EXHIBIT 1.1
COVAD COMMUNICATIONS GROUP, INC.
$215,000,000 Principal Amount of 12 1/2% Senior Notes
due 2009
Purchase Agreement
February 11, 1999
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
BT ALEX. BROWN INCORPORATED
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇▇▇, ▇▇▇▇▇ & CO.
COVAD COMMUNICATIONS GROUP, INC.
$215,000,000 Principal Amount of 12 1/2% Senior Notes due 2009
PURCHASE AGREEMENT
February 11, 1999
New York, New York
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
BT ▇▇▇▇. ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
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., BT Alex.
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Brown Incorporated, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation and
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. (together, the "Initial Purchasers") $215,000,000
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aggregate principal amount of 12 1/2% Senior Notes due 2009 (the "Senior
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Notes"), subject to the terms and conditions set forth herein. The Senior Notes
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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 Senior Notes are more fully described in the
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Offering Memorandum referred to below.
1. Issuance of Notes. The Company proposes to, upon the terms and subject
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to the conditions set forth herein, issue and sell to the Initial Purchasers the
Senior Notes. The Senior Notes and the Exchange Notes (as defined below)
issuable in exchange therefore are hereinafter collectively referred to as the
Notes. Capitalized terms used but not otherwise defined herein shall have 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 Notes shall bear the legends required to
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be set forth in the Indenture.
2. Offering. The Notes will be offered and sold to the Initial Purchasers
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pursuant to an exemption from the registration requirements under the Securities
Act. The Company has prepared a preliminary offering memorandum, dated January
29, 1999 (the "Preliminary Offering Memorandum"), and a final offering
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memorandum, dated February 11, 1999 (the "Offering Memorandum"), relating to
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the Company and the Notes.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers to resell (the "Exempt Resales") the Notes 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"). Such QIBs shall be referred to herein as the "Eligible
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Purchasers". The Initial
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Purchasers will offer the Notes to such Eligible Purchasers initially at a
purchase price equal to 97.921% 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"), to be dated the Closing Date, for
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so long as such Notes constitute "Transfer Restricted Securities" (as defined in
such agreement). Pursuant to the Registration Rights Agreement, the Company
will agree to file with the Securities and Exchange Commission (the
"Commission"), under the circumstances set forth therein, (i) a registration
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statement under the Securities Act (the "Exchange Offer Registration Statement")
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with respect to an offer to exchange (the "Exchange Offer") the Notes for a new
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issue of debt securities of the Company (the "Exchange Notes") to be offered in
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exchange for the Notes and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the "Shelf
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Registration Statement") relating to the resale by certain holders of the Notes,
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and to use its best efforts to cause such Registration Statements to be declared
effective and consummate the Exchange Offer. In addition, a portion of the net
proceeds from the sale of the Notes will be held by the Trustee for the benefit
of the holders of the Notes in a pledge account pursuant to a pledge agreement
(the "Pledge Agreement") between the Company and the Trustee. This Agreement,
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the Notes, the Indenture, the Pledge Agreement and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "Operative
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Documents".
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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, the
aggregate principal amount of Notes set forth opposite such Initial Purchaser's
name on Schedule I hereto. The purchase price for the Notes shall be $955.46
per Note.
(b) Delivery of, and payment of the purchase price for, the Notes
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 February 18, 1999 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) Notes sold to QIBs will be represented by one or more permanent
global Notes in definitive, fully registered form without interest coupons (each
a "Restricted Global Note", and in the aggregate, the "Global Notes") registered
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in the name of Cede & Co., as nominee of the Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Notes sold to QIBs. The Global Notes 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 Notes 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.
4. Agreements of the Company. The Company covenants and agrees with each
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of the Initial Purchasers as follows:
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(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 Notes 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 Notes 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 Notes 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.
(e) To cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the qualification or registration of the
Notes 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.
