EXHIBIT 4.1
Pac-West Telecomm, Inc.
$ 150,000,000
13 1/2% Senior Notes due 2009
Purchase Agreement
dated January 27, 1999
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp.
First Union Capital Markets
Table of Contents
Section 1. Representations and Warranties.................................... 2
No Registration Required..................................................... 2
No Integration of Offerings or General Solicitation.......................... 2
Eligibility for Resale under Rule 144A....................................... 3
The Offering Memorandum...................................................... 3
The Purchase Agreement....................................................... 3
The Registration Rights Agreement, the Pledge Agreement and DTC Agreement.... 3
Authorization of the Securities and the Exchange Securities.................. 4
Authorization of the Indenture............................................... 4
Description of the Securities and the Indenture.............................. 4
No Material Adverse Change................................................... 4
Independent Accountants...................................................... 4
Preparation of the Financial Statements...................................... 5
Incorporation and Good Standing of the Company............................... 5
Capitalization and Other Capital Stock Matters............................... 5
Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required...................................................... 6
No Material Actions or Proceedings........................................... 6
Intellectual Property Rights................................................. 6
All Necessary Permits, etc................................................... 7
Title to Properties.......................................................... 7
Tax Law Compliance........................................................... 7
Company Not an Investment Company............................................ 7
Insurance.................................................................... 7
No Price Stabilization or Manipulation....................................... 8
Solvency..................................................................... 8
Related Party Transactions................................................... 8
Section 2. Purchase, Sale and Delivery of Securities......................... 8
The Securities............................................................... 8
The Closing Date............................................................. 8
Delivery of the Securities................................................... 9
Delivery of Offering Memorandum to the Initial Purchasers.................... 9
Initial Purchasers as Qualified Institutional Buyers......................... 9
Section 3. Additional Covenants.............................................. 9
Initial Purchasers' Review of Proposed Amendments and Supplements............ 9
Amendments and Supplements to the Offering Memorandum and Other
Securities Act Matters.................................................. 9
Copies of the Offering Memorandum............................................ 10
Blue Sky Compliance.......................................................... 10
Use of Proceeds.............................................................. 10
The Depositary............................................................... 11
Additional Issuer Information................................................ 11
Future Reports to the Initial Purchasers..................................... 11
No Integration............................................................... 11
Legended Securities.......................................................... 11
PORTAL....................................................................... 11
Usury........................................................................ 11
Pledged Securities........................................................... 11
Subsequent Financial Statements.............................................. 11
Due Diligence................................................................ 12
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Section 4. Payment of Expenses.............................................. 12
Section 5. Conditions of the Obligations of the Initial Purchasers.......... 12
Accountants' Comfort Letter................................................. 13
No Material Adverse Change or Ratings Agency Change......................... 13
Opinion of Counsel for the Company.......................................... 13
Opinion of Counsel for the Initial Purchasers............................... 13
Officers' Certificate....................................................... 13
Bring-down Comfort Letter................................................... 14
PORTAL Listing.............................................................. 14
Additional Agreements....................................................... 14
Additional Documents........................................................ 14
Section 6. Reimbursement of Initial Purchasers' Expenses.................... 14
Section 7. Offer, Sale and Resale Procedures................................ 14
Offers and Sales only to Qualified Institutional Buyers..................... 14
No General Solicitation..................................................... 15
Purchases by Non-Bank Fiduciaries........................................... 15
Restrictions on Transfer.................................................... 15
Delivery of Offering Memorandum............................................. 16
Section 8. Indemnification.................................................. 16
Indemnification of the Initial Purchasers................................... 16
Indemnification of the Company, its Directors and Officers.................. 17
Notifications and Other Indemnification Procedures.......................... 17
Settlements................................................................. 18
Section 9. Contribution..................................................... 19
Section 10. Termination of this Agreement................................... 20
Section 11. Representations and Indemnities to Survive Delivery............. 20
Section 12. Notices......................................................... 20
Section 13. Successors...................................................... 21
Section 14. Partial Unenforceability........................................ 21
Section 15. Governing Law Provisions........................................ 21
Section 16. Default of One or More of the Several Initial Purchasers........ 21
Section 17. General Provisions.............................................. 22
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Purchase Agreement
January 27, 1999
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp.
