EXHIBIT 1.1
COVAD COMMUNICATIONS GROUP, INC.
260,000 UNITS CONSISTING OF
$260,000,000 PRINCIPAL AMOUNT AT MATURITY OF 13 1/2% SENIOR DISCOUNT NOTES
DUE 2008
AND
WARRANTS TO PURCHASE 1,684,588 SHARES OF COMMON STOCK
PURCHASE AGREEMENT
MARCH 6, 1998
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
BT ALEX. BROWN INCORPORATED
COVAD COMMUNICATIONS GROUP, INC.
260,000 Units Consisting of
$260,000,000 Principal Amount at Maturity of 13 1/2% Senior Discount Notes
due 2008
and
Warrants to Purchase 1,684,588 Shares of Common Stock
PURCHASE AGREEMENT
March 6, 1998
New York, New York
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
BT Alex. Brown Incorporated
c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies & Gentlemen:
Covad Communications Group, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Bear, ▇▇▇▇▇▇▇ & Co. Inc. and BT Alex.
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Brown Incorporated (together, the "Initial Purchasers") an aggregate of 260,000
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units (the "Units") consisting in the aggregate of $260,000,000 aggregate
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principal amount at maturity of 13 1/2% Senior Discount Notes due 2008 (the
"Senior Discount Notes") and Warrants (the "Warrants") initially exercisable to
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purchase 1,684,588 shares of common stock, par value $.001 per share (the
"Common Stock"), of the Company (the "Warrant Shares"), subject to the terms and
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conditions set forth herein. Each Unit will consist of (a) $1,000 principal
amount at maturity of the Senior Discount Notes and (b) one Warrant, initially
exercisable to purchase 6.4792 shares of Common Stock. The Senior Discount
Notes will be issued pursuant to an indenture (the "Indenture"), to be dated the
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Closing Date (as defined below), between the Company and The Bank of New York,
as trustee (the "Trustee"). The Warrants will be issued pursuant to a warrant
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agreement (the "Warrant Agreement") to be dated the Closing Date, between the
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Company and The Bank of New York, as warrant agent (the "Warrant Agent"). The
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Senior Discount Notes and the Warrants comprising each Unit will not be
separable until the earlier of (i) the 90 days from the issue date thereof, (ii)
such earlier date as the Initial Purchasers may, in their discretion, deem
appropriate, (iii) in the event a Change of Control (as defined in the
Indenture) occurs, the date the Company mails notice thereof to holders of
Senior Discount Notes, (iv) the date on which the Exchange Offer (as defined
below) is consummated and (v) the date on which the Shelf Registration (as
defined below) is declared effective (such date, the "Separation Date"). The
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Units, the Senior Discount Notes and the Warrants are more fully described in
the Offering Memorandum referred to below.
1. Issuance of Securities. The Company proposes to, upon the terms and
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subject to the conditions set forth herein, issue and sell to the Initial
Purchasers the Units. The Senior Discount Notes
forming a part of the Units and the Exchange Notes (as defined below) issuable
in exchange therefore are hereinafter collectively referred to as the Notes. The
Units, the Notes and the Warrants are collectively referred to herein as the
"Securities". Capitalized terms used but not otherwise defined herein shall have
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the meanings given to such terms in the Indenture.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"), the Units, the Notes, the Warrants and the
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Warrant Shares (and all securities issued in exchange or in substitution
therefor) shall bear the legends required to be set forth in the Indenture.
2. Offering. The Units will be offered and sold to the Initial
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Purchasers pursuant to an exemption from the registration requirements under the
Securities Act. The Company has prepared a preliminary offering memorandum,
dated February 23, 1998 (the "Preliminary Offering Memorandum"), and a final
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offering memorandum, dated March 6, 1998 (the "Offering Memorandum"), relating
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to the Company and the Units.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers to resell (the "Exempt Resales") the Units on the
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terms set forth in the Offering Memorandum, as amended or supplemented, solely
to persons whom any of the Initial Purchasers reasonably believe to be
"qualified institutional buyers", as defined in Rule 144A under the Securities
Act ("QIBs"), and to non-U.S. persons outside the United States within the
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meaning of Regulation S under the Securities Act ("Regulation S Investors").
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Such QIBs and Regulation S Investors shall be referred to herein as the
"Eligible Purchasers". The Initial Purchasers will offer the Units to such
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Eligible Purchasers initially at a purchase price equal to 51.962% of the amount
thereof.
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), and holders (including subsequent
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transferees) of the Warrants and Warrant Shares will have the registration
rights set forth in the registration rights agreement relating thereto (the
"Warrant Registration Rights Agreement"), to be dated the Closing Date for so
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long as such Notes, Warrants or any Warrant Shares constitute "Transfer
Restricted Securities" (as defined in such agreements). Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
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set forth therein, (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") with respect to an offer to exchange
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(the "Exchange Offer") the Notes for a new issue of debt securities of the
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Company (the "Exchange Notes") to be offered in exchange for the Notes and (ii)
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under certain circumstances, a shelf registration statement pursuant to Rule 415
under the Securities Act (the "Shelf Registration Statement") relating to the
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resale by certain holders of the Notes, and to use its best efforts to cause
such Registration Statements to be declared effective and consummate the
Exchange Offer. This Agreement, the Securities, the Indenture, the Warrant
Agreement, the Registration Rights Agreement and the Warrant Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "Operative
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Documents". The Company has also entered into that certain Series C Preferred
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Stock and Warrant Subscription Agreement dated as of February 20, 1998 (the
"Subscription Agreement"), as modified by that certain side letter dated
February 21, 1998 (collectively, the "Subscription Agreement"), pursuant
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to which (i) two investors of the Company have agreed to purchase equity
securities of the Company within twelve months after the Closing and (ii)
another investor of the Company has agreed to purchase equity securities of the
Company at the Closing (the "Stock Purchase"). Such investors are herein
collectively referred to as the "Equity Investors".
3. Purchase, Sale and Delivery.
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(a) On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to its terms and conditions, the
Company agrees to issue and sell to each Initial Purchaser, and each Initial
Purchaser agrees severally and not jointly to purchase from the Company, that
number of Units set forth opposite such Initial Purchasers name on Schedule I
hereto. The purchase price for the Units shall be $501.43 per Unit.
(b) Delivery of, and payment of the purchase price for, the Units
shall be made at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 10:00 a.m., New
York City time, on March 11, 1998 or at such other time as shall be agreed upon
by the Initial Purchasers and the Company. The time and date of such delivery
and payment are herein called the "Closing Date".
