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EXHIBIT 10.1
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GLOBAL TELESYSTEMS GROUP, INC.
(a Delaware corporation)
5,415,584 Shares of Common Stock
PURCHASE AGREEMENT
Dated: April 19, 1999
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TABLE OF CONTENTS
Page
PURCHASE AGREEMENT............................................................................................1
SECTION 1. Representations and Warranties..........................................................3
(a) Representations and Warranties by the Company...........................................3
(i) Compliance with Registration Requirements.................................4
(ii) Incorporated Documents....................................................5
(iii) Independent Accountants...................................................5
(iv) Financial Statements......................................................5
(v) No Material Adverse Change in Business....................................6
(vi) Good Standing of the Company..............................................6
(vii) Good Standing of Subsidiaries.............................................6
(viii) Capitalization............................................................7
(ix) Authorization of Agreement................................................8
(x) Authorization and Description of Securities...............................8
(xi) Absence of Defaults and Conflicts.........................................8
(xii) Absence of Labor Dispute..................................................9
(xiii) Absence of Proceedings....................................................9
(xiv) Accuracy of Exhibits.....................................................10
(xv) Possession of Intellectual Property......................................10
(xvi) Absence of Further Requirements..........................................10
(xvii) Possession of Licenses and Permits.......................................10
(xviii) Title to Property........................................................11
(xix) Compliance with Cuba Act.................................................11
(xx) Investment Company Act...................................................11
(xxi) Environmental Laws.......................................................12
(xxii) Registration Rights......................................................12
(b) Representations and Warranties by the Selling Shareholders.............................12
(i) Accurate Disclosure......................................................13
(ii) Authorization of Agreements..............................................13
(iii) Valid and Marketable Title...............................................14
(iv) Due Execution of Custody Agreement.......................................14
(v) Absence of Manipulation..................................................14
(vi) Absence of Further Requirements..........................................14
(viii) Certificates Suitable for Transfer.......................................15
(c) Officer's Certificates.................................................................15
SECTION 2. Sale and Delivery to Underwriters; Closing.............................................15
(a) Initial Securities.....................................................................15
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(b) Option Securities......................................................................16
(c) Payment................................................................................16
(d) Denominations; Registration............................................................17
SECTION 3. Covenants of the Company...............................................................17
(a) Compliance with Securities Regulations and Commission Requests.........................17
(b) Filing of Amendments...................................................................18
(c) Delivery of Registration Statements....................................................18
(d) Delivery of Prospectus.................................................................19
(e) Continued Compliance with Securities Laws..............................................19
(f) Rule 158...............................................................................20
(g) Listing................................................................................20
(h) Restriction on Sale of Securities......................................................20
(i) Reporting Requirements.................................................................21
SECTION 4. Payment of Expenses....................................................................21
(a) Expenses...............................................................................21
(b) Expenses of the Selling Shareholders...................................................21
(c) Termination of Agreement...............................................................22
(d) Allocation of Expenses.................................................................22
SECTION 5. Conditions of Underwriters' Obligations................................................22
(a) Effectiveness of Registration Statement................................................22
(b) Opinion of Counsel for Company.........................................................23
(c) Opinion of Counsel for the Selling Shareholders........................................23
(d) Opinion of Counsel for Underwriters....................................................23
(e) Officers' Certificate..................................................................23
(f) Certificates of Selling Shareholders...................................................24
(g) Accountant's Comfort Letter............................................................24
(h) Bring-down Comfort Letter..............................................................24
(i) Approval of Listing....................................................................25
(j) No Objection...........................................................................25
(k) Conditions to Purchase of Option Securities............................................25
(l) Additional Documents...................................................................26
(m) Termination of Agreement...............................................................27
SECTION 6. Indemnification........................................................................27
(a) Indemnification of Underwriters........................................................27
(b) Indemnification of Company, Directors and Officers and Selling Shareholders............29
(c) Actions Against Parties; Notification..................................................29
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(d) Settlement Without Consent if Failure to Reimburse.....................................30
(e) Other Agreements with Respect to Indemnification.......................................31
SECTION 7. Contribution...........................................................................31
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.........................32
SECTION 9. Termination of Agreement...............................................................33
(a) Termination; General...................................................................33
(b) Liabilities............................................................................33
SECTION 10. Default by One or More of the Underwriters.............................................33
SECTION 11. Default by One or More of the Selling Shareholders or the Company......................34
SECTION 12. Notices................................................................................35
SECTION 13. Parties................................................................................35
SECTION 14. GOVERNING LAW AND TIME.................................................................36
SECTION 15. Effect of Headings.....................................................................36
SCHEDULES
Schedule A - List of Underwriters.....................................................Sch A-1
Schedule B - List of Company and Selling Shareholders.................................Sch B-1
Schedule C - Pricing Information......................................................Sch C-1
EXHIBITS
Exhibit A-1 - Form of Opinion of Shearman & Sterling.....................................A-1-1
Exhibit A-2 - Form of Opinion of Grier Raclin............................................A-2-1
Exhibit A-3 - Form of Opinion of Coudert Brothers........................................A-3-1
Exhibit A-4 - Form of Opinion of Loeff Claeys Verbeke....................................A-4-1
Exhibit A-5 - Form of Opinion of Counsel for the Selling Shareholders....................A-5-1
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GLOBAL TELESYSTEMS GROUP, INC.
(a Delaware corporation)
5,415,584 Shares of Common Stock
(Par Value $.10 Per Share)
PURCHASE AGREEMENT
April 19, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Bear, Stearns & Co. Inc.
Dresdner Kleinwort Benson
North America LLC
BT Alex. Brown Incorporated
Lehman Brothers Inc.
Prudential Securities Incorporated
ING Baring Furman Selz LLC
BancBoston Robertson Stephens Inc.
CIBC Oppenheimer Corp.
ABN AMRO Incorporated
Arnhold and S. Bleichroeder, Inc.
Credit Suisse First Boston Corporation
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
GLOBAL TELESYSTEMS GROUP, INC., a Delaware corporation (the
"Company"), and the other persons listed in Schedule B hereto (the "Selling
Shareholders") confirm their agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters",
which term shall also include any underwriter substituted as hereinafter
provided in Section 10 hereof), for whom Merrill Lynch, Donaldson, Lufkin &
Jenrette Securities Corporation, Dresdner Kleinwort Benson North America LLC,
Lehman Brothers Inc., BancBoston Robertson Stephens Inc.,
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CIBC Oppenheimer Corp., ING Baring Furman Selz LLC, Prudential Securities
Incorporated, ABN AMRO Incorporated, Arnhold & S. Bleichroeder, Inc., and
Credit Suisse First Boston Corporation are acting as representatives (in such
capacity, the "Representatives"), with respect to the sale by the Selling
Shareholders, acting severally and not jointly, and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.10 per share, of the Company ("Common
Stock") set forth in said Schedule A, and with respect to the grant by the
Selling Shareholders, acting severally and not jointly, to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b)
hereof to purchase all or any part of 812,337 additional shares of Common Stock
to cover over-allotments, if any. The aforesaid 5,415,584 shares of Common
Stock (the "Initial Securities") to be purchased by the Underwriters and all or
any part of the 812,337 shares of Common Stock subject to the option described
in Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities."