First Union Capital Markets, a division of Wheat First Securities, Inc.
As Initial Purchasers
c/o NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Introductory. Pac-West Telecomm, Inc., a California corporation (the
"Company"), proposes to issue and sell to the several Initial Purchasers named
in Schedule A (the "Initial Purchasers"), acting severally and not jointly, the
respective amounts set forth in such Schedule A of an $150,000,000 aggregate
principal amount of the Company's 13 1/2% Senior Notes due 2009 (the
"Securities"). NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC, CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp. and
First Union Capital Markets, a division of Wheat First Securities, Inc., have
agreed to act as the several Initial Purchasers in connection with the offering
and sale of the Securities.
The Securities will be issued pursuant to an indenture dated as of
January 29, 1999 (the "Indenture") between the Company and Norwest Bank
Minnesota, N.A., as trustee (the "Trustee"). Securities issued in book-entry
form will be issued in the name of Cede & Co., as nominee of The Depository
Trust Company (the "Depositary") pursuant to a DTC Agreement, to be dated as of
the Closing Date (as defined in Section 2) (the "DTC Agreement"), among the
Company, the Trustee and the Depositary.
The holders of the Securities will be entitled to the benefits of a
registration rights agreement to be dated as of January 29, 1999 (the
"Registration Rights Agreement"), among the Company and the Initial Purchasers,
pursuant to which the Company will agree to file, within 90 days of the Closing
Date, a registration statement with the Commission (as defined herein)
registering the Exchange Securities (as defined herein) under the Securities Act
(as defined herein).
The Company understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
in the Offering Memorandum (as defined below) and agrees that the Initial
Purchasers may resell, subject to the conditions set forth herein, all or a
portion of the Securities to purchasers (the "Subsequent Purchasers") at any
time after the date of this Agreement. The Securities are to be offered and sold
to or through the Initial Purchasers without being registered with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933 (the "Securities Act", which term, as used herein, includes the rules
and regulations of the Commission promulgated thereunder), in reliance upon
exemptions therefrom. The terms of the Securities and the Indenture will require
that investors that acquire Securities expressly agree that Securities may only
be resold or otherwise transferred, after the date hereof, if such Securities
are registered for
sale under the Securities Act or if an exemption from the registration
requirements of the Securities Act is available (including the exemptions
afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S").
The Company has prepared and delivered to each Initial Purchaser
copies of a Preliminary Offering Memorandum "subject to completion" dated
January 5, 1999 (the "Preliminary Offering Memorandum") and has prepared and
will deliver to each Initial Purchaser, on the date hereof or the next
succeeding day, copies of the Offering Memorandum dated January 27, 1999
describing the terms of the Securities, each for use by such Initial Purchaser
in connection with its solicitation of offers to purchase the Securities. As
used herein, the "Offering Memorandum" shall mean, with respect to any date or
time referred to herein this Agreement, the Company's Offering Memorandum dated
January 27, 1999, including amendments or supplements thereto, any exhibits
thereto, in the most recent form that has been prepared and delivered by the
Company to the Initial Purchasers in connection with their solicitation of
offers to purchase Securities. Further, any reference to the Preliminary
Offering Memorandum or the Offering Memorandum shall be deemed to refer to and
include any Additional Issuer Information (as defined in Section 3(g)) furnished
by the Company prior to the completion of the distribution of the Securities.
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Offering Memorandum (or other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other information
which are incorporated by reference in the Offering Memorandum.
The Company hereby confirms its agreements with the Initial Purchasers
as follows:
Section 1. Representations and Warranties. The Company hereby represents,
warrants and covenants to each Initial Purchaser as follows:
(a) No Registration Required. Subject to compliance by the Initial
Purchasers with the representations and warranties set forth in Section
2(e) hereof and with the procedures set forth in Section 7 hereof, it is
not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers and to each Subsequent Purchaser in
the manner contemplated by this Agreement and the Offering Memorandum to
register the Securities under the Securities Act or, until such time as the
Exchange Securities are issued, pursuant to an effective registration
statement, to qualify the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act", which term, as used herein, includes the rules
and regulations of the Commission promulgated thereunder).