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(c) Units sold to Regulation S Investors will initially be
represented by one or more temporary Units in global definitive, fully
registered form without interest coupons (each a "Regulation S Global Unit")
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registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), for the accounts of the Euroclear System ("Euroclear") and Cedel Bank,
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societe anonyme ("Cedel"), having an aggregate principal amount at maturity
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corresponding to the aggregate principal amount at maturity of the Units sold to
Regulation S Investors. Units sold to QIBs will be represented by one or more
permanent global Units in definitive, fully registered form without interest
coupons (each a "Restricted Global Unit", and together with the Regulation S
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Global Unit, the "Global Units") registered in the name of Cede & Co., as
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nominee of DTC, having an aggregate amount corresponding to the aggregate amount
of the Units sold to QIBs. Each Global Unit will be comprised of one or more
global certificates for the Notes (the "Global Notes") and one or more global
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certificates for the Warrants (the "Global Warrants" and, together with the
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Global Notes and Global Units, the "Global Securities"). The Global Securities
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shall be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct), against payment by the Initial Purchasers of the purchase
price therefor, by wire transfer of immediately available funds to an account
specified by the Company or as the Company may direct in writing; provided that
the Company shall give at least two business days' prior written notice to the
Initial Purchasers of the information required to effect such wire transfers.
The Global Units, Global Notes and Global Warrants shall be made available to
the Initial Purchasers for inspection not later than 10:00 a.m., New York City
time, on the business day immediately preceding the Closing Date.
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4. Agreements of the Company. The Company covenants and agrees with each
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of the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by
the Initial Purchasers, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the qualification
or exemption from qualification of any Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority and (ii) of the happening of
any event that, in the reasonable opinion of counsel to the Company, makes any
statement of a material fact made in the Preliminary Offering Memorandum or the
Offering Memorandum untrue in any material respect or that requires the making
of any additions to or changes in the Preliminary Offering Memorandum or the
Offering Memorandum in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading in any material respect.
The Company shall use its best efforts to prevent the issuance of any stop order
or order suspending the qualification or exemption of any Securities under any
state securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption of any Securities under any state securities or Blue
Sky laws, the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Company, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchasers may reasonably request. The
Company consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum or
the Offering Memorandum prior to the Closing Date unless the Initial Purchasers
shall previously have been advised thereof and shall not have objected thereto
within a reasonable time after being furnished a copy of the applicable
amendment or supplement. The Company shall promptly prepare, upon the Initial
Purchasers' request, any amendment or supplement to the Preliminary Offering
Memorandum or the Offering Memorandum that may be necessary or advisable in
connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any Exempt
Resale, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of either counsel to the Company or counsel
to the Initial Purchasers, it becomes necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum in order
to make the statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or Offering Memorandum to comply
with applicable law, (i) to notify the Initial Purchasers of such occurrence and
(ii) forthwith to prepare an appropriate amendment or supplement to such
Offering Memorandum so that the statements therein as so amended or supplemented
will not, in the light of the circumstances when it is so delivered, be
misleading, or so that such Offering Memorandum will comply with applicable law.
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(e) To cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the qualification or registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may reasonably request and to continue such qualification in effect
so long as required for the Exempt Resales; provided, however that the Company
shall not be required in connection therewith to register or qualify as a
foreign corporation where it is not now so qualified or to take any action that
would subject it to service of process in suits or taxation, in each case, other
than as to matters and transactions relating to the Preliminary Offering
Memorandum, the Offering Memorandum or Exempt Resales, in any jurisdiction where
it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to the performance of the obligations
of the Company hereunder, including in connection with: (i) the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial statements) and
all amendments and supplements thereto required pursuant hereto, (ii) the
issuance, transfer and delivery by the Company of the Securities to the Initial
Purchasers, (iii) the qualification or registration of the Securities for offer
and sale under the securities or Blue Sky laws of the several states (including,
without limitation, the cost of preparing, printing and mailing a preliminary
and final Blue Sky Memorandum and the reasonable fees and disbursements of
counsel to the Initial Purchasers relating thereto), (iv) furnishing such copies
of the Preliminary Offering Memorandum and the Offering Memorandum, and all
amendments and supplements thereto, as may be requested by the Initial
Purchasers for use in connection with Exempt Resales, (v) the preparation of
certificates for the Securities, (vi) the fees, disbursements and expenses of
the Company's counsel and accountants, (vii) all expenses and listing fees in
connection with the application for quotation of the Securities in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System -
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PORTAL ("PORTAL"), (viii) all fees and expenses (including fees and expenses of
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counsel to the Company) of the Company in connection with the approval of the
Securities by DTC for "book-entry" transfer, (ix) the reasonable fees and
expenses of the Trustee and its counsel in connection with the Indenture and the
Notes, (x) the reasonable fees and expenses of the Warrant Agent and its counsel
in connection with the Warrant Agreement and the Warrants, (xi) the performance
by the Company of its other obligations under this Agreement and the other
Operative Documents and (xii) "roadshow" travel and other expenses incurred in
connection with the marketing and sale of the Units, the Notes and the Warrants.
(g) To use the proceeds from the sale of the Units in the manner
described in the Offering Memorandum under the caption "Use of Proceeds".
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by it prior to or after the Closing Date and to satisfy all
conditions precedent on its part to the delivery of the Units.
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(j) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that
would be integrated with the sale of the Units in a manner that would require
the registration under the Securities Act of the sale to the Initial Purchasers,
the QIBs or the Regulation S Investors of the Units, the Notes or the Warrants
or to take any other action that would result in the Exempt Resales not being
exempt from registration under the Securities Act.
(k) For so long as any of the Securities remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
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available upon request to any beneficial owner of Units, Notes or Warrants in
connection with any sale thereof and any prospective purchaser of such Units,
Notes or Warrants from such beneficial owner, the information required by Rule
144A(d)(4) under the Securities Act.
(l) To comply with all of its agreements set forth in the
Registration Rights Agreement and the Warrant Registration Rights Agreement and
all agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Securities by DTC for "'book-entry" transfer.
(m) To use its best efforts to effect the designation of the
Securities as eligible for PORTAL and to obtain approval of the Securities by
DTC for "book-entry" transfer.
(n) For so long as any of the Securities remain outstanding, to
deliver without charge to each of the Initial Purchasers, promptly upon request,
copies of (i) all reports or other publicly available information that the
Company shall mail or otherwise make available to its securityholders generally
and (ii) all reports, financial statements and proxy or information statements
filed by the Company with the Commission or any national securities exchange and
other information made publicly available by the Company, including without
limitation, press releases.
(o) Prior to the Closing Date, to furnish to each of the Initial
Purchasers, as soon as they have been prepared in the ordinary course by the
Company, copies of any consolidated financial statements or any unaudited
interim financial statements of the Company for any period subsequent to the
periods covered by the financial statements appearing in the Offering
Memorandum.
(p) Not to take, directly or indirectly, any action designed to, or
that 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.
(q) Not to distribute any Preliminary Offering Memorandum, Offering
Memorandum or other offering material in connection with the offering and sale
of the Securities, except as permitted by the Securities Act.
(r) To comply with the agreements in the Indenture, the Warrant
Agreement, the Registration Rights Agreement, the Warrant Registration Rights
Agreement and any other Operative Document
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(s) To reserve and continue to reserve as long as any Warrants remain
outstanding, a sufficient number of shares of Common Stock for issuance upon
exercise of the Warrants.