It is understood that the Company, concurrently with the
offer and sale of the Securities, intends to sell pursuant to an exemption from
the 1933 Act (as defined) 8,700,000 depositary shares, each representing 1/100
of a share of the Company's convertible preferred stock (the "Convertible
Preferred Stock"). The offering and sale of the Securities and the offering and
sale of such depositary shares are not conditional upon one another.
The Company and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") two registration statements on Form S-3
(Nos. 333-70871 and 333-70885) covering the registration of the Securities, and
the offering thereof from time to time in accordance with Rule 415 under the
Securities Act of 1933, as amended (the "1933 Act"), including the related
preliminary prospectus or Prospectus and such registration statements, as
amended, have become effective. The Company has prepared a form of prospectus
supplement reflecting the terms of the Securities, the terms of the offering
thereof and other matters set forth therein, and promptly after execution and
delivery of this Agreement, the Company will file such prospectus supplement in
accordance with the provisions of Rule 430A ("Rule 430A") of the rules and
regulations of the
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Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of
Rule 424 ("Rule 424(b)") of the 1933 Act Regulations. One form of prospectus
supplement is to be used in connection with the offering and sale of the
Securities (the "Form of Prospectus Supplement"). The information included in
any such prospectus supplement that was omitted from such registration
statements at the time they became effective but that is deemed to be part of
such registration statements at the time they became effective (a) pursuant to
paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b)
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information."
The Form of Prospectus Supplement used before such registration statements
became effective, and any prospectus supplement that omitted, as applicable,
the Rule 430A Information or the Rule 434 Information, that was used after such
effectiveness and prior to the execution and delivery of this Agreement, is
herein called a "Preliminary Prospectus." Such registration statements,
including the exhibits thereto and schedules thereto, at the time they became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, are herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The base prospectus included in the Registration Statement relating
to all offerings of securities under the Registration Statement, as
supplemented by the final Form of Prospectus Supplement is herein called the
"Prospectus," except that, if such base prospectus is amended or supplemented
on or prior to the date on which the Prospectus Supplement is first filed
pursuant to Rule 424, the term "Prospectus" shall refer to the base prospectus
as so amended or supplemented and as supplemented by the Prospectus Supplement,
including the documents filed by the Company with the Commission pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 Act"). For purposes
of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the Prospectus or any amendment or supplement to any of
the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter and the Selling Shareholders as of
the date hereof, as of the Closing
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Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
(i) Compliance with Registration Requirements. The
Registration Statement has become effective under the 1933 Act and no
stop order suspending the effectiveness of the Registration Statement
has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the
part of the Commission for additional information has been complied
with.
At the respective times the Registration Statement and any
post-effective amendments thereto became effective and at the Closing
Time (and, if any Option Securities are purchased, at the Date of
Delivery), the Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any amendments or supplements thereto were issued and at
the Closing Time (and, if any Option Securities are purchased, at the
Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434 and
the Prospectus shall not be "materially different," as such term is
used in Rule 434, from the Prospectus included in the Registration
Statement at the time it became effective. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter through the
Representatives expressly for use in the Registration Statement or the
Prospectus.
Each preliminary prospectus and the Prospectus filed as part
of the Registration Statement as originally filed
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or as part of any amendment thereto, or filed pursuant to Rule 424
under the 1933 Act, complied when so filed in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
each preliminary prospectus and the Prospectus delivered to the
Underwriters for use in connection with this offering was identical to
the electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of the
commission thereunder and, when read together with the other
information in the Prospectus, at the time the Registration Statement
became effective, at the time the Prospectus was issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein not misleading.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the entities to which they relate as of the dates indicated and their
respective results of operations, stockholders' equity and cash flows
for the periods specified; said financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information
shown therein and, in the case of the consolidated financial data
therein, have been
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compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement, and in the case of
the combined financial data therein, have been compiled from financial
statements prepared on a basis consistent with that of the audited
financial statements included in the Registration Statement.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement (at the time it became effective), except as otherwise stated
therein (at the time it became effective), (A) there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and
its Subsidiaries (as defined below) considered as one enterprise,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) there have been no transactions entered into by
the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C)
there has been no dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not, singly or in the aggregate, result in a
Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) and all entities in which the Company has a direct or
indirect majority equity interest or voting power (each a "Subsidiary"
and, collectively, the "Subsidiaries") has been duly organized (to the
extent applicable) and is validly existing as a corporation, general
partnership, limited partnership, limited
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liability company, closed joint stock company, or similar entity in
good standing (to the extent applicable) under the laws of the
jurisdiction of its organization, has organizational power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not, singly or in the aggregate, result in a Material
Adverse Effect; except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding capital stock or other
ownership interests of each such Subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable (to the extent
applicable) and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity, except that the Company's
Capital Stock in Vostok Mobile B.V. and in GTS Hungary has been pledged
to Ericsson Finans A.B. and Creditanstalt Bank as collateral for
certain borrowings; none of the outstanding shares of capital stock or
other ownership interests of any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder of such
Subsidiary. The only subsidiaries of the Company are (a) the
subsidiaries listed on Exhibit 21 to the Registration Statement and (b)
certain other subsidiaries which, considered in the aggregate as a
single Subsidiary, do not constitute a "significant subsidiary" as
defined in Rule 1-02 of Regulation S-X.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.
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(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) Authorization and Description of Securities. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement, and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued, fully paid and non-assessable;
the Common Stock conforms in all material respects to all statements
relating thereto contained in the Prospectus and such description
conforms to the rights set forth in the instruments defining the same;
no holder of the Securities will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities is
not subject to the preemptive or other similar rights of any
securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its Ventures (as defined below) is in violation of its
charter or by-laws (or equivalent constitutive documents) or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its Ventures is
a party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any Venture is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not, singly or in the aggregate, result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated in
this Agreement and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the
caption "Use of Proceeds") and compliance by the Company with its
obligations under this Agreement have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any Venture pursuant to, the Agreements and
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Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions
of the charter or by-laws (or equivalent constitutive documents) of the
Company or any Venture or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Venture or any of their assets,
properties or operations. As used herein, (a) "Ventures" means all
entities in which the Company has a direct or indirect greater than 25%
equity interest or voting power and (b) a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any Venture.
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Venture exists or, to the knowledge of
the Company, is threatened, which, in either case, may reasonably be
expected to, singly or in the aggregate, result in a Material Adverse
Effect.
(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any Venture, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which,
singly or in the aggregate, might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets of the Company
or any Venture or the consummation of the transactions contemplated in
this Agreement or the performance by the Company of its obligations
hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any Venture is a party
or of which any of their respective property or assets is the subject
which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, singly or in
the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
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(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xv) Possession of Intellectual Property. The Company and the
Ventures own or possess, or can acquire on reasonable terms, adequate
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, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the
business now operated by them, except to the extent the failure to so
own, possess or be able to acquire would not result in a Material
Adverse Effect, and neither the Company nor any Venture has received
any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of
the Company or any Venture therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities under this Agreement or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and foreign or state securities or blue sky laws.