(b) No Integration of Offerings or General Solicitation. The Company
has not, directly or indirectly, solicited any offer to buy or offered to
sell, and will not, directly or indirectly, solicit any offer to buy or
offer to sell, in the United States or to any United States citizen or
resident, any security which is or would be integrated with the sale of the
Securities in a manner that would require the Securities to be registered
under the Securities Act. None of the Company, its affiliates (as such term
is defined in Rule 501(b) under the Securities Act) (each, an "Affiliate"),
or any person authorized to act on its or any of their behalf (other than
the Initial Purchasers, as to whom the Company makes no representation or
warranty) has engaged or will engage, in connection with the offering of
the Securities, in any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act. With respect to
those Securities sold in
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reliance upon Regulation S, (i) none of the Company, its Affiliates or any
person authorized to act on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation or warranty) has
engaged or will engage in any directed selling efforts within the meaning
of Regulation S and (ii) each of the Company and its Affiliates and any
person authorized to act on its or their behalf (other than the Initial
Purchasers, as to whom the Company makes no representation or warranty) has
complied and will comply with the offering restrictions set forth in
Regulation S.
(c) Eligibility for Resale under Rule 144A. The Securities are
eligible for resale pursuant to Rule 144A and will not be, at the Closing
Date, of the same class as securities listed on a national securities
exchange registered under Section 6 of the Exchange Act or quoted in a U.S.
automated interdealer quotation system.
(d) The Offering Memorandum. The Offering Memorandum does not, and
at the Closing Date will not, include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that this representation, warranty and
agreement shall not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
furnished to the Company in writing by any Initial Purchaser through
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC expressly for use in the Offering
Memorandum. Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4). The Company has not
distributed and will not distribute, prior to the later of the Closing Date
and the completion of the Initial Purchasers' distribution of the
Securities, any offering material in connection with the offering and sale
of the Securities other than a preliminary Offering Memorandum or the
Offering Memorandum.
(e) The Purchase Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles and
except as rights to indemnification under the Registration Rights Agreement
may be limited by applicable law
(f) The Registration Rights Agreement, the Pledge Agreement and DTC
Agreement. At the Closing Date, each of the Registration Rights Agreement,
the Pledge Agreement (as defined in the Offering Memorandum) and the DTC
Agreement will be duly authorized, executed and delivered by, and will be a
valid and binding agreement of, the Company, enforceable in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles and except as rights to indemnification under the Registration
Rights Agreement may be limited by applicable law. Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Commission, under the circumstances set forth therein, (i) a registration
statement under the Securities Act relating to another series of debt
securities of the Company with terms substantially identical to the
Securities (the "Exchange Securities") to be offered in exchange for the
Securities (the "Exchange Offer") and (ii) to the extent required by the
Registration Rights Agreement, a shelf registration statement pursuant to
Rule 415 of the Securities Act
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relating to the resale by certain holders of the Notes, and in each case,
to use its reasonable best efforts to cause such registration statements to
be declared effective.
(g) Authorization of the Securities and the Exchange Securities. The
Securities to be purchased by the Initial Purchasers from the Company are
in the form contemplated by the Indenture, have been duly authorized for
issuance and sale pursuant to this Agreement and the Indenture and, at the
Closing Date, will have been duly executed by the Company and, when
authenticated in the manner provided for in the Indenture and delivered
against payment of the purchase price therefor, will constitute valid and
binding agreements of the Company, enforceable in accordance with their
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles and will be entitled to the benefits of the Indenture. The
Exchange Securities have been duly and validly authorized for issuance by
the Company, and when issued and authenticated in accordance with the terms
of the Indenture, the Registration Rights Agreement and the Exchange Offer,
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or affecting
enforcement of the rights and remedies of creditors or by general
principles of equity and will be entitled to the benefits of the Indenture.
(h) Authorization of the Indenture. The Indenture has been duly
authorized by the Company and, at the Closing Date, will have been duly
executed and delivered by the Company and will constitute a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(i) Description of the Securities and the Indenture. The Notes, the
Exchange Securities and the Indenture will conform in all material respects
to the respective statements relating thereto contained in the Offering
Memorandum and will be in substantially the respective forms previously
delivered to the Initial Purchasers.