(t) To cause each certificate for a Note to bear the legend contained
in the Indenture for the time period and upon the other terms stated in the
Indenture.
(u) To file with the Commission, not later than 15 days after the
Closing Date, five copies of a notice on Form D under the Securities Act (one of
which win be manually signed by a person duly authorized by the Company); to
otherwise comply with the requirements of Rule 503 under the Securities Act; and
to furnish promptly to the Initial Purchasers evidence of each such required
timely filing (including a copy thereof).
5. Representations and Warranties of the Company; Representations,
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Warranties and Covenants of the Initial Purchasers
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(a) The Company represents and warrants to each of the Initial
Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales. The
Preliminary Offering Memorandum and the Offering Memorandum do not, and any
supplement or amendment to them will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties contained
in this paragraph shall not apply to statements in or omissions from the
Preliminary Offering Memorandum and the Offering Memorandum (or any supplement
or amendment thereto) made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing by the
Initial Purchasers expressly for use therein. No stop order preventing the use
of the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Securities Act, has been issued.
(ii) When the Units, the Notes and the Warrants are issued and
delivered pursuant to this Agreement, no Unit, Note or Warrant will be of the
same class (within the meaning of Rule 144A under the Securities Act) as
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.
(iii) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum. Each of the Company and each
subsidiary is duly qualified as a foreign corporation to transact business and
is in good standing in the State of California and 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 for such jurisdictions
(other than the State of California)
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where the failure to so qualify or to be in good standing would not,
individually or in the aggregate, result in a material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions in the
ordinary course of business, of the Company and its subsidiaries, considered as
one entity (any such change is called a "Material Adverse Change"). The Company
does not own or control, directly or indirectly, any corporation, association or
other entity other than Covad Communications Company, a California corporation,
and DIECA Communications, Inc., a Virginia corporation. The Company has obtained
CLEC regulatory approval in the States of California, Illinois, Massachusetts,
New York, Oregon and Washington.
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. At December 31, 1997, after giving effect to the issuance and sale of
the Units pursuant hereto, the Equity Commitment and the Stock Purchase, and the
application of the net proceeds from the sale of the Units, the Equity
Commitment and the Stock Purchase, (as defined in the Offering Memorandum), the
Company had the pro forma consolidated capitalization as set forth in the
Offering Memorandum under the caption "Capitalization".
(v) All of the outstanding capital stock of each subsidiary of
the Company is owned, directly or indirectly, by the Company, free and clear of
any security interest, claim, lien, limitation on voting rights or encumbrance;
and all such securities have been duly authorized, validly issued, and are fully
paid and nonassessable and were not issued in violation of any preemptive or
similar rights.
(vi) Except as disclosed in the Offering Memorandum, there are
not currently, and will not be as a result of the Offering, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any capital stock
or other equity interest of the Company or any of its subsidiaries.
(vii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Operative Documents and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the corporate
power and authority to issue, sell and deliver the Securities as provided herein
and therein and the power to effect the Use of Proceeds as described in the
Offering Memorandum.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legally valid and binding
agreement of the Company, enforceable against it in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
(ix) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be the
legally valid and binding obligation of
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the Company, enforceable against the Company in accordance with its terms,
subject to (A) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally, (B)
general principles of equity (whether considered in a proceeding in equity or at
law) or (C) applicable public policy considerations. The Offering Memorandum
contains a fair summary of the principal term of the Indenture.
(x) The Subscription Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the Company,
will be the legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (A) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally, (B) and subject to general
principles of equity (whether considered in a proceeding in equity or at law) or
(C) applicable public policy considerations. The Offering Memorandum contains a
fair summary of the principal terms of the Subscription Agreement.
(xi) The Units have been duly and validly authorized by the
Company for issuance and sale to the Initial Purchasers pursuant to the terms of
this Agreement.
(xii) The Senior Discount Notes have been duly and validly
authorized by the Company for issuance and sale to the Initial Purchasers by the
Company pursuant to this Agreement and, when issued and authenticated in
accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms hereof and thereof, will be the legally
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to (A) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally, (B)
general principles of equity (whether considered in a proceeding in equity or at
law) or (C) applicable public policy considerations. The Offering Memorandum
contains a fair summary of the terms of the Senior Discount Notes.
(xiii) The Exchange Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in accordance
with the terms of the Exchange Offer and the Indenture, will be the legally
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to (A) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally, (B)
general principles of equity (whether considered in a proceeding in equity or at
law) or (C) applicable public policy considerations. The Offering Memorandum
contains a fair summary of the terms of the Exchange Notes.
(xiv) The Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered by the
Company, win be the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (A)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally, (B) general principles
of equity (whether considered in a proceeding in equity or at law) or (C)
applicable public policy considerations. The Offering Memorandum contains a fair
summary of the principal terms of the Registration Rights Agreement.
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(xv) The Warrant Agreement has been duly and validly
authorized by the Company, and, when duly executed and delivered by the Company,
will be the legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (A) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally, (B) general principles of equity
(whether considered in a proceeding in equity or at law) or (C) applicable
public policy considerations. The Offering Memorandum contains a fair summary of
the principal terms of the Warrant Agreement.
(xvi) The Warrants have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant to this
Agreement and, when issued and countersigned in accordance with the terms of the
Warrant Agreement and delivered against payment therefor in accordance with the
terms hereof and thereof, will be the legally valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms and
entitled to the benefits of the Warrant Agreement, subject to (A) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally, (B) general principles of equity
(whether considered in a proceeding in equity or at law) or (C) applicable
public policy considerations. The Offering Memorandum contains a fair summary of
the principal terms of the Warrants.
(xvii) The Warrants will be exercisable for Warrant Shares in
accordance with the terms of the Warrant Agreement. The Warrant Shares have been
duly authorized for issuance by the Company and, when issued and paid for upon
exercise of the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and nonassessable, free of any preemptive or similar rights.
The Company has reserved sufficient shares of Common Stock for issuance upon the
exercise of the Warrants.
(xviii) The Warrant Registration Rights Agreement has been duly
and validly authorized by the Company and, when duly executed and delivered by
the Company, will be the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (A)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally, (B) general principles
of equity (whether considered in a proceeding in equity or at law) or (C)
applicable public policy considerations. The Offering Memorandum contains a fair
summary of the principal terms of the Warrant Registration Rights Agreement.
