▇▇▇▇▇ Brothers Inc.
3 World Financial center
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Brothers International (Europe)
Bear ▇▇▇▇▇▇▇ International Limited
Deutsche Bank AG London
PaineWebber International Inc.
c/▇ ▇▇▇▇▇▇ Brothres international (Europe)
▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
Dear Sirs and Mesdames:
The undersigned understands that ▇▇▇▇▇▇ Brothers Inc. ("▇▇▇▇▇▇ Brothers")
and ▇▇▇▇▇▇ Brothers International (Europe) ("LBIE") propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") with FirstWorld
Communications, Inc., a Delaware corporation (the "Company"), providing for the
public offering (the "Public Offering") by the several Underwriters, including
▇▇▇▇▇▇ Brothers and LBIE (the "Underwriters") of shares (the "Shares") of the
Series B Common Stock, par value $.0001 per share of the Company (the "Common
Stock").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of ▇▇▇▇▇▇ Brothers on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the final prospectus relating
to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting
Agreement or (b) transactions relating to shares of Common Stock or other
securities acquired in open market transactions after the completion of the
Public Offering. In addition, the undersigned agrees that, without the prior
written consent of ▇▇▇▇▇▇ Brothers on behalf of the Underwriters, it will not,
during the period commencing on the date hereof and ending 180 days after the
date of the Prospectus, make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock.
In addition, the undersigned hereby waives, on its own behalf and on behalf
of any other parties to such agreements or understandings, any and all notice
requirements and rights with respect to registration of securities pursuant to
any agreement, understanding or otherwise setting forth the terms of any
security of the Company held by the undersigned, including any registration
rights agreement to which the undersigned and the Company may be party; provided
that such waiver shall apply only to the Public Offering, and any other action
taken by the Company in connection with the Public Offering.
The undersigned hereby agrees that, to the extent that the terms of this
Lock-Up Agreement conflict with or are in any way inconsistent with any
registration rights or other agreement to which the undersigned and the Company
may be party, this Lock-Up Agreement supersedes such agreement.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
_________________________
(Name)
_________________________
(Address)
A-2