(xvii) Possession of Licenses and Permits. Except as otherwise
disclosed in the Registration Statement, the Company and the Ventures
possess such material permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and the Ventures are in
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compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, result in a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except
when the invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect would not
have a Material Adverse Effect; and neither the Company nor any Venture
has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xviii) Title to Property. The Company and the Ventures have
good and marketable title to all real property owned by the Company and
the Ventures and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, 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 or any Venture; and all of the leases and subleases
material to the business of the Company and the Ventures, considered as
one enterprise, and under which the Company or any Venture holds
properties described in the Prospectus, are in full force and effect,
and neither the Company nor any Venture has any notice of any material
claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any Venture under any of the leases or
subleases mentioned above, or affecting or questioning the rights of
the Company or such Venture to the continued possession of the leased
or subleased premises under any such lease or sublease.
(xix) Compliance with Cuba Act. The Company has complied with,
and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xx) Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company" or an entity "controlled"
by an "investment company" as such
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terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
(xxi) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any Venture is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and the Ventures have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any Ventures
and (D) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental body
or agency, against or affecting the Company or any Ventures relating to
Hazardous Materials or any Environmental Laws.
(xxii) Registration Rights. Except as disclosed in the
Prospectus or in connection with the transaction regarding Omnicom
described in the Prospectus , there are no persons with registration
rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
(b) Representations and Warranties by the Selling
Shareholders. Each Selling Shareholder severally represents and warrants to
each Underwriter and the Company as of the date
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hereof, as of the Closing Time, and as of each Date of Delivery (if any) and
agrees with each Underwriter, as follows:
(i) Accurate Disclosure. Such Selling Shareholder has reviewed
and is familiar with the Registration Statement and the Prospectus and
neither the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact 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; provided,
that the representations and warranties set forth in this paragraph
1(b)(i) apply only to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to such
Selling Shareholder furnished to the Company in writing by such Selling
Shareholder expressly for use therein. It is understood and agreed that
the only written information furnished to the Company by each
respective Selling Shareholder specifically for use in the Registration
Statement is the information relating to such Selling Shareholder set
forth in the table under the caption "Selling Stockholders" in the
Prospectus.
(ii) Authorization of Agreements. Such Selling Shareholder has
the full right, power and authority to enter into this Agreement and a
Custody Agreement (the "Custody Agreement") and such Selling
Shareholder has the full right, power and authority to sell, transfer
and deliver the Securities to be sold by such Selling Shareholder
hereunder. The execution and delivery of this Agreement and the Custody
Agreement and the sale and delivery of the Securities to be sold by
such Selling Shareholder and the consummation of the transactions
contemplated herein and compliance by such Selling Shareholder with its
obligations hereunder have been duly authorized by such Selling
Shareholder and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any tax, lien, charge or encumbrance upon the Securities to be sold by
such Selling Shareholder or any property or assets of such Selling
Shareholder pursuant to any material contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Shareholder is a party or
by which such Selling Shareholder may be bound, or to which any of the
property or assets of such Selling Shareholder is subject, nor will
such action result in any violation
18
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of the provisions of the charter or by-laws or other organizational
instrument of such Selling Shareholder, if applicable, or any
applicable treaty, law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over such Selling Shareholder
or any of its properties.
(iii) Valid and Marketable Title. Such Selling Shareholder has
and will at the Closing Time have valid and marketable title to the
Securities to be sold by such Selling Shareholder hereunder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the
purchase price therefor as herein contemplated, assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive valid and marketable title to the Securities
purchased by it from such Selling Shareholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
(iv) Due Execution of Custody Agreement. Such Selling
Shareholder has duly executed and delivered the Custody Agreement with
the Company, as custodian (the "Custodian"); the Custodian is
authorized to deliver the Securities to be sold by such Selling
Shareholder.
(v) Absence of Manipulation. Such Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might 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 the Securities.
(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by such Selling
Shareholder of its obligations hereunder or in the Custody Agreement or
in connection with the sale and delivery of the Securities hereunder or
the consummation of the transactions contemplated by this Agreement,
except such as may have previously been made or obtained or as may be
required under the 1933 Act or the 1933 Act Regulations or
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state securities laws and except for such filings, consents, approvals
or authorizations that could not reasonably be expected to have a
material adverse effect on the ability of such Selling Shareholder to
consummate the transactions contemplated by this Agreement.
(vii) Certificates Suitable for Transfer. Certificates for all
of the Securities to be sold by such Selling Shareholder pursuant to
this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.
(c) Officer's Certificates. Any certificate signed by any
officer of the Company or any Ventures delivered to Merrill Lynch, the
Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company herein to each Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of a Selling
Shareholder as such and delivered to the Representatives or to counsel for the
Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by such Selling Shareholder to the Underwriters as
to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. Each Selling Shareholder, severally
and not jointly, agrees to sell to each Underwriter, severally and not jointly,
and on the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, each Underwriter,
severally and not jointly, agrees to purchase from each Selling Shareholder, at
the price per share set forth in Schedule C, that proportion of the number of
Initial Securities set forth in Schedule B opposite the name of such Selling
Shareholder which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter, plus any additional number of Initial
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof, bears to the total number of Initial
Securities, subject in each case, to such adjustments among the Underwriters as
the Representatives in their sole discretion shall make to eliminate any sales
or purchases of fractional shares.
20
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(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, each Selling Shareholder, severally and not
jointly, hereby grants an option to the Underwriters, severally and not
jointly, to purchase up to an additional 812,337 shares of Common Stock as set
forth in Schedule B, at the price per share set forth in Schedule C, less an
amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised not more than two times in whole or in part only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Securities upon notice by Merrill
Lynch to the Company and the Selling Shareholders setting forth the number of
Option Securities as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery for the Option Securities (a
"Date of Delivery") shall be determined by the Merrill Lynch, but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, on the basis of the
representations and warranties of the Company and each Selling Shareholder
contained herein and subject to the terms and conditions herein set forth, will
purchase that proportion of the total number of Option Securities then being
purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of Initial
Securities, subject in each case to such adjustments as Merrill Lynch in its
discretion shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for the Initial
Securities shall be made at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005 or at such other place as shall be agreed upon
by Merrill Lynch and the Company, at 9:00 A.M. (Eastern time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on the date
hereof) business day after the date hereof (unless postponed in accordance with
the provisions of Section 10), or such other time not later than ten business
days after such date as shall be agreed upon by Merrill Lynch and the Company
(such time and date of payment and delivery being herein called "Closing
Time").
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In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price for
such Option Securities shall be made at the above-mentioned offices, or at such
other place as shall be agreed upon by Merrill Lynch and the Company, on each
Date of Delivery as specified in the notice from Merrill Lynch to the Company.
Payment shall be made to the Selling Shareholders by wire
transfer of immediately available funds to bank accounts designated by the
Custodian pursuant to each Selling Shareholder's Custody Agreement. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Securities and the Option Securities, if any, which it
has agreed to purchase. Merrill Lynch, individually and not as representative of
the Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Securities or the Option Securities, if any, to
be purchased by any Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants
with each Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Merrill Lynch immediately, and confirm the notice in writing, (i)
when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission,
22
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(iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus
or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings
for any of such purposes. The Company will promptly effect the filings
necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file
such prospectus. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give Merrill Lynch
notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any
Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, will furnish Merrill Lynch with copies
of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use
any such document to which Merrill Lynch or counsel for the
Underwriters shall reasonably object within three Business Days after
being furnished such documents.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will
also deliver to the Representatives, without charge, a conformed copy
of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission
23
-19-
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectus. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the Securities Exchange of 1934 (the "1934 Act"), such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments
or supplements thereto furnished to the Underwriters will be identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Securities as
contemplated in this Agreement and the Prospectus. If at any time when
a prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall
exist as a result of which it is necessary, in the reasonable opinion
of counsel for the Underwriters or for the Company, to amend the
Registration Statement or amend or supplement any Prospectus in order
that the Prospectus will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the reasonable opinion of any such
counsel, at any such time to amend the Registration Statement or amend
or supplement any Prospectus in order to comply with the requirements
of the 1933 Act or the 1933 Act Regulations, the Company will promptly
prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectus
comply with such requirements, and the Company will furnish to the
Underwriters such number of copies of such amendment or supplement as
the Underwriters may reasonably request.