(xix) Neither the Company nor any of its subsidiaries is, or,
after giving effect to the offering of the Securities, will be (A) in violation
of its charter or bylaws, (B) in default in the performance of any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
properties is subject, or (C) in violation of any local, state or Federal law,
statute, ordinance, rule, regulation, requirement, judgment or court decree
(including, without limitation, the Communications Act and the rules and
regulations of the FCC and environmental laws, statutes, ordinances, rules,
regulations, judgments or court decrees) applicable to the Company, its
subsidiaries or any of their assets or properties (whether owned or leased)
other than, in the case of clauses (B) and (C), any default or violation that
could not reasonably be expected to (x) individually or in the aggregate, result
in a material adverse effect on the
-10-
properties, business, results of operations, condition (financial or otherwise),
affairs or prospects of the Company and its subsidiaries, taken as a whole, (y)
interfere with or adversely affect the issuance or marketability of the Units
pursuant hereto or (z) in any manner draw into question the validity of this
Agreement or any other Operative Document or the transactions described in the
Offering Memorandum under the caption "Use of Proceeds" (any of the events set
forth in clauses (x), (y) or (z), a "Material Adverse Effect"). There exists no
condition that, with notice, the passage of time or otherwise, would constitute
a default under any such document or instrument, except as disclosed in the
Offering Memorandum, except for any such condition which would not reasonably be
expected to result in a Material Adverse Effect.
(xx) None of (A) the execution, delivery or performance by the
Company of this Agreement and the other Operative Documents, (B) the issuance
and sale of the Securities and (C) consummation by the Company of the
transactions contemplated hereby violate, conflict with or constitute a breach
of any of the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or require
consent which has not been obtained under, or result in the imposition of a lien
or encumbrance other than a "Permitted Lien", as defined in the Indenture on any
properties of the Company or any of its subsidiaries, or an acceleration of any
indebtedness of the Company or any of its subsidiaries pursuant to, (i) the
charter or bylaws of the Company or any of its subsidiaries, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or its subsidiaries or their properties is or may be bound,
(iii) any statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their assets or properties or (iv) any judgment, order or
decree of any court or governmental agency or authority having jurisdiction over
the Company or any of its subsidiaries or any of their assets or properties,
except in the case of clauses (ii), (iii) and (iv) for such violations,
conflicts, breaches, defaults, consents, impositions of liens or accelerations
that (x) would not singly, or in the aggregate, have a Material Adverse Effect
or (y) which are disclosed in the Offering Memorandum. Other than as described
in the Offering Memorandum, no consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, (A) any court
or governmental agency, body or administrative agency (including, without
limitation, the FCC) or (B) any other person is required for (1) the execution,
delivery and performance by the Company of this Agreement and the other
Operative Documents, (2) the issuance and sale of the Securities and the
transactions contemplated hereby and thereby, except (x) such as have been
obtained and made (or, in the case of the Registration Rights Agreement, will be
obtained and made) under the Securities Act, the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and state securities or Blue Sky laws and
-------------------
regulations or such as may be required by the NASD or (y) where the failure to
obtain any such consent, approval, authorization or order of, or filing
registration, qualification, license or permit would not reasonably be expected
to result in a Material Adverse Effect.
(xxi) There are no legal or governmental actions, suits or
proceedings pending or, to Company's knowledge, threatened (i) against or
affecting the Company or any of its subsidiaries, (ii) which has as the subject
thereof any officer or director (in any such capacity) of, or property owned or
leased by, the Company or any of its subsidiaries or (iii) relating to
environmental or discrimination matters, where in any such case (A) there is a
reasonable possibility that such action, suit or proceeding might be determined
adversely to the Company or such subsidiary and (B) any such action, suit or
-11-
proceeding, if so determined adversely, would reasonably be expected to result
in a Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute with the
employees of the Company or any of its subsidiaries exists or, to the best of
the Company's knowledge, is threatened or imminent.
(xxii) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Securities or prevents or suspends the use of the
Offering Memorandum; no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction has been issued that prevents
the issuance of the Securities, prevents or suspends the sale of the Securities
in any jurisdiction referred to in Section 4(e) hereof or that could adversely
affect the consummation of the transactions contemplated by this Agreement, the
Operative Documents or the Offering Memorandum; and every request of any
securities authority or agency of any jurisdiction for additional information
has been complied with in all material respects.
(xxiii) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change, (i) to the best
of the Company's knowledge, neither the Company nor any of its subsidiaries is
in violation of any federal, state, local or foreign law or regulation relating
to pollution or protection of human health or 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 emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum and petroleum products (collectively, "Materials of
Environmental Concern"), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern (collectively, "Environmental Laws"), which
violation includes, but is not limited to, noncompliance with any permits or
other governmental authorizations required for the operation of the business of
the Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or any
of its subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges that
the Company or any of its subsidiaries is in violation of any Environmental Law;
(ii) there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the Company or
any of its subsidiaries has received written notice, and no written notice by
any person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, attorneys' fees or penalties arising out of, based
on or resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated by
the Company or any of its subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to the best of the Company's knowledge,
threatened against the Company or any of its subsidiaries or any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by operation of
law; and (iii) to the best of the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that reasonably could result
in a violation of any Environmental Law or form the basis of a potential
Environmental Claim against
-12-
the Company or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries has
retained or assumed either contractually or by operation of law.
(xxiv) The Company and each of its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the Offering
Memorandum or the financial statements included in the Offering Memorandum as
owned by it, free and clear of all liens, charges, encumbrances and
restrictions, except such as are described in the Offering Memorandum or as
would not have a Material Adverse Effect, (ii) peaceful and undisturbed
possession to the extent described in the Offering Memorandum under all material
leases to which it is a party as lessee, (iii) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from, and has
made all declarations and filings with, all federal, state and local authorities
(including, without limitation, the FCC), all self-regulatory authorities and
all courts and other tribunals (each an "Authorization") necessary to engage in
-------------
the business conducted by the Company and its subsidiaries in the manner
described in the Offering Memorandum, except as described in the Offering
Memorandum and except insofar as the failure to obtain any such Authorization
would not reasonably be expected to have a Material Adverse Effect, and no such
Authorization contains a materially burdensome restriction that is not disclosed
in the Offering Memorandum and (iv) not received any notice that any
governmental body or agency is considering limiting, suspending or revoking any
such Authorization. Except where the failure to be in full force and effect
would not have a Material Adverse Effect, an such Authorizations are valid and
in fun force and effect and the Company and each of its subsidiaries is in
compliance in all material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory authorities
having jurisdiction with respect thereto. All material leases to which the
Company and each of its subsidiaries is a party are valid and binding and no
default by the Company or any of its subsidiaries has occurred and is continuing
thereunder and, to the best knowledge of the Company, no material defaults by
the landlord are existing under any such lease that could reasonably be expected
to result in a Material Adverse Effect.
(xxv) The Company and its subsidiaries own, possess or have the
right to employ sufficient patents, patent rights, licenses (including all FCC,
state, local or other jurisdictional regulatory licenses), inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, software, systems or
procedures), trademarks, service marks and trade names, inventions, computer
programs, technical data and information (collectively, the "Intellectual
------------
Property Rights") reasonably necessary to conduct their businesses as now
---------------
conducted; and the expected expiration of any of such Intellectual Property
Rights would not result in a Material Adverse Change. The Intellectual Property
Rights presently employed by the Company and its subsidiaries in connection with
the businesses now operated by them or which are proposed to be operated by them
are owned, to the best of the Company's knowledge, free and clear of and without
violating any right, claimed right, charge, encumbrance, pledge, security
interest, restriction or lien of any kind of any other person and neither the
Company nor any of its subsidiaries has received any notice of infringement of
or conflict with asserted rights of others with respect to any of the foregoing
except as would not reasonably be expected to have a Material Adverse Effect.