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(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 Notes to the
Initial Purchasers, (iii) the qualification or registration of the Notes 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 Notes, (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 Notes in
the National Association of Securities Dealers, Inc. ("NASD") Automated
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Quotation System - PORTAL ("PORTAL"), (viii) all fees and expenses (including
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fees and expenses of counsel to the Company) of the Company in connection with
the approval of the Notes 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 performance by the Company of its other
obligations under this Agreement and the other Operative Documents and (xi)
"roadshow" travel and other expenses incurred in connection with the marketing
and sale of the Notes.
(g) To use the proceeds from the sale of the Notes 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 Notes.
(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 Notes.
(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 Notes in a manner that would
require the registration under the Securities Act of the sale to the Initial
Purchasers or the QIBs of the Notes 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 Notes 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 Notes in connection with any
sale thereof and any prospective purchaser of such Notes 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 all agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(m) To use its best efforts to effect the designation of the
Notes as eligible for PORTAL and to obtain approval of the Notes by DTC for
"book-entry" transfer.
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(n) For so long as any of the Notes 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 Notes.
(q) Not to distribute any Preliminary Offering Memorandum, Offering
Memorandum or other offering material in connection with the offering and sale
of the Notes, except as permitted by the Securities Act.
(r) To comply with the agreements in the Indenture, the
Registration Rights Agreement and any other Operative Document.
(s) 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.
(t) 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 will 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 Notes are issued and delivered pursuant to this
Agreement, no Note will be of the same class (within the meaning of Rule 144A
under the Securities Act) as
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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) 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 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
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Change"). The Company does not own or control, directly or indirectly, any
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corporation, association or other entity other than Covad Communications
Company, a California corporation, and DIECA Communications, Inc., a Virginia
corporation. The Company or a subsidiary of the Company has obtained CLEC
regulatory approval in the States of California, Illinois, Massachusetts, New
York, Oregon, Washington, Maryland, Texas, Virginia, Delaware, Colorado, New
Jersey, New Hampshire, District of Columbia, Pennsylvania, Michigan, Florida,
Georgia and Missouri.
(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
September 30, 1998, after giving effect to the issuance and sale of the Notes
pursuant hereto and the application of the net proceeds therefrom, 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 Notes 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.
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(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 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 Indenture.
(x) The Senior 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 Notes.
(xi) 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.
(xii) The 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 Registration Rights Agreement.
(xiii) The Pledge 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 Pledge Agreement.
(xiv) Neither the Company nor any of its subsidiaries is, or, after
giving effect to the offering of the Notes, 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
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reasonably be expected to (x) individually or in the aggregate, result in a
material adverse effect on the 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 sale
of the Notes pursuant hereto or (z) in any manner draw into question the
validity of this Agreement or any other Operative Document (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.
(xv) 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 Notes 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 Notes 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
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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.
(xvi) Except as set forth in the Offering Memorandum, 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 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 Company's knowledge, is threatened or imminent.
(xvii) 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 Notes or
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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 Notes,
prevents or suspends the sale of the Notes 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.
(xviii) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change, (i) to 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 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 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
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.
(xix) 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
9
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,
all such Authorizations are valid and in full 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 Company's
knowledge, no material defaults by the landlord are existing under any such
lease that could reasonably be expected to result in a Material Adverse Effect.
(xx) Except as set forth in the Offering Memorandum, 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 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 infringe on the rights of any person, except as could not
reasonably be expected to have a Material Adverse Effect.
(xxi) 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) would reasonably be expected to 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, would reasonably be expected to have had a Material Adverse
Effect or (iii) if not continued in the future, would reasonably be expected to
have a Material Adverse Effect.
(xxii) 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.
10
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.
(xxiii) 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").
----------------------
(xxiv) 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.
(xxv) 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 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.
(xxvi) 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 will 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.
(xxvii) 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 Notes 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 Notes or (B) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.