24
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(f) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.
(g) Listing. The Company will use its best efforts to effect
the admission of the Securities being issued and sold by the Company
pursuant to this Agreement on the European Association of Securities
Dealers Automated Quotation ("EASDAQ") system and comply with the
requirements of such exchange to maintain such listing. The Company
will use its best efforts to effect and maintain the quotation of the
Securities being issued and sold by the Company pursuant to this
Agreement on the Nasdaq National Market and will file with the Nasdaq
National Market all documents and notices required by the Nasdaq
National Market of companies that have securities that are traded in
the over-the-counter market and quotations for which are reported by
the Nasdaq National Market.
(h) Restriction on Sale of Securities. During the 60-day
period after the date of the Prospectus, the Company will not, without
the prior written consent of Merrill Lynch, directly or indirectly,
issue, sell, offer or agree to sell, grant any option for the sale of,
or otherwise dispose of or transfer any shares of capital stock of the
Company or any securities that are convertible into or exercisable or
exchangeable for capital stock or file a registration statement under
the 1933 Act with respect to the foregoing (excluding (A) the
Convertible Preferred Stock, (B) Common Stock issuable by the Company
upon conversion of the Company's Senior Subordinated Convertible Bonds
due 2000 or Senior Subordinated Convertible Bonds due 2010 or the
Convertible Preferred Stock, or as dividends on the Convertible
Preferred Stock or other securities convertible or exchangeable into
Common Stock outstanding as of the date hereof, (C) any shares of
Common Stock issued or options to purchase Common Stock granted
pursuant to existing employee benefit plans (including any shares of
Common Stock to be added to any such plan at the 1999 Annual Meeting of
Stockholders) of the Company referred to in the Prospectus or (D) any
shares of Common Stock or securities convertible into or exchangeable
for Common Stock issued as consideration for or to otherwise finance an
acquisition of an interest in or the assets of a business).
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(i) Reporting Requirements. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act and rules and regulations of the
Commission thereunder within the time periods referred to therein.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to
the performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, if any, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
printing and delivery to the Underwriters of copies of each preliminary
prospectus, any Term Sheets and of the Prospectus and any amendments or
supplements thereto, (vi) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (vii)
the fees and expenses of any transfer agent or registrar for the Securities,
(viii) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Securities and (ix) the fees and expenses incurred in connection with the
listing of the Securities being sold by the Selling Shareholders pursuant to
this Agreement on EASDAQ and inclusion of the Securities being sold by the
Selling Shareholders pursuant to this Agreement in the Nasdaq National Market.
(b) Expenses of the Selling Shareholders. The Selling
Shareholders, severally and not jointly, will pay all expenses incident to the
performance of their respective obligations under, and the consummation of the
transactions contemplated by, this Agreement, including (i) any stamp duties,
capital duties and stock transfer taxes, if any, payable upon the sale of the
Securities to the Underwriters, and (ii) the fees and disbursements of their
respective counsel and accountants.
26
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(c) Termination of Agreement. If this Agreement is terminated
by the Representatives in accordance with the provisions of Section 5, Section
9(a)(i) or Section 11 hereof, the Company shall reimburse the Underwriters for
all of their out-of-pocket expenses reasonably incurred by the Underwriters in
connection with this Agreement or the offering of the Securities contemplated
hereunder, including the reasonable fees and disbursements of counsel and
special counsel for the Underwriters.
If this Agreement shall be terminated by the Underwriters, or
any of them, because of (i) any failure or refusal on the part of one or more
Selling Shareholders to comply with the terms or to fulfill any of the
conditions of this Agreement, or (ii) the inability for any reason of one or
more Selling Shareholders to perform its obligations under this Agreement, such
Selling Shareholder or Selling Shareholders, as the case may be, will reimburse
the Underwriters, for their out-of-pocket expenses reasonably incurred by the
Underwriters in connection with this Agreement or the offering of Securities
contemplated hereunder, including the reasonable fees and disbursements of
counsel and special counsel to the Underwriters, to the extent such termination
is due to the events described in the foregoing clause (i) or (ii).
(d) Allocation of Expenses. The provisions of this Section
shall not affect any agreement that the Company and the Selling Shareholders
may make for the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof and in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of any Selling Shareholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement has become effective and at Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to
27
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the Underwriters. A prospectus containing the Rule 430A Information
shall have been filed with the Commission in accordance with Rule
424(b) (or a post-effective amendment providing such information shall
have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon
Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of
Closing Time, of each of Shearman & Sterling, counsel for the Company,
Grier Raclin, Senior Vice President and General Counsel of the Company,
Coudert Brothers, special counsel for the Company and special
regulatory counsel for Hermes Europe Railtel B.V. and Esprit Telecom
Group plc, and Loeff Claeys Verbeke, special Dutch counsel, each in
form and substance satisfactory to counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of
the other Underwriters to the effect set forth in Exhibits A-1 through
A-4 hereto.
(c) Opinion of Counsel for the Selling Shareholders. At
Closing Time, the Underwriters shall have received the favorable
opinion, dated as of the Closing Time, of the respective counsel for
each Selling Shareholder, in form and substance satisfactory to counsel
for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters substantially to the effect
set forth in Exhibit A-5 hereto and to such further effect as counsel
to the Underwriters may reasonably request.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Underwriters shall have received the favorable opinion, dated as of
Closing Time, of each of Cahill Gordon & Reindel, counsel for the
Underwriters, and Clifford Chance, special Russian counsel to the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters as to such matters as are reasonably
requested by the Representatives.
(e) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business
28
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affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary
course of business, and the Representatives shall have received a
certificate of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company, dated
as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time, (iii) the Company
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of such officer, are
contemplated by the Commission.
(f) Certificates of Selling Shareholders. At Closing Time, the
Underwriters shall have received certificates signed by each Selling
Shareholder or an Attorney-in-Fact on behalf of each Selling
Shareholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of each Selling Shareholder contained in
Section 1(b) hereof are true and correct in all respects with the same
force and effect as though expressly made at and as of Closing Time and
(ii) each Selling Shareholder has complied in all material respects
with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution
of this Agreement, the Underwriters shall have received from Ernst &
Young a letter dated such date, in form and substance satisfactory to
the Representatives, together with signed or reproduced copies of such
letter for each of the other Underwriters containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the
Underwriters shall have received from Ernst & Young a letter, dated as
of Closing Time, to the effect that they reaffirm the statements made
in the letter furnished
29
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pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days
prior to Closing Time.