The use of the Intellectual Property in connection with the business and
operations of the Company and its subsidiaries does not
-13-
infringe on the rights of any person, except as could not reasonably be expected
to have a Material Adverse Effect.
(xxvi) None of the Company or any of its subsidiaries, or, or
to the best knowledge of the Company, any of their respective officers,
directors, partners, employees, agents or affiliates or any other person acting
on behalf of the Company or any of its subsidiaries has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, official or
employee of any governmental agency (domestic or foreign), instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is or may be in a position
to help or hinder the business of the Company or any of its subsidiaries (or
assist the Company or any of its subsidiaries in connection with any actual or
proposed transaction) which (i) might subject the Company, or any other
individual or entity to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (ii) if not given
in the past, might have had a Material Adverse Effect or (iii) if not continued
in the future, might have a Material Adverse Effect.
(xxvii) All material tax returns required to be filed by the
Company and its subsidiaries in all jurisdictions have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities or that are due and payable
have been paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without penalty
or interest. To the knowledge of the Company, there are no material proposed
additional tax assessments against the Company or any of its subsidiaries or the
assets or property of the Company or any of its subsidiaries. The Company has
made adequate charges, accruals and reserves in the applicable financial
statements included in the Offering Memorandum in respect of all federal, state
and foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its consolidated subsidiaries has not been
finally determined.
(xxviii) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
----------------------
(xxix) Except as disclosed in the Offering Memorandum, there
are no holders of securities of the Company or any of its subsidiaries who, by
reason of the execution by the Company of this Agreement or any other Operative
Document to which it is a party or the consummation by the Company or any of its
subsidiaries of the transactions contemplated hereby or thereby, have the right
to request or demand that the Company or any of its subsidiaries register under
the Securities Act or analogous foreign laws and regulations securities held by
them, other than such that have been duly waived.
(xxx) The Company and its subsidiaries each maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as
-14-
necessary to permit preparation of financial statements in conformity in all
material respects with generally accepted accounting principles and to maintain
accountability for assets; and (iii) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xxxi) Each of the Company and its subsidiaries are insured by
recognized, financially sound institutions with policies in such amounts and
with such deductibles and covering such risks as are customary for similarly
situated businesses including, but not limited to, policies covering real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction and acts of vandalism. The Company has no reason to
believe that it or any subsidiary win not be able (i) to renew its existing
insurance coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material
Adverse Change.
(xxxii) The Company has not (i) taken, directly or indirectly, any
action designed to, or that 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 Units, the Notes or the Warrants or (ii)
since the date of the Preliminary Offering Memorandum (A) sold, bid for,
purchased or paid any person any compensation for soliciting purchases of, the
Units, the Notes or the Warrants or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(xxxiii) No registration under the Securities Act of the Units, the
Notes or the Warrants is required for the sale of the Units to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming (i) that
the purchasers who buy the Units in the Exempt Resales are either QIBs or
Regulation S Investors and (ii) the accuracy of the Initial Purchasers'
representations contained herein. No form of general solicitation or general
advertising was used by the Company or any of its representatives (other than
the Initial Purchasers, their employees, agents or any other persons acting on
their behalf, as to which the Company makes no representation or warranty) in
connection with the offer and sale of any of the Securities in connection with
Exempt Resales, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same respective classes as the Securities have been issued and
sold by the Company within the six-month period immediately prior to the date
hereof.
(xxxiv) The Company and its subsidiaries and any "employee benefit
plan" (as defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or a subsidiary, any member of any group of organizations described in
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (the
"Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under
-15-
ERISA) has occurred or is reasonably expected to occur with respect to any
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfunded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(xxxv) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto read in
conjunction with the Preliminary Offering Memorandum or the Final Offering
Memorandum, as applicable, as of its date, contains the information specified
in, and meets the requirements of, Rule 144A(d)(4) under the Securities Act.
(xxxvi) Except as otherwise disclosed in the Offering Memorandum,
subsequent to the respective dates as of which information is given in the
Offering Memorandum: (i) there has been no Material Adverse Change; (ii) the
Company and its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company or,
except for dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or redemption by the
Company or any of its subsidiaries of any class of capital stock; (iv) there has
been no capital expenditure or commitment by the Company or any of its
subsidiaries exceeding $100,000, either individually or in the aggregate except
in the ordinary course of business as generally contemplated by the Offering
Memorandum, (v) there has been no change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by the
Company or any of its subsidiaries; (vi) there has been no revaluation by the
Company or any of its subsidiaries of any of their assets; (vii) there has been
no increase -in the salary or other compensation payable or to become payable by
the Company or any of its subsidiaries to any of their officers, directors,
employees or advisors, nor any declaration, payment or commitment or obligation
of any kind for the payment by the Company or any of its subsidiaries of a bonus
or other additional salary or compensation to any such person; (viii) there has
been no amendment or termination of any material contract, agreement or license
to which the Company or any subsidiary is a party or by which it is bound; (ix)
there has been no waiver or release of any material right or claim of the
Company or any subsidiary, including any write-off or other compromise of any
material account receivable of the Company or any subsidiary; and (x) there has
been no change in pricing or royalties set or charged by the Company or any
subsidiary to their respective customers or licensees or in pricing or royalties
set or charged by persons who have licensed Intellectual Property Rights to the
Company or any of its subsidiaries.
-16-
(xxxvii) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the application of the
proceeds from the issuance and sale of the Securities and the consummation of
the transactions contemplated thereby as set forth in the Offering Memorandum,
will violate Regulations G, T, U or X promulgated by the Board of Governors of
the Federal Reserve System or analogous foreign laws and regulations.
(xxxviii) ▇▇▇▇▇ & Young LLP, who have expressed their opinion with
respect to the financial statements (which term as used in this Agreement
includes the related notes thereto) and supporting schedules included in the
Offering Memorandum are independent public or certified public accountants
within the meaning of Regulation S-X under the Securities Act and the Exchange
Act.
(xxix) The financial statements, together with the related notes,
included in the Offering Memorandum present fairly in all material respects the
consolidated financial position of the Company and its subsidiaries as of and at
the dates indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. The financial data set forth in the Offering Memorandum
under the captions "Offering Memorandum Summary-Summary Financial Data",
"Selected Financial Data" and "Capitalization" fairly present the information
set forth therein on a basis consistent with that of the audited financial
statements contained in the Offering Memorandum.