(xxviii) No registration under the Securities Act of the Notes is
required for the sale of the Notes to the Initial Purchasers as contemplated
hereby or for the Exempt Resales assuming (i) that the purchasers who buy the
Notes in the Exempt Resales are QIBs 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 Notes 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
11
advertising. No securities of the same respective classes as the Notes have been
issued and sold by the Company within the six-month period immediately prior to
the date hereof.
(xxix) 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 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.
(xxx) 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 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.
(xxxi) 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
12
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.
(xxxii) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Notes, the application of the proceeds
from the issuance and sale of the Notes 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.
(xxxiii) ▇▇▇▇▇ & 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.
(xxxiv) 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 Consolidated Financial
Data", "Selected Consolidated 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.
(xxxv) 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 salable 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 Notes, the present fair salable 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 Notes, 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.
(xxxvi) 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 Notes.
(xxxvii) 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.
(xxxviii) 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
13
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.
(xxxix) 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 Notes.
(ii) Such Initial Purchaser is not acquiring the Notes 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.
(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 Notes,
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 (A) that they will
offer to sell the Notes only to, and will solicit offers to buy the Notes only
from QIBs who in purchasing such Notes will be deemed to have represented and
agreed that they are purchasing the Notes for their own accounts or accounts
with respect to which they exercise sole investment discretion and that they or
such accounts are QIBs and (B) that such QIBs will acknowledge and agree that
such Notes 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 a
signed letter containing certain representations and agreements relating to the
Notes (the form of such letter can be obtained from the Trustee), 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.
14
(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 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.
15
(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 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 Notes 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 Notes (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 Memorandum. The relative fault of the Company and of the
Initial Purchasers shall be determined by reference to, among other things,
whether the
16
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 Notes 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 Notes, 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 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 Notes
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 Notes; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the Company's knowledge, 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
17
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 in
accordance with generally accepted accounting principles on the latest balance
sheet or notes thereto included in the Offering Memorandum and are not so
disclosed. 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.
---------
(h) 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 ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special New York counsel to the Company, to the effect
set forth in Exhibit C hereto.
---------
(i) 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.
(j) 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.
(k) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ 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,
18
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(l) 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.
(m) The Company and the Trustee shall have entered into the
Indenture and the Pledge Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
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 Notes set forth in the last paragraph of the outside of the
front cover page; the stabilization language set forth on the inside of the
front cover page; and the third paragraph, the fifth 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 Agreements. 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 Notes 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
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, other than as set forth in the
Offering Memorandum, (iv) any downgrading shall have occurred in the rating
accorded the Company's securities by any "nationally recognized statistical
rating organization", as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Securities Act, or any such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the
19
Company's debt securities, or (v)(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 Notes 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 Notes 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 Notes 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., BT ▇▇▇▇. ▇▇▇▇▇ Incorporated,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation and ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., 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 Officer, telecopy number: (▇▇▇) ▇▇▇-▇▇▇▇, with a
copy, which shall not constitute notice, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
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 Notes 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.
20
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]
21
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 among us.
Very truly yours,
COVAD COMMUNICATIONS GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
Accepted and agreed to as of
the date first above written:
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
BT ALEX. BROWN INCORPORATED
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇▇▇, ▇▇▇▇▇ & CO.
By: BEAR, ▇▇▇▇▇▇▇ & CO. INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Managing Director
Schedule I
Aggregate Principal
Amount of Notes to
Initial Purchasers be Purchased
------------------ ------------
Bear, ▇▇▇▇▇▇▇ & Co. Inc............................... $134,375,000
BT ▇▇▇▇. ▇▇▇▇▇ Incorporated........................... $ 26,875,000
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation... $ 26,875,000
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co................................... $ 26,875,000
Total: $215,000,000
Exhibit A
---------
Form of Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
1. The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to carry on
its business as it is currently being conducted and as described in the
Offering Memorandum and to own, lease and operate its properties, and is
duly qualified and in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect on the Company on a consolidated basis.