(i) Listing. At Closing Time, the Securities being sold by the
Selling Shareholders pursuant to this Agreement shall have been
accepted for listing on EASDAQ, subject only to official notice of
issuance. At Closing Time, the Securities being sold by the Selling
Shareholders pursuant to this Agreement shall have been accepted for
inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(j) No Objection. The NASD has confirmed that it has not
raised any objection with respect to the fairness and reasonableness of
the underwriting terms and arrangements.
(k) Conditions to Purchase of Option Securities. In the event
that the Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the Option Securities, the
representations and warranties of the Company and the Selling
Shareholders contained herein and the statements in any certificates
furnished by the Company, any subsidiary of the Company and the Selling
Shareholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representatives
shall have received:
(i) Officers' Certificate. A certificate, dated such
Date of Delivery, of the President or a Vice President of the
Company and of the chief financial or chief accounting officer
of the Company confirming that the certificate delivered at
the Closing Time pursuant to Section 5(d) hereof remains true
and correct as of such Date of Delivery.
(ii) Certificate of the Selling Shareholders. A
certificate, dated such Date of Delivery, of an
Attorney-in-Fact on behalf of each Selling Shareholder
confirming that the certificate delivered at Closing Time
pursuant to Section 5(f) hereof remains true and correct as of
such Date of Delivery.
(iii) Opinion of Counsel for Company. The favorable
opinion, dated as of such Date of Delivery, of each of the
counsels listed in Section 5(b), each in form and substance
satisfactory to counsel for the
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Underwriters, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(b) hereof.
(iv) Opinion of Counsel for the Selling Shareholders.
The favorable opinion, dated as of such Date of Delivery, of
the respective counsel for each Selling Shareholder, in form
and substance satisfactory to counsel for the Underwriters,
relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion
required by Section 5(c) hereof.
(v) Opinion of Counsel for Underwriters. The
favorable opinion of Cahill Gordon & Reindel, counsel for the
Underwriters and Clifford Chance, special counsel to the
Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(vi) Bring-down Comfort Letter. A letter from Ernst &
Young, in form and substance satisfactory to the
Representatives and dated such Date of Delivery, substantially
in the same form and substance as the letter furnished to the
Representatives pursuant to Section 5(f) hereof, except that
the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to
such Date of Delivery.
(l) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with
such documents and opinions as they may reasonably request for the
purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Securities by
the Company and with the sale of the Securities by the Selling
Shareholders as herein contemplated shall be reasonably satisfactory in
form and substance to the Representatives and counsel for the
Underwriters.
31
-27-
(m) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the
Representatives by notice to the Company at any time at or prior to
Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company and the
Selling Shareholders, jointly and severally, agree to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
and the directors, officers and employees of any Underwriter or any such
controlling person, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
32
-28-
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(c) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of any Underwriter through the Representatives expressly for use in
the Registration Statement (or any amendment or supplement thereto), including
the Rule 430A Information and the Rule 434 Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); provided, further that the Company shall not be liable for any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or made in reliance upon and in conformity with Selling
Shareholder Information (as defined); provided, further that neither the Company
nor any Selling Shareholder will be liable to an Underwriter with respect to any
preliminary prospectus to the extent that any such loss, liability, claim,
damage or expense resulted from the fact that such Underwriter, in contravention
of a requirement of this Agreement or applicable law, sold Securities to a
person to whom such Underwriter failed to send or give, at or prior to the
Closing Date, a copy of the Prospectus, as then amended or supplemented if: (i)
the Company has previously furnished copies thereof (sufficiently in advance of
the Closing Date to allow for distribution by the Closing Date) to the
Underwriters and the loss, liability, claim, damage or expense of such
Underwriter resulted from an untrue statement or omission of a material fact
contained in or omitted from the preliminary prospectus which was corrected in
the Prospectus as, if applicable, amended or supplemented prior to the Closing
Date and such Prospectus was required by law to be delivered at or prior to the
written confirmation of sale to such person and (ii) such failure to give or
send such Prospectus by the
33
-29-
Closing Date to the party or parties asserting such loss, liability, claim,
damage or expense would have constituted the sole defense to the claim asserted
by such person; provided, further, that each Selling Shareholder shall be liable
only with reference to information relating to such Selling Shareholder
furnished to the Company in writing by or on behalf of such Selling Shareholder
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement thereto (it being understood that such
information is limited to the extent and as described in Section 1(b)(i) hereof)
(the "Selling Shareholder Information"); provided, further, that each Selling
Shareholder's aggregate liability under this Section 6(a) shall be limited to an
amount equal to the gross proceeds (after deducting the underwriting discount,
but before deducting expenses) received by such Selling Shareholder from the
sale of the Securities pursuant to the Purchase Agreement.
(b) Indemnification of Company, Directors and Officers and
Selling Shareholders. Each Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, each
Selling Shareholder and each person, if any, who controls any Selling
Shareholder within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment or supplement thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives expressly for use in the Registration Statement (or
any amendment or supplement thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a
34
-30-
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 6(a) above, counsel to the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel to the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action; provided, however, that counsel
to the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 6 or Section 7 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
35
-31-
(e) Other Agreements with Respect to Indemnification. The
provisions of this Section shall not affect any agreement among the Company and
the Selling Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for
in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportions that (a) the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bears to the offering price appearing thereon and
(b) the Company and the Selling Shareholders are severally responsible for the
balance on the same basis as each of them would have been obligated to provide
indemnification pursuant to Section 6 or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Selling
Shareholders on the second hand and of the Underwriters on the third hand in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative fault of the Company and the Selling Shareholders
and the Underwriters shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Shareholders or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of
36
-32-
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, (i) no
Selling Shareholder shall be required to contribute any amount in excess of the
amount of the total net proceeds received by such Selling Shareholder from the
Securities purchased from such Selling Shareholder and (ii) no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who
controls a Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company or any the Selling Shareholder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company or such Selling Shareholder, as the case may be. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth opposite
their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company or any Venture or
the Selling Shareholders submitted pursuant hereto, shall remain operative and
in full force and effect, regardless of any investigation made
37
-33-
by or on behalf of any Underwriter or controlling person, or by or on behalf of
the Company or the Selling Shareholders, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate
this Agreement, by notice to the Company and the Selling Shareholders, at any
time at or prior to Closing Time (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission, EASDAQ or the Nasdaq National Market, or
if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) Liabilities. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 10. Default by One or More of the Underwriters. If one
or more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
38
-34-
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representatives shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Selling
Shareholders to sell the Option Securities to be purchased and sold on
such Date of Delivery shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the Underwriters to purchase and the Selling Shareholders to sell the
relevant Option Securities, as the case may be, either (i) the Representatives
or (ii) the Company and any Selling Shareholder shall have the right to postpone
Closing Time or the relevant Date of Delivery, as the case may be, for a period
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. Default by One or More of the Selling
Shareholders. (a) If one or more of the Selling Shareholders selling an
aggregate of at least $15,000,000 of Securities shall fail at Closing Time or at
a Date of Delivery to sell and
39
-35-
deliver the number of Securities which such Selling Shareholder or Selling
Shareholders are obligated to sell hereunder, and the remaining Selling
Shareholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Shareholders as set forth in Schedule B hereto,
then the Underwriters may, at option of the Representatives, by notice from the
Representatives to the Company and the non-defaulting Selling Shareholders,
either (a) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8
shall remain in full force and effect or (b) elect to purchase the Securities
which the non-defaulting Selling Shareholders have agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve any Selling Shareholder
so defaulting from liability, if any, in respect of such default.