(xl) The Company does not intend to, nor does it believe that it
will, incur debts beyond its ability to pay such debts as they mature. The
present fair saleable value of the assets of the Company on a consolidated basis
exceeds the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of the
Company on a consolidated basis as they become absolute and matured. The assets
of the Company on a consolidated basis do not constitute an unreasonably small
capital to carry out the business of the Company as conducted or as proposed to
be conducted. Upon the issuance of the Units, the present fair saleable value
of the assets of the Company on a consolidated basis will exceed the amount that
will be required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Company on a consolidated
basis as they become absolute and matured. Upon the issuance of the Units, the
assets of the Company on a consolidated basis will, not constitute an
unreasonably small capital to carry out its businesses as now conducted,
including the capital needs of the Company on a consolidated basis.
(xli) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company and any other person that would
give rise to a valid claim against the Company or either of the Initial
Purchasers for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Securities.
(xlii) There are no business relationships or related-party
transactions involving the Company or any subsidiary or any other person that
would be required to be described in the Offering Memorandum were it to be filed
as a part of a Registration Statement on Form S-1 under the Securities Act,
which have not been described as would have been so required.
-17-
(xliii) The statements (including the assumptions described therein)
included in the Offering Memorandum under the heading "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview" (i) are within the coverage of Rule 175(b) under the
Securities Act to the extent such data constitute forward looking statements as
defined in Rule 175(c) and (ii) were made by the Company with a reasonable basis
and reflect the Company's good faith estimate of the matters described therein.
(xliv) The Company and to the Company's knowledge, its affiliates
and all persons acting on their behalf (other than the Initial Purchasers, their
employees, agents or any other persons acting on their behalf, as to whom the
Company makes no representation) have complied with and will comply with the
offering restrictions requirements of Regulation S in connection with the
offering of the Securities outside the United States and, in connection
therewith, the Offering Memorandum will contain the disclosure required by Rule
902(h).
(xlv) The data set forth on Exhibit C hereto are true and correct
in all material respects on and as of the date hereof, and the Company
authorizes the Initial Purchasers to rely upon the accuracy of such data,
without independent investigation, in determining the allocation of the purchase
price of the Units between the Notes and the Warrants, and the valuation of the
Warrants for the purposes of calculating original issue discount, in each case
as of the date hereof, in connection with the offering of the Units by the
Offering Memorandum. The calculations of "Accreted Value" of the Notes for each
"Semi-Annual Accrual Date" (as such terms are defined in the Offering
Memorandum) are accurate and correct.
(xlvi) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
pursuant to this Agreement shall be deemed to be a representation and warranty
by the Company to the Initial Purchasers as to the matters covered thereby.
The Company acknowledges that each of the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel to the Company and counsel to the Initial Purchasers,
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
(b) Each of the Initial Purchasers severally and not jointly
represents, warrants and covenants to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Units.
(ii) Such Initial Purchaser is not acquiring the Units with a
view to any distribution thereof that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction.
-18-
(iii) No form of general solicitation or general advertising
has been or will be used by either of the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the Units,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(iv) Each of the Initial Purchasers agrees that (A) that they
will offer to sell the Units only to, and will solicit offers to buy the Units
only from (1) QIBs who in purchasing such Units will be deemed to have
represented and agreed that they are purchasing the Units for their own accounts
or accounts with respect to which they exercise sole investment discretion and
that they or such accounts are QIBs and (2) Regulation S Investors in offers and
sales that occur outside the United States to persons other than U.S. persons
who in purchasing such Units will be deemed to have represented that they are
acquiring the Units in an offshore transaction within the meaning of Regulation
S under the Securities Act and (B) that such QIBs and Regulation S Investors
will acknowledge and agree that such Units will not have been registered under
the Securities Act and may be resold, pledged or otherwise transferred only
(x)(I) to a person who the seller reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A, (II) in a transaction meeting the
requirements of Rule 144, (III) outside the United States to a person that is
not a U.S. Person (as defined in Rule 902 under the Securities Act) in an
offshore transaction meeting the requirements of Rule 904 under the Securities
Act, (IV) to an institutional "Accredited Investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) that, prior
to such transfer, furnishes to the Trustee and Warrant Agent a signed letter
containing certain representations and agreements relating to the Units, Notes
and Warrants (the form of such letter can be obtained from the Trustee or
Warrant Agent), or (V) in accordance with another exemption from the
registration requirements of the Securities Act (in the case of II, III, IV or
V, based upon an opinion of counsel if the Company or Trustee, or the
"Registrar" or "Transfer Agent" (as such terms are defined in the Indenture) for
the Securities so requests), (y) to the Company or (z) pursuant to an effective
registration statement under the Securities Act and, in each case, in accordance
with any applicable securities laws of any state of the United States and (C)
that the holder and each subsequent holder will be required to notify any
purchaser of the security evidenced thereby of the resale restrictions set forth
in (B) above.
(v) Each of the Initial Purchasers understands that the
Company and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 8 hereof, counsel to the Company and counsel to
the Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless (i) each of the
Initial Purchasers, (ii) each person, if any, who controls either of the Initial
Purchasers within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act and (iii) the respective officers, directors,
partners, employees, representatives and agents of any of the Initial Purchasers
or any controlling person to the fullest extent lawful, from and against any and
all losses, liabilities, claims, damages and expenses whatsoever (including but
not limited to attorneys' fees and any and all expenses
-19-
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering Memorandum, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that the Company will not be liable in any such case to the extent, but
only to the extent, that any such loss, liability, claim, damage or expense
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Initial Purchasers expressly for use therein. This indemnity agreement will
be in addition to any liability which the Company may otherwise have, including
under this Agreement.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against any losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of either Initial Purchaser expressly for use therein;
provided, however, that in no case shall either Initial Purchaser be liable or
responsible for any amount in excess of the discounts and commissions received
by such Initial Purchaser, as set forth on the cover page of the Offering
Memorandum. This indemnity will be in addition to any liability which either
Initial Purchaser may otherwise have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which
-20-
it may otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
(and where the Initial Purchasers are the indemnified parties, Bear, ▇▇▇▇▇▇▇ &
Co. Inc. shall have the right to select such counsel for the Initial
Purchasers), but the fees and expenses of such counsel shall be at the expense
of such indemnified party or parties unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above, shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent;
provided, however, that such consent was not unreasonably withheld.