2. Each of the Company's subsidiaries is a corporation duly
incorporated and validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, has all requisite corporate
power and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease and
operate its properties, and is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect
on the Company on a consolidated basis.
3. All of the outstanding shares of capital stock of the Company
have been, to such counsel's knowledge, duly authorized and validly issued,
are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights. The authorized, issued and outstanding
capital stock of the Company conforms in all respects to the description
thereof set forth in the Offering Memorandum.
4. There are not, to such counsel's knowledge, currently, and will
not be following the offering of the Notes, 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, except as described in the Offering
Memorandum.
5. When the Notes are issued and delivered pursuant to this
Agreement, no Note 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.
6. 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
thereby, including, without limitation, the corporate power and authority
to issue, sell and deliver the Notes.
7. This Agreement has been duly and validly authorized, executed
and delivered by the Company and is the legally valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except that such counsel need express no opinion as to the
validity or enforceability of rights of indemnity or contribution, or both
and except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity.
1
8. Each of the Indenture, the Pledge Agreement and the Registration
Rights Agreement has been duly and validly authorized, executed and
delivered by the Company and assuming due execution by the other parties
thereto, is the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that
such counsel need express no opinion as to the validity or enforceability
of rights of indemnity or contribution, or both and except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.
9. The Notes are in the form contemplated by the Indenture, 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
authenticated in accordance with the terms of the Indenture and delivered
against payment therefor in accordance with the terms of this Agreement 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, except that such counsel need
express no opinion as to the validity or enforceability of rights of
indemnity or contribution, or both, and except as such enforceability may
be limited by (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally,
(ii) to general principles of equity (whether considered in a proceeding in
equity or at law) or (iii) applicable public policy considerations .
10. 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 Indenture and delivered against payment therefor in
accordance with the terms of this Agreement 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, except that such counsel need express no opinion as to the
validity or enforceability of rights of indemnity or contribution, or both,
and except as such enforceability may be limited by (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting
the rights of creditors generally, (ii) general principles of equity
(whether considered in a proceeding in equity or at law) or (iii)
applicable public policy considerations.
11. The Offering Memorandum contains a fair summary of the principal
terms of each of the Notes, this Agreement, the Indenture, the Pledge
Agreement and the Registration Rights Agreement.
12. No registration under the Securities Act of the Notes is
required for the sale of the Notes to the Initial Purchasers as
contemplated by this Agreement or for the Exempt Resales, it being
understood that no opinion is expressed as to any subsequent resale of any
Notes, assuming (A) that the purchasers who buy such Notes in the initial
resale thereof are Eligible Purchaser, and (B) the accuracy of the Initial
Purchasers' and the Company's representations contained in this Agreement
regarding the absence of general solicitation in connection with the sale
of Notes to the Initial Purchasers and the Exempt Resales.
13. The Offering Memorandum, as of its date (except for the
financial statements and schedules and other financial or statistical data
included therein, as to which no opinion need be expressed), contains all
the information specified in, and meets the requirements of, Rule
144A(d)(4) under the Securities Act.
2
14. Prior to the effectiveness of the Exchange Registration
Statement or the Shelf Registration Statement, the Indenture is not
required to be qualified under the Trust Indenture Act.