(j) No Material Adverse Change. 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, or any development that could reasonably be
expected to result in a material adverse change, in the condition,
financial or otherwise, or in the earnings, business, operations or
prospects, whether or not arising from transactions in the ordinary course
of business, of the Company (any such change is called a "Material Adverse
Change"); (ii) the Company has 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; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of capital stock or repurchase or redemption by the Company of any class of
capital stock.
(k) Independent Accountants. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, 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
4
Offering Memorandum are independent public or certified public accountants
within the meaning of Regulation S-X under the Securities Act and the
Exchange Act.
(l) Preparation of the Financial Statements. The financial
statements, together with the related schedules and notes, included in the
Offering Memorandum present fairly the financial position of the Company as
of and at the dates indicated and the results of their operations and cash
flows for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
may be expressly stated in the related notes thereto. The financial data
set forth in the Offering Memorandum under the captions "Offering
Memorandum Summary--Summary Financial Data," "Selected Financial Data" and
"Capitalization" fairly present the information set forth therein on a
basis consistent with that of the audited financial statements contained in
the Offering Memorandum. The pro forma financial statements of the Company
and the related notes thereto included under the caption, "Unaudited Pro
Forma Financial Data" and elsewhere in the Offering Memorandum present
fairly the information contained therein, have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements and have been properly presented on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein. The Company's
ratio of earnings to fixed charges set forth in the Offering Memorandum
under the caption "Selected Financial Data" has been calculated in
compliance with Item 503(d) of Regulation S-K under the Securities Act.
(m) Incorporation and Good Standing of the Company. The Company has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of California and has corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum and to enter into and perform its
obligations under each of this Agreement, the Registration Rights
Agreement, the DTC Agreement, the Pledge Agreement, the Securities, the
Exchange Securities and the Indenture. The Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except for
such jurisdictions 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. The Company has no subsidiaries and does not own or
control, directly or indirectly, any corporation, association or other
entity.
(n) Capitalization and Other Capital Stock Matters. At January 27,
1999, the Company had an authorized and outstanding capitalization as set
forth in the Offering Memorandum under the caption "Capitalization" (other
than for subsequent issuances of capital stock, if any, pursuant to
employee benefit plans described in the Offering Memorandum). The Company's
common stock and preferred stock (collectively, the "Stock") conforms in
all material respects to the description thereof set forth in the Offering
Memorandum. All of the outstanding shares of Stock have been duly
authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal and state securities laws. There are
no authorized or outstanding options, warrants, preemptive rights, rights
of first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of
the Company other than those accurately described in the Offering
Memorandum.
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(o) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. The Company is not in violation of
its charter or by-laws or is in default (or, with the giving of notice or
lapse of time, would be in default) ("Default") under any indenture,
mortgage, loan or credit agreement, note, contract, franchise, lease or
other instrument to which it is a party or by which it may be bound or to
which any of the property or assets of the Company is subject (each, an
"Existing Instrument"), except for such Defaults as would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Change. The Company's execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Pledge Agreement, the DTC
Agreement and the Indenture, and the issuance and delivery of the
Securities or the Exchange Securities, and consummation of the transactions
contemplated hereby and thereby and by the Offering Memorandum (i) have
been duly authorized by all necessary corporate action and will not result
in any violation of the provisions of the charter or by-laws of the
Company, (ii) will not conflict with or constitute a breach of, or Default
or a Debt Repayment Triggering Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to, or require the consent of
any other party to, any Existing Instrument, except for such conflicts,
breaches, Defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, reasonable be expected to result in a
Material Adverse Change and (iii) will not result in any violation of any
law, administrative regulation or administrative or court decree applicable
to the Company except for such violation as would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Change. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or regulatory
authority or agency, is required for the Company's execution, delivery and
performance of this Agreement, the Registration Rights Agreement, the
Pledge Agreement, the DTC Agreement or the Indenture, or the issuance and
delivery of the Securities or the Exchange Securities, or consummation of
the transactions contemplated hereby and thereby and by the Offering
Memorandum, except such as have been obtained or made by the Company and
are in full force and effect, applicable state securities or blue sky laws
and except such as may be required by federal and state securities laws
with respect to the Company's obligations under the Registration Rights
Agreement. As used herein, a "Debt Repayment Triggering Event" means any
event or condition which gives, or with the giving of notice or lapse of
time would give, the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company.