In the event of a default by any Selling Shareholder as
referred to in this Section 11, each of the Representatives, the Company and the
non-defaulting Selling Shareholders shall have the right to postpone Closing
Time or the Date of Delivery for a period not exceeding seven days in order to
effect any required change in the Registration Statement or Prospectus or in any
other documents or arrangements.
SECTION 12. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives c/o Merrill Lynch & Co.,
Merrill Lynch Pierce, Fenner & Smith Incorporated at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Robert Kramer;
notices to the Company shall be directed to it at 1751 Pinnacle Drive, North
Tower - 12th Floor, McLean, VA 22102, attention of William H. Seippel; and
notices to the Selling Shareholders shall be directed to the Company at 1751
Pinnacle Drive, North Tower - 12th Floor, McLean, VA 22102, attention of William
H. Seippel.
SECTION 13. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Underwriters, the Company and the Selling
Shareholders and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Shareholders and their respective successors and the controlling persons and
officers and directors referred to in
40
-36-
Sections 6 and 7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
41
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If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters, the Company and the Selling Shareholders in
accordance with its terms.
Very truly yours,
GLOBAL TELESYSTEMS GROUP, INC.
By /s/ Grier C. Raclin
--------------------------------------------
Title: Vice President - External Affairs
General Counsel and Corporate
Secretary
APAX FUNDS NOMINEES LIMITED WARBURG, PINCUS VENTURES, L.P.
By: /s/ John P. McMonigall By: /s/ Stephen Distler
-------------------------- -----------------------------
Name: John P. McMonigall Name: Stephen Distler
Title: Director Title: Partner
42
-38-
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
DRESDNER KLEINWORT BENSON
NORTH AMERICA LLC
BT ALEX. BROWN INCORPORATED
LEHMAN BROTHERS INC.
PRUDENTIAL SECURITIES INCORPORATED
ING BARING FURMAN SELZ LLC
BANCBOSTON ROBERTSON STEPHENS INC.
CIBC OPPENHEIMER CORP.
ABN AMRO INCORPORATED
ARNHOLD AND S. BLEICHROEDER, INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Robert Kramer
--------------------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
43
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
- ------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ........................................... 1,121,484
Bear, Stearns & Co. Inc. ............................................. 487,000
BT Alex. Brown Incorporated .......................................... 487,000
Donaldson, Lufkin & Jenrette Securities
Corporation ...................................................... 487,000
Dresdner Kleinwort Benson North
America LLC ...................................................... 487,000
Lehman Brothers Inc. ................................................. 487,000
BancBoston Robertson Stephens Inc. ................................... 243,300
CIBC Oppenheimer Corp. ............................................... 243,300
ING Baring Furman Selz LLC ........................................... 243,300
Prudential Securities Incorporated ................................... 243,300
ABN AMRO Incorporated ................................................ 124,300
Arnhold and S. Bleichroeder, Inc. .................................... 124,300
Credit Suisse First Boston Corporation ............................... 124,300
Doft & Co., Inc. ..................................................... 54,000
Lazard Freres & Co. LLC .............................................. 54,000
Schroder & Co. Inc. .................................................. 54,000
J.C. Bradford & Co. .................................................. 27,000
First Union Capital Markets Corp. .................................... 27,000
Gabelli & Company, Inc. .............................................. 27,000
Gerard Klauer Mattison & Co., Inc. ................................... 27,000
Schedule A-1
44
Legg Mason Wood Walker, Incorporated ................................. 27,000
McDonald Investments Inc. ............................................ 27,000
Neuberger Berman, LLC ................................................ 27,000
Ragen MacKenzie Incorporated ......................................... 27,000
Raymond James & Associates, Inc. ..................................... 27,000
The Robinson-Humphrey Company, LLC ................................... 27,000
Scotia Capital Markets (USA) Inc. .................................... 27,000
Tucker Anthony Incorporated .......................................... 27,000
Utendahl Capital Partners, L.P. ...................................... 27,000
------------
Total ................................................................ 5,415,584
============
Schedule A-2
45
SCHEDULE B
Number of Maximum Number
Initial of Option
Securities Securities
to be Sold to be Sold
---------- ----------
Apax Funds Nominees Limited........... 3,708,891 556,333
Warburg, Pincus Ventures, L.P......... 1,706,693 256,004
--------- ---------
Total................................. 5,415,584 812,337
Schedule B-1
46
SCHEDULE C
GLOBAL TELESYSTEMS GROUP, INC.
Shares of Common Stock
(Par Value $.10 Per Share)
1. The public offering price per share for the Securities,
determined as provided in said Section 2, shall be $57.50.
2. The purchase price per share for the Securities to be paid
by the several Underwriters shall be $55.345, being an amount equal to
the public offering price set forth above less $2.155 per share;
provided that the purchase price per share for any Option Securities
purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any
dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities.
Schedule C-1
47
Exhibit A-1
FORM OF OPINION OF SHEARMAN & STERLING
TO BE DELIVERED PURSUANT TO SECTION 5(b)(1)
1. The Company is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Prospectus;
2. The Purchase Agreement was duly authorized, executed and
delivered by the Company;
3. Any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time period required
by Rule 424(b);
4. The authorized and, to such counsel's knowledge, issued and
outstanding capital stock of the Company was, at December 31, 1998, as
set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization"; all of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable;
5. The Shares to be purchased by the Underwriters from the
Selling Shareholders have been duly authorized and are validly issued,
fully paid, and non-assessable and are not subject to preemptive rights
pursuant to the Delaware GCL, the Certificate of Incorporation or
By-Laws of the Company or any agreement listed on Annex A attached
hereto;
6. The execution and delivery by the Company of the Purchase
Agreement and the consummation of the transactions contemplated in the
Purchase Agreement, and compliance by the Company with the terms
thereof (1) will not result in any violation of the Certificate of
Incorporation or By-Laws of the Company, and (2) will not conflict
with, or constitute default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to (A) any
- ---------------------
(1) Capitalized terms not defined herein have the meanings given to them in
the Purchase Agreement.