7. Contribution. In order to provide for contribution in circumstances
------------
in which the indemnification provided for in Section 6 is for any reason held to
be unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and the Initial Purchasers shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Initial Purchasers, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act) to which the Company
and one or both of the Initial Purchasers may be subject, in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Initial Purchasers from the offering of the Units or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 6, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Initial
Purchasers in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Initial Purchasers shall be deemed to be in the same proportion as (x) the total
proceeds from the offering of Units (net of discounts but before deducting
expenses) received by the Company and (y) the discounts received by the Initial
Purchasers, respectively, in each case as set forth in the table on the cover
page of the Offering
-21-
Memorandum. The relative fault of the Company and of the Initial Purchasers
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7, (i) in no case shall either of the Initial Purchasers be
required to contribute any amount in excess of the amount by which the discount
applicable to the Units purchased by such Initial Purchaser pursuant to this
Agreement exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7, (A)
each person, if any, who controls either of the Initial Purchasers within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and (B) the respective officers, directors, partners, employees, representatives
and agents of any of the Initial Purchasers or any controlling person shall have
the same rights to contribution as such Initial Purchaser, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 7. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such, party
in respect of which a claim for contribution may be made against another party
or parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its prior written consent; provided, however, that such written consent
was not unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The several
---------------------------------------------
obligations of the Initial Purchasers to purchase and pay for the Units, if any,
as provided herein, shall be subject to the satisfaction of the following
conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement and in the Subscription Agreement shall be true and
correct on the date hereof and on the Closing Date with the same force and
effect as if made on and as of the date hereof and the Closing Date,
respectively. The Company shall have performed or complied with all of the
agreements herein contained and required to be performed or complied with by it
at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York City
time, on the second business day following the date of this Agreement or at such
later date and time as to which the Initial Purchasers may agree, and no stop
order suspending the qualification or exemption from qualification of the Units,
the Notes
-22-
or the Warrants in any jurisdiction referred to in Section 4(e) shall have been
issued and no proceeding for that purpose shall have been commenced or shall be
pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Units, the
Notes or the Warrants; no action, suit or proceeding shall have been commenced
and be pending against or affecting or, to the best knowledge of the Company,
threatened against, the Company before any court or arbitrator or any
governmental body, agency or official that (1) could reasonably be expected to
result in a Material Adverse Effect and (2) has not been disclosed in the
Offering Memorandum; and no stop order shall have been issued preventing the use
of the Offering Memorandum, or any amendment or supplement thereto, or which
could reasonably be expected to have a Material Adverse Effect
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material adverse change, or any
development that is reasonably likely to result in a material adverse change, in
the capital stock or the long-term debt, or material increase in the short-term
debt, of the Company or any of its subsidiaries from that set forth in the
Offering Memorandum, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company or any of its subsidiaries on any
class of its capital stock, (iii) neither the Company nor any of its
subsidiaries shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and its subsidiaries, taken as a whole, and that are required to be disclosed on
a balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet or notes
thereto included in the Offering Memorandum. Since the date hereof and since
the dates as of which information is given in the Offering Memorandum, there
shall not have occurred any Material Adverse Effect.
(e) The Initial Purchasers shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by each of the Company's Chief
Executive Officer and Chief Financial Officer in form and substance reasonably
satisfactory to the Initial Purchasers, confirming, as of the Closing Date, the
matters set forth in paragraphs (a), (b), (c) and (d) of this Section 8 and
that, as of the Closing Date, the obligations of the Company to be performed
hereunder on or prior thereto have been duly performed in all material respects.
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers and counsel to the Initial Purchasers, of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel for the Company, to the effect set forth in
Exhibit A hereto.
---------
(g) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers and counsel to the Initial Purchasers, of ▇▇▇▇▇ ▇▇▇▇▇▇,
General Counsel of the Company, to the effect set forth in Exhibit B hereto.
---------
-23-
(h) The Initial Purchasers shall have received an opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Initial Purchasers, covering
such matters as are customarily covered in such opinions.
(i) At the time this Agreement is executed and at the Closing Date,
the Initial Purchasers shall have received from Ernst & Young LLP, independent
public accountants for the Company, dated as of the date of this Agreement and
as of the Closing Date, customary comfort letters addressed to the Initial
Purchasers and in form and substance satisfactory to the Initial Purchasers and
counsel to the Initial Purchasers with respect to the financial statements and
certain financial information of the Company contained in the Offering
Memorandum.
(j) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ shall have been furnished with such documents,
in addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in this
Section 8 and in order to evidence the accuracy, completeness or satisfaction in
all material respects of any of the representations, warranties or conditions
herein contained.
(k) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.
(l) The Company and the Trustee shall have entered into the Indenture
and the Initial Purchasers shall have received counterparts, conformed as
executed, thereof.
(m) The Company shall have entered into the Warrant Agreement and the
Initial Purchasers shall have received counterparts, conformed as executed,
thereof.
(n) The Company shall have entered into the Warrant Registration
Rights Agreement and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(o) The Company and each of the Equity Investors shall have duly and
validly authorized, executed and delivered the Subscription Agreement, and the
Subscription Agreement will constitute the legally valid and binding obligation
of each of such parties.
(p) The Company shall have furnished to the Initial Purchasers
evidence, in form and substance satisfactory to them, that all amounts
outstanding under the Company's revolving line of credit with Silicon Valley
Bank have been repaid in full and the security interests created in connection
therewith shall have been released.
(q) At the date of this agreement and at the Closing Date, the Chief
Financial Officer of the Company shall have executed and delivered a letter
addressed to the Initial Purchasers with respect to the independent
substantiation of certain numerical and statistical information set forth in the
offering Memorandum (and not covered by the letter delivered pursuant to
paragraph (g) of this Section), which letter shall be in form and scope
satisfactory to the Initial Purchasers.
-24-
(r) The amendment to the Amended and Restated Stockholder Rights
Agreement, as defined in the Offering Memorandum (copies of which have been
previously provided to you), has been duly authorized, executed and delivered by
each of the parties thereto.
(s) The Subscription Agreement shall be a duly enforceable obligation
of each of the Company and each of the Equity investors, and none of the Equity
Investors shall have repudiated any of its obligations thereunder.
(t) The Stock Purchase shall have been consummated.
All opinions, certificates, letters and other documents required by
this Section 8 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchasers. The Company will furnish the Initial Purchasers with
such conformed copies of such opinions, certificates, letters and other
documents as it shall reasonably request.
9. Initial Purchasers' Information. The Company and the Initial
-------------------------------
Purchasers severally acknowledge that the statements with respect to the
offering of the Units set forth in the last paragraph of the outside of the
front cover page; the stabilization language in the last paragraph on page iv;
and the third paragraph, the fourth sentence of the fourth paragraph and the
fifth paragraph under the caption "Plan of Distribution" in such Offering
Memorandum constitute the only information furnished in writing by the Initial
Purchasers expressly for use in the Offering Memorandum.