(p) No Material Actions or Proceedings. Except as otherwise
disclosed in the Offering Memorandum, there are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened (i) against or affecting the Company, (ii) which has
as the subject thereof any officer or director of, or property owned or
leased by, the Company 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 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 exists or, to the best of the Company's knowledge,
is threatened or imminent.
(q) Intellectual Property Rights. The Company owns or possesses
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and
6
other similar rights (collectively, "Intellectual Property Rights")
reasonably necessary to conduct its businesses as now conducted; and the
expected expiration of any of such Intellectual Property Rights would not
result in a Material Adverse Change. The Company has not received any
notice of infringement or conflict with asserted Intellectual Property
Rights of others, which infringement or conflict, if the subject of an
unfavorable decision, would result in a Material Adverse Change.
(r) All Necessary Permits, etc. The Company possesses such valid and
current certificates, authorizations or permits issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary to
conduct its business, and the Company has received no notice of proceedings
relating to the revocation or modification of, or non-compliance with, any
such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
could reasonably be expected to result in a Material Adverse Change.
(s) Title to Properties. The Company has good and marketable title
to all the properties and assets reflected as owned in the financial
statements referred to in Section 1(l) above, in each case free and clear
of any security interests, mortgages, liens, encumbrances, equities, claims
and other defects, except as described in the Offering Memorandum or such
as do not materially and adversely affect the value of such property and do
not materially interfere with the use made or proposed to be made of such
property by the Company. The real property, improvements, equipment and
personal property held under lease by the Company are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company.
(t) Tax Law Compliance. The Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid all taxes
required to be paid by it and, if due and payable, any related or similar
assessment, fine or penalty levied against it. The Company has made
adequate charges, accruals and reserves in the applicable financial
statements referred to in Section 1(l) above in respect of all federal,
state and foreign income and franchise taxes for all periods as to which
the tax liability of the Company has not been finally determined.
(u) Company Not an "Investment Company." The Company is not, and
after receipt of payment for the Securities will not be, an "investment
company" within the meaning of Investment Company Act of 1940, as amended
(the "Investment Company Act") and will conduct its business in a manner so
that it will not become subject to the Investment Company Act.
(v) Insurance. The Company maintains insurance policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for its businesses including, but not limited
to, policies covering real and personal property owned or leased by the
Company against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it 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. The
Company has not been denied any insurance coverage which it has sought or
for which it has applied.
7
(w) No Price Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action designed to or
that might be reasonably expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.
(x) Solvency. The Company is, and immediately after the Closing Date
will be, Solvent. As used herein, the term "Solvent" means, with respect to
the Company on a particular date, that on such date (i) the fair market
value of the assets of the Company is greater than the total amount of
liabilities (including contingent liabilities) of the Company, (ii) the
present fair salable value of the assets of the Company is greater than the
amount that will be required to pay the probable liabilities of the Company
on its debts as they become absolute and matured, (iii) the Company is able
to realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature and (iv) the Company does
not have unreasonably small capital.
(y) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company 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.
(z) The Company and its affiliates and all persons authorized to act
on their behalf (other than the Initial Purchasers, as to whom the Company
makes no representation) have complied with and will comply with the
offering restrictions requirements of Regulation S in connection with the
offering of the Securities outside the United States and, in connection
therewith, the Offering Memorandum will contain the disclosure required by
Rule 902(g).
(aa) The Securities sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
restricted period referred to in Rule 903(b)(3) of the Securities Act and
only upon certification of beneficial ownership of such Securities by non-
U.S. persons or U.S. persons who purchased such Securities in transactions
that were exempt from the registration requirements of the Securities Act.
Any certificate signed by an officer of the Company and delivered
to the Initial Purchases or to counsel for the Initial Purchasers shall be
deemed to be a representation and warranty by the Company to each Initial