15. None of (A) the execution, delivery or performance by the
Company of this Agreement and the other Operative Documents or (B) the
issuance and sale of the Notes violates, conflicts with or constitutes 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 under, or result in the imposition of a lien
or encumbrance 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 Reviewed Agreement, (iii) the Delaware
General Corporation Law or any federal statute, rule or regulation known to
such counsel to be applicable to the Company (other than federal or state
securities laws, which are specifically addressed elsewhere herein, and
other than as are specifically addressed in the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇,
General Counsel of the Company, separately delivered to you pursuant to
Section 8(g) of this Agreement, 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
known to such counsel, 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) are disclosed in the Offering
Memorandum. Assuming compliance with applicable state securities and Blue
Sky laws, as to which such counsel need express no opinion, and except for
the filing of a registration statement under the Securities Act and
qualification of the Indenture under the Trust Indenture Act in connection
with the Registration Rights Agreement, no consent, approval, authorization
or order of, or filing, registration, qualification, license or permit of
or with, any court or governmental agency, body or administrative agency is
required for the execution, delivery and performance by the Company of this
Agreement, the Operative Documents or the issuance and sale of the Notes,
except such as have been obtained and made or have been disclosed in the
Offering Memorandum. To such counsel's knowledge, after reasonable inquiry,
no consents or waivers from any other person are required for the
execution, delivery and performance by the Company of this Agreement, the
Operative Documents or the issuance and sale of the Notes, other than such
consents and waivers as have been obtained.
16. The Company is not and after giving effect to the offering and
sale of the Notes and the application of the proceeds thereof as described
in the Offering Memorandum, will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
17. Except as set forth in this Agreement or the Registration Rights
Agreement, to such counsel's knowledge, there are no holders of securities
of the Company 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 of the transactions contemplated thereby, have
the right to request or demand that the Company register under the
Securities Act securities held by them.
18. None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Notes, the application of the
proceeds from the issuance and sale of the Notes and the consummation of
the transactions contemplated thereby as set forth in the Offering
Memorandum, will violate Regulations T, U or X promulgated by the Board of
Governors of the Federal Reserve System.
3
19. To such counsel's knowledge, after reasonable inquiry, and
except as described in the Offering Memorandum, there is (i) no action,
suit, investigation or proceeding (other than proceedings with respect to
pending license applications) before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, now pending, or
threatened or contemplated to which the Company and any of its subsidiaries
is or may be a party or to which the business or property of the Company
and any of its subsidiaries is or may be subject and (ii) no injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction to which the Company or any of its subsidiaries is
or may be subject, or to which the business, assets or property of the
Company are or may be subject, has been issued, except in the case of
clauses (i) and (ii), those which (a) would not singly or in the aggregate
have a Material Adverse Effect upon the Company and its subsidiaries taken
as a whole or (b) which are disclosed in the Offering Memorandum.
20. To such counsel's knowledge, there is no statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body to
which the Company or any of its subsidiaries is or may be subject or to
which the business, assets or property of the Company or any of its
subsidiaries are or may be subject, except those which (a) would not singly
or in the aggregate have a Material Adverse Effect upon the Company and its
subsidiaries taken as a whole or (b) which are disclosed in the Offering
Memorandum.
21. The statements contained in the Offering Memorandum under the
captions "Risk Factors--Holding Company Structure; Restrictions on Access
to Subsidiary Cash Flow", "Risk Factors--Fraudulent Conveyance Risks",
"Business--Intellectual Property", "Business--Legal Proceedings",
"Management--Employment Agreements and Change in Control Arrangements",
"Management--1997 Stock Plan", "Management--1998 Employee Stock Purchase
Plan", "Certain Relationships and Related Transactions--Series C Preferred
Stock and Warrant Subscription Agreement", "Certain Relationships and
Related Transactions--The Intel Stock Purchase", "Certain Relationships and
Related Transactions--Equipment Lease Financing", "Certain Relationships
and Related Transactions--The Strategic Investments and Relationships",
"Management--Limitation on Liability and Indemnification Matters",
"Description of Notes", "Description of Certain Indebtedness" and "Notice
to Investors", in each case, insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to
therein, fairly present the information required with respect to such legal
matters, documents and proceedings and fairly summarize the matters
referred to therein in all material respects.
Such counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent certified
public accountants of the Company and the Initial Purchasers and its
representatives at which the contents of the Preliminary Offering Memorandum and
the Offering Memorandum and related matters were discussed and, although such
counsel is not passing upon and assumes no responsibility for, the accuracy,
completeness or fairness of the statements contained in the Preliminary Offering
Memorandum or the Offering Memorandum (except as indicated above), on the basis
of the foregoing, no facts have come to such counsel's attention which led such
counsel to believe that the Offering Memorandum, as of its date or the Closing
Date, contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading (except as
to financial statements and schedules and other financial data, included
therein).