10. Survival of Representations and Amendments. All representations and
------------------------------------------
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including the agreements contained in Sections 4(f)
and 11(d), the indemnity agreements contained in Section 6 and the contribution
agreements contained in Section 7, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Initial
Purchasers or any controlling person thereof or by or on behalf of the Company
or any controlling person thereof, and shall survive delivery of and payment for
the Units to and by the Initial Purchasers. The representations contained in
Section 5 and the agreements contained in Sections 4(f), 6, 7 and 11(d) shall
survive the termination of this Agreement, including any termination pursuant to
Section 11.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company from
the Initial Purchasers, without liability (other than with respect to Sections 6
and 7) on the Initial Purchasers' part to the Company if, on or prior to such
date, (i) the Company shall have failed, refused or been unable to perform in
any material respect any agreement on its part to be performed hereunder, (ii)
any other condition to the obligations of the Initial Purchasers hereunder as
provided in Section 8 is not fulfilled when and as required in any material
-25-
respect, (iii) in the reasonable judgment of the Initial Purchasers any material
adverse change shall have occurred since the respective dates as of which
information is given in the Offering Memorandum in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects, net worth,
results of operations or cash flows of the Company taken as a whole, other than
as set forth in the Offering Memorandum, or (iv)(A) any domestic or
international event or act or occurrence has materially disrupted, or in the
opinion of the Initial Purchasers will in the immediate future materially
disrupt, the market for the Company's securities or for securities in general;
or (B) trading in securities generally on the New York or American Stock
Exchanges shall have been suspended or materially limited, or minimum or maximum
prices for trading shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange, or by such exchange or
other regulatory body or governmental authority having jurisdiction; or (C) a
banking moratorium shall have been declared by Federal or state authorities, or
a moratorium in foreign exchange trading by major international banks or persons
shall have been declared; or (D) there is an outbreak or escalation of armed
hostilities involving the United States on or after the date hereof, or if there
has been a declaration by the United States of a national emergency or war, the
effect of which shall be, in the Initial Purchasers' judgment, to make it
inadvisable or impracticable to proceed with the offering or delivery of the
Units on the terms and in the manner contemplated in the Offering Memorandum; or
(E) there shall have been such a material adverse change in general economic,
political or financial conditions or if the effect of international conditions
on the financial markets in the United States shall be such as, in the Initial
Purchasers' judgment, makes it inadvisable or impracticable to proceed with the
delivery of the Units as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof, or if the sale of the Units provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth herein is not satisfied or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof, the Company will, subject to demand by the Initial
Purchasers, reimburse the Initial Purchasers for all out-of-pocket expenses
(including the reasonable fees and expenses of Initial Purchasers' counsel),
incurred by the Initial Purchasers in connection herewith.
12. Notice. All communications hereunder, except as may be otherwise
------
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to Bear, ▇▇▇▇▇▇▇ & Co. Inc. and BT ▇▇▇▇. ▇▇▇▇▇
Incorporated, c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: Corporate Finance Department, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇,
with a copy, which shall not constitute notice, to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇;
telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇; and if sent to the Company, shall be mailed,
delivered or telexed, telegraphed or telecopied and confirmed in writing to
Covad Communications Group, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: Chief Executive Office, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy,
which shall not constitute notice, to ▇▇▇▇▇▇
-26-
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇.
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, the Initial Purchasers and the Company and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Units from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance with
------------
the internal laws of the State of New York without giving any effect to any
provisions thereof relating to conflicts of law. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
15. Captions. The captions included in this Agreement are included solely
--------
for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various counterparts
------------
which together shall constitute one and the same instrument.
[Signature page to follow]
-27-
If the foregoing correctly sets forth the understanding among the Initial
Purchasers and the Company, please so indicate in the space provided below, for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours.
COVAD COMMUNICATIONS GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer, Treasurer
and Vice-President, Finance
Accepted and agreed to as of
the date first above written:
BEAR ▇▇▇▇▇▇▇ & CO. INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Managing Director
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
BT ALEX. BROWN INCORPORATED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Principal
-28-
Schedule I
Number of
Units to
Initial Purchaser be Purchased
------------
Bear, ▇▇▇▇▇▇ & Co. Inc..................................... 156,000
BT Alex. Brown Incorporated................................ 104,000
-------
Total: 260,000
EXHIBIT A
(See Exhibit 5.1 to the Registration Statement)
EXHIBIT B
Form of Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel of the Company
1. All of the licenses, permits and authorizations required by the FCC
for the provision of telecommunications services by the Company, as such counsel
understands those services to be provided currently based upon the attached
certificate and the Offering Memorandum, have been issued to and are validly
held by the Company. All of the licenses, permits and authorizations required
by any "state commissions" as defined in Section 3 of the Communications Act of
1934, as amended (the "State Telecommunications Agencies") for the provision of
telecommunications services by the Company, as such counsel understands those
services to be provided currently based upon the attached certificate and the
Offering Memorandum, have been issued to and, to the best knowledge of such
counsel, are validly held by the Company, except where the failure to obtain or
hold such license, permit or authority would not have a Material Adverse Effect.
All such licenses, permits and authorizations are in full force and effect.
2. The Company is not the subject of any proceeding (including a rule
making proceeding), pending complaint or investigation, or, to the best of such
counsel's knowledge, any threatened complaint or investigation, before the FCC,
or, to the best of such counsel's knowledge, of any proceeding (including a rule
making proceeding), pending complaint or investigation, or any threatened
complaint or investigation, before the State Telecommunications Agencies based,
in each case, on any alleged violation of any statutes governing the FCC or the
State Telecommunications Agencies and the rules and regulations promulgated
thereunder (the "Telecommunications Laws") by the Company in connection with its
provision of or failure to provide telecommunications services of a character
required to be disclosed in the Offering Memorandum which is not disclosed in
the Offering Memorandum.
3. The statements in the Offering Memorandum under the headings of "Risk
Factors -Availability of Collocation Space; Dependence on ILECs to Provide
Collocation Space, Collocation and Transmission Facilities and to Order and
Provision Copper Lines; Dependence on Interconnection Agreements", "Risk Factors
- Uncertain Quality and Availability of the ILEC Copper Lines Used by the
Company", "Risk Factors - Government Regulation and Current Industry
Litigation", "Business - Industry Background - Impact of the Telecommunications
Act of 1966" and "Business - Government Regulation" regarding the
Telecommunications Laws of the FCC or the State Telecommunications Agencies
fairly and accurately summarize the matters therein described.
4. The Company has the consents, approvals, authorizations, licenses,
certificates, permits, or orders of the FCC or the State Telecommunications
Agencies, if any is required, for the consummation of the transactions
contemplated in the Offering Memorandum, except where the failure to obtain the
consents, approvals, authorizations, licenses, certificates, permits or orders
would not have a Material Adverse Effect.
5. Neither the execution and delivery of the Operative Documents nor the
sale of the Securities contemplated thereby will conflict with or result in, a
violation of any order or regulation of
the FCC or the State Telecommunications Agencies applicable to the Company,
except where the conflict with or the violation of which would not have a
Material Adverse Effect.
6. As of the date hereof, the Company has obtained CLEC regulatory
approval in the States of California, Illinois, Massachusetts, New York, Oregon
and Washington.
-2-
EXHIBIT C
Common Stock Outstanding as of 2/15/98 3,788,068
Preferred Stock Outstanding/Subscribed
Series A 250,000
Series B 5,700,001
Series C 2,041,429
Stock Options Outstanding
As of 2/15/98 1,438,350
Grants from 2/16/98 to 3/6/98 93,600
Rounding 2,000
Series C Commitment Warrants 600,000
Subtotal 13,913,448
Warrants sold in the Offering 1,684,588
Total fully diluted outstanding equity 15,598,036
Post-money valuation $90,000,000
Post-money price per share $5.77
Total Number of Units 260,000
Warrants per Unit 6.4792