A-1-1
48
of the agreements set forth in Annex A attached hereto, (B) any
existing applicable law, rule or regulation which, in each instance in
our experience, are normally applicable to corporations such as the
Company or transactions of this type, other than the securities or blue
sky laws of the various states, as to which, in each case, we express
no opinion or (C) any judgment, order or decree of any Federal or New
York court, governmental agency or body or arbitrator known by us to be
applicable to the Company (except for such conflicts, defaults or
liens, charges or encumbrances, with respect to clause (2) above, that
would not reasonably be expected to result in a Material Adverse
Effect);
7. To the best of such counsel's knowledge, no authorization,
approval, consent or license of any government, governmental
instrumentality or court is required for the consummation by the
Company of the transactions contemplated by the Purchase Agreement,
except for such consents, approvals, authorizations or orders as have
been obtained under the Securities Act or may be required under the
securities or blue sky laws of any jurisdiction in the United States in
connection with the offer and sale of the Shares;
8. The statements in the Prospectus under the captions
"Description of Capital Stock," "United States Federal Income Tax
Considerations to Non-U.S. Stockholders," "Underwriting," in the third
paragraph under the caption "Shares Eligible for Future Sale," and in
the Registration Statement under Item 14, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly summarize the matters referred to therein;
9. The Company is not now required to register under the
Investment Company Act of 1940, as amended to date; and
10. The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the charter and
by-laws of the Company and the requirements of the Nasdaq National
Market.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Underwriters and counsel for the Underwriters
and representatives of the independent public accountants of the Company at
which the contents of the Registration Statement and Prospectus and
A-1-2
49
related matters were discussed and that, (i) in such counsel's opinion, the
Registration Statement and the Prospectus (other than the financial statements
and other financial data contained therein or omitted therefrom, as to which
such counsel need not comment) appear on their face to be appropriate
responsively in all material respects to the requirements of the Securities Act
and the applicable rules and regulations of the Commission thereunder; (ii) no
facts came to such counsel's attention which gave such counsel reason to believe
that (a) the Registration Statement (other than the financial statements and
other financial data contained therein or omitted therefrom, as to which such
counsel need not comment), at the time it 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 (other than the financial statements and other financial data
contained therein or omitted therefrom, as to which we have not been requested
to comment), as of their date or the Closing Date, contained or contain an
untrue statement of a material fact or omitted 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; and (iii) such counsel does not know
of any contract or other document of a character required to be filed as an
exhibit to the Registration Statement that is not so filed.
A-1-3
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Exhibit A-2
FORM OF OPINION OF GRIER RACLIN
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. Each subsidiary listed in Annex B hereto (each, a
"Subsidiary") is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware with corporate power
and authority under such laws to own, lease and operate its properties
and conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each United States jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure so to qualify or
to be in good standing, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of the
Company, its subsidiaries and Ventures considered as one enterprise on
a combined basis ("Material Adverse Effect"); except as otherwise
disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized
and validly issued and, to the best of such counsel's knowledge, is
fully paid and non-assessable and is owned by the Company, directly or
indirectly through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive rights of any securityholder of such
Subsidiary;
2. The authorized and issued and outstanding capital stock of
the Company was, at December 31, 1998, as set forth in the Prospectus
in the column entitled "Actual" under the caption "Capitalization"; all
of the issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive rights of any
securityholder of the Company;
3. To the best of such counsel's knowledge, neither the
Company nor any of its Subsidiaries listed in Annex B is in violation
of, in conflict with, in breach of or in default of (A) its Certificate
of Incorporation or By-Laws or (B) the terms of any of the agreements
set forth in
A-2-1
51
Annex A attached hereto to which the Company is a party or by which it
is bound or any of its properties is subject, except, in the case of
clause (B) only, to the extent that any such violation, conflict,
breach or default would not reasonably be expected to result in a
Material Adverse Effect;
4. To the best of such counsel's knowledge, the execution and
delivery by the Company of the Purchase Agreements and the consummation
of the transactions contemplated in the Purchase Agreements and in the
Registration Statement, and compliance by the Company with the terms
thereof will not result in any (1) violation of the Certificate of
Incorporation or By-Laws of the Company, and (2) will not conflict
with, or constitute default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to (A) any of the agreements set forth
in Annex A attached hereto, (B) any existing applicable law, rule or
regulation which, in each instance in such counsel's experience, are
normally applicable to corporations such as the Company or transactions
of this type, other than the securities or blue sky laws of the various
states, as to which, in each case, need not express any opinion or (C)
any judgment, order or decree of any Federal or New York court,
governmental agency or body or arbitrator known by me to be applicable
to the Company (except for such conflicts, defaults or liens, charges
or encumbrances, with respect to clause (2) above, that would not
reasonably be expected to result in a Material Adverse Effect);
5. To the best of such counsel's knowledge, (a) there is no
pending action, suit, proceeding, inquiry or investigation before or
brought by any U.S. court or governmental agency or body, with which
the Company or any of its subsidiaries has been served, (I) to which
the Company or any of its subsidiaries is a party or (II) to which the
property of the Company or any of its subsidiaries is subject, or (b)
any such action, suit, proceeding, inquiry or investigation threatened,
in each case which might reasonably be expected to result in a Material
Adverse Effect; and
6. To the best of such counsel's knowledge, there are no
persons with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement or, except
as described in the Prospectus, otherwise registered by the Company
under the 1933 Act.
A-2-2
52
In addition, such counsel shall state that (i) in such
counsel's opinion, the Registration Statement and the Prospectus (other than the
financial statements and other financial data contained therein or omitted
therefrom, as to which such counsel need not comment) appear on their face to be
appropriate responsively in all material respects to the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder; (ii) no facts came to such counsel's attention which gave such
counsel reason to believe that (a) the Registration Statement (other than the
financial statements and other financial data contained therein or omitted
therefrom, as to which such counsel need not comment), at the time it 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 (other than the
financial statements and other financial data contained therein or omitted
therefrom, as to which we have not been requested to comment), as of their date
or the Closing Date, contained or contain an untrue statement of a material fact
or omitted 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; and (iii) such counsel does not know of any contract or other
document of a character required to be filed as an exhibit to the Registration
Statement that is not so filed.
A-2-3
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Exhibit A-3
FORM OF OPINION OF COUDERT BROTHERS
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. The statements in the Prospectus relating to the Offering
under the captions "RISK FACTORS Delays in regulatory liberalization in
EU member states could adversity affect our service offerings in these
countries" and "BUSINESS - Licenses and Regulatory Issues," insofar as
they purport to constitute a summary of the matters expressly referred
to therein, fairly describe such matters in all material respects.
2. Hermes Europe Railtel B.V. ("Hermes") and Esprit Telecom
Group plc ("Esprit"), or their respective subsidiaries, have obtained
all necessary licences, authorizations, consents and approvals
(collectively the "Authorizations") of and from, and has made all
necessary filings with and notices to all Danish, Swedish, Spanish,
Luxembourgian, United Kingdom, Belgian, French, German, Italian, Dutch,
Swiss, and United States governmental authorities, regulatory agencies,
courts and tribunals necessary to render lawful the conduct of its
business as an operator of telecommunication facilities and provider of
telecommunication services within the said countries, as such is
described in the Registration Statement dated April 19, 1999 relating
to the Offering (with respect to each of Hermes and Esprit, the
"Business").
3. So far as such counsel is aware, having made due inquiry of
the Company
(a) Neither Hermes nor Esprit has received any notice of
proceedings relating to the revocation or
modification of any such Authorizations, and
(b) Each of Hermes and Esprit is conducting its business
in accordance with the Authorizations and is not in
violation of, or in default under, any condition or
other provision of the Authorizations or any national
or regional laws, regulation, rule, order or judgment
with respect to the Authorizations or the conduct of
the Business.
4. Each of the Russian companies listed on Schedule 1 (the
"Russian Companies") has been duly organized
A-3-1
54
and is validly existing as a legal entity registered under the laws of
the Russian Federation and has the corporate power and authority to
carry on its business and to own, lease and operate its properties as
disclosed in the Prospectus.