4
Exhibit B
---------
Form of Opinion of ▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel of the Company
1. Neither the execution and delivery of the Operative Documents nor
the sale of the Notes contemplated thereby violate (A) the Communications
Act of 1934 (the "Communications Act") as interpreted as of this date, (B)
the Telecommunications Act of 1996 (the "Telecom Act of 1996") as
interpreted as of this date, (C) any rules of regulations of the Federal
Communications Commission (the "FCC") applicable to the Company and its
subsidiaries as interpreted as of this date, or (D) any rules or regulations
of the public utility commissions in the States listed in paragraph 7 below
(the "State Telecommunications Agencies") as interpreted as of this date.
2. The Company and its subsidiaries (A) have made all reports and
filings, and paid all fees, required by the FCC and any of the State
Telecommunications Agencies, and (B) have all certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and have made
all filings and registrations with, the FCC and any of the State
Telecommunications Agencies necessary to own, lease, license and use their
respective properties and assets and to conduct their respective businesses
as described in the Offering Memorandum; and, except as described in the
Offering Memorandum, there are no pending or, to my knowledge, threatened
proceedings before the FCC or any State Telecommunications Agencies relating
to the revocation or modification of any such certificates, orders, permits,
licenses, authorizations, consents or approvals which, if determined
adversely, would have a Material Adverse Effect.
3. Except as described in the Offering Memorandum, (A) no decree or
order of the FCC or any of the State Telecommunications Agencies is
outstanding, (B) no litigation or proceeding has been commenced or, to my
knowledge, threatened, (C) to my knowledge, no inquiry or investigation has
been commenced or threatened and (D) no formal notice of violation or order
to show cause has been issued, against the Company or its subsidiaries
before the FCC or any of the State Telecommunications Agencies.
4. The statements in the Offering Memorandum under the headings of
"Risk Factors--Uncertain Availability of Collocation Space and Dependence on
ILECs to Provide Collocation Space and Collocation Facilities and Unbundled
Network Elements ("UNEs")," "Risk Factors--Dependence on ILECs to Provide
Transmission Facilities and to Provision Copper Lines," "Risk Factors--
Dependence on Interconnection Agreements with ILECs," "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 1996" and "Business--Government Regulation"
regarding the Telecommunications Laws of the FCC or the State
Telecommunications Agencies fairly and accurately summarize the matters
therein described.
5. The Company and its subsidiaries have the consents, approvals,
authorizations, licenses, certificates, permits, or orders of the FCC or the
State
5
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.
6. Neither the execution and delivery of the Operative Documents nor
the sale of the Notes contemplated thereby will conflict with or result in a
violation of any of the Material Agreements, except for such conflicts or
violations which would not have a Material Adverse Effect.
7. As of the date hereof, (A) the Company's subsidiaries are
authorized to operate as CLECs in the States of California, Illinois,
Massachusetts, Michigan, New York, Oregon, Pennsylvania, Washington,
Virginia, Texas, Maryland, District of Columbia, New Hampshire, New Jersey,
Colorado, Florida, Georgia, Missouri, and Delaware, and no such
authorization is the subject of any legal challenge (except as disclosed in
the Offering Memorandum) and (B) none of the Company's subsidiaries has
received any notice of rejection or denial, nor has it withdrawn, any of its
applications for CLEC approval in seven additional States where such
applications, as of the date of the Offering Memorandum, are pending
approval.
6
Exhibit C
---------
Form of Opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, special New York counsel
to the Company
1. The provisions of the Pledge Agreement are effective to create a
valid security interest in favor of the Trustee for the benefit of the
holders of Notes in that portion of the collateral described in the Pledge
Agreement which is subject to Article 9 of the UCC (the "Collateral"), as
security for the payment, to the extent set forth therein, of the
Obligations (as defined therein). To the extent that the Collateral consists
of securities entitlements held by the Trustee, the Trustee has control over
such Collateral and the security interest in such Collateral created by the
Pledge Agreement is perfected and is prior to all other security interests
therein. To the extent that the Collateral consists of certificated
securities which are registered in the name of and delivered to the Trustee,
the security interest created by the Pledge Agreement in such Collateral is
perfected and prior to any adverse claim to such Collateral.
Such counsel may render the opinion in paragraph 1 above subject to the
following assumptions, exceptions, limitations and qualifications:
(i) we express no opinion as to the creation, validity or perfection
or priority of any security interest that is not governed by, or that is
excluded from coverage by, Articles 8 and 9 of the UCC and we express no
opinion as to the priority of any security interest or lien, except as
expressly set forth in paragraph 9;
(ii) we have assumed that the Company has "rights" in the Collateral
and the Pledged Securities and that "value" has been given, as contemplated
by Section 9-203 of the UCC;
(iii) we call to your attention the fact that the perfection of a
security interest in "proceeds" (as defined in the UCC) of collateral is
governed and restricted by Section 9-306 of the UCC;
(iv) we call to your attention the fact that under the UCC, with
certain limited exceptions, the effectiveness of any financing statement
will lapse five years after the date of filing thereof and the security
interest will become unperfected, unless a continuation statement is filed
within six months prior to the end of such five-year period. We also call to
your attention the fact that perfection of security interests under the UCC
in any of the Collateral will be terminated as to any Collateral acquired by
the Company more than four (4) months after the Company changes its name,
identity or corporate structure to such an extent as to make a financing
statement seriously misleading, unless a new appropriate financing statement
indicating the new name, identity or corporate structure of the Company is
properly filed before the expiration of four (4) months after such change;
(v) Section 552 of the federal Bankruptcy Code limits the extent to
which property acquired by a debtor after the commencement of a case under
the federal Bankruptcy Code may be subject to a security interest arising
from a security agreement entered into by the debtor before the commencement
of such case
(vi) we express no opinion with respect to (a) whether or to what
extent particular items in the Pledge Account may constitute "certificated
securities," "uncertificated securities," "securities entitlements,"
"securities accounts," "commodity contracts" or "commodity accounts" (as
each such term is defined in the UCC and (b) the effect of Section 9-306 of
the UCC or any other applicable law with respect to proceeds of any funds or
other property credited to the Pledge Account to the extent such funds or
other property constitute proceeds of the Collateral of either the Trustee
or any other
7
creditor; and
(vii) we have assumed (i) that the Depositary which is acting as the
securities intermediary (as defined in UCC Section 8-102(a)(14)) with
respect to any Financial Assets (as defined in UCC Section 8-102(a)(9)) in
the Pledge Account, is a bank or broker which in the ordinary course of its
business maintains "securities accounts" (as defined in UCC Section 8-
501(a)) for others and at all times the Depositary will be acting in such
capacity with respect to the maintenance of the Pledge Account and the
carrying of the Financial Assets in the Pledge Account; (ii) the Depositary
will maintain the Pledge Account as a "securities account" as defined in
Section 8-501(a) of the UCC; (iii) the books and records of the Depositary
indicate and, at the time of reference thereto, will indicate the Trustee as
the sole Person which has rights to control the Pledge Account; (iv) the
Pledge Agreement, and no other agreement or understanding with any Person,
governs the Trustee, the Depositary and the Company's rights and duties with
respect to the Pledge Account and the financial assets contained therein;
and (v) at the time each Financial Asset is acquired by the Depositary with
respect to the Pledge Account, neither the Depositary nor the Trustee will
have any notice of any adverse claim (as defined in UCC Section 8-102(a)(1))
to such Financial Asset.
8