5. All of the outstanding shares of capital stock or ownership
interests, as applicable, of each of the Russian Companies have been
duly authorized and validly issued and the issuance of such shares was
properly registered with the appropriate authorities competent therefor,
and, to the best of such counsel's knowledge, to the extent owned,
directly or indirectly, by GTS, are owned free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature.
GTS owns, directly or indirectly, that percentage of the issued and
outstanding shares of capital stock or ownership interests of the
Russian Companies set forth on Schedule 1 hereto as being owned by GTS.
6. Except as disclosed in the Prospectus, under current
legislation of the Russian Federation, as applicable, (i) subject to the
qualifications set forth in paragraph (e) hereof, dividends and other
distributions declared and payable on the issued and outstanding shares
of the Russian Companies may be paid to the foreign shareholders in U.S.
Dollars and may be transferred by such foreign shareholders out of the
Russian Federation, as the case may be; (ii) all such dividends are, and
other distributions may be, subject to withholding taxes unless an
international treaty provides otherwise and the procedures set forth in
applicable Russian legislation enabling the foreign shareholders to
avail themselves of such treaty benefits are followed; and (iii) such
dividends and distributions are otherwise free and clear of any other
tax or deduction in the Russian Federation, provided that all profits
and other taxes have been paid by the relevant Russian Company prior to
the payment of such dividends and distributions.
7. Except as disclosed in the Prospectus, each Russian Company
has such telecommunications permits, licenses and authorizations of
governmental or regulatory authorities, including, without limitation,
licenses issued by the State Committee of the Russian Federation on
Communications and Information (formerly the Ministry of Communications)
(the "Telecommunications Licenses"), permissions issued by the State
Service for Communications Oversight (also referred to as
Gossviaznadzor), and/or radio-frequency allocations issued by the State
Commission for Radio Frequencies (all of the foregoing, without
A-3-2
55
limitation, being the "Telecommunications Permits"), which are
necessary to own, lease, and operate its respective properties and to
conduct its business as disclosed in the Prospectus. Such
Telecommunications Permits contain no restriction that is likely to
have a material adverse effect on the business, condition (financial or
other), properties, net worth, results of operations or prospects (a
"Material Adverse Effect") of such Russian Company. Except as disclosed
in the Prospectus, to the best of such counsel's knowledge, each of the
Russian Companies has fulfilled and performed all of its material
obligations with respect to such Telecommunications Permits and no
event has occurred which creates, or after notice or lapse of time or
both would create, a material likelihood that such Telecommunications
Permits would be revoked or terminated.
8. To the best of such counsel's knowledge, there are no
outstanding subscriptions, rights, warrants, options, calls,
convertible securities, or commitments of sale entitling any person to
purchase or otherwise acquire from any of the Russian Companies any
shares of the capital stock of, or other ownership interest in, any of
such Russian Companies, with the exception of those arising as a matter
of Russian law and those included in the foundation documents
(including the shareholders' agreements), and any amendments thereto,
of the Russian Companies.
9. Except as otherwise set forth in the Prospectus, there are
no legal or governmental proceedings pending or threatened in writing
to which any Russian Company is a party or of which any of its property
is the subject, which could have a Material Adverse Effect on the
Russian Companies as a whole.
A-3-3
56
Exhibit A-4
FORM OF OPINION OF LOEFF CLAEYS VERBEKE
TO BE DELIVERED PURSUANT TO SECTION 5(b)
1. Each of Commstruct International B.V., Vostok Mobile B.V., Hermes
Europe Railtel B.V. ("HER") and Hermes Europe Railtel Holdings B.V.
(the "Companies") has been duly incorporated and is validly existing as
a "besloten vennootschap met beperkte aansprakelijkheid" (private
company with limited liability) under the laws of the Netherlands.
2. Each of the Companies has the corporate power and authority to own its
property and to conduct its business in accordance with their
respective objects clauses as set forth in Section 2 of their
respective Articles.
3. Under the laws of the Netherlands there are no qualification
requirements to do business for any of the Companies.
4. Under the laws of the Netherlands (i) all dividends and other
distributions declared and payable on the issued and outstanding shares
of the Companies may be paid in Dutch Guilders, (ii) such Dutch
Guilders may be converted into foreign currency that may be transferred
out of the Netherlands, (iii) all such dividends and other
distributions are subject to withholding taxes unless an international
treaty provides otherwise and the procedures set forth in the
Netherlands or other applicable legislation are followed, and (iv) such
dividends and distributions are otherwise free and clear of any other
tax or deduction in the Netherlands.
5. The Shares have been duly and validly authorized and validly issued and
are validly outstanding and, except that the HER Shares II issued to
GTS Hermes, Inc. must be paid up by GTS Hermes, Inc. to their par value
upon call by HER, the Shares are non assessable.
6. The matters of Dutch law mentioned in the paragraphs of the
Registration Statement filed on April 19, 1999 as attached in Schedule
II hereto, are correct.
A-4-1
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Exhibit A-5
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than the issuance
of the order of the Commission declaring the Registration Statement effective
and such authorizations, approvals or consents as may be necessary under state
securities laws, as to which [I][we] need express no opinion), is necessary or
required to be obtained by the Selling Shareholder(s) for the performance of
[each/the] Selling Shareholder of its obligations under the Purchase Agreement
or in the Power of Attorney and Custody Agreement, or in connection with the
offer, sale or delivery of the Securities and except for such filings, consents,
approvals or authorizations that could not reasonably be expected to have a
material adverse effect on the ability of such Selling Shareholder(s) to
consummate the transactions contemplated by this Agreement.
(ii) The Custody Agreement has been duly executed and
delivered by the [respective] Selling Shareholder(s) [named therein] and
constitutes the legal, valid and binding agreement of [such/the] Selling
Shareholder.
(iii) The Purchase Agreement has been duly authorized,
executed and delivered by or on behalf of [each/the] Selling Shareholder.
(iv) The execution, delivery and performance of the Purchase
Agreement and the Custody Agreement and the sale and delivery of the Securities
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement and compliance by the Selling Shareholder(s)
with its obligations under the Purchase Agreement have been duly authorized by
all necessary action on the part of the Selling Shareholder(s) and do not and
will not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default under or result in the
creation or imposition of any tax, lien, charge or encumbrance upon the
Securities or any property or assets of the Selling Shareholder(s) pursuant to,
any material contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other instrument or agreement to which
[any/the] Selling Shareholder is a party or by which [he/she/it/they] may be
bound, or to which any of the property or assets of the Selling Shareholder(s)
may be subject nor will
A-5-1
58
such action result in any violation of the provisions of the charter or by-laws
of the Selling Shareholder(s), if applicable, or any law, administrative
regulation, judgment or order of any governmental agency or body or any
administrative or court decree having jurisdiction over [such/the] Selling
Shareholder or any of its properties.
(vi) Assuming that each of the Underwriters acquires the
certificates representing the Securities to be sold by [each/the] Selling
Shareholder in good faith and without notice of any adverse claims, as defined
in Section 8-302 of the Uniform Commercial Code as in effect in the State of New
York (the "UCC"), upon delivery of the certificates representing such Securities
to the person designated by the Underwriters, endorsed to the Underwriters, or
endorsed in blank, the Underwriters will acquire all of the rights of the
Selling Shareholder(s) in the certificates representing such Securities free of
any adverse claims (within the meaning of Section 8-302 of the UCC).
A-5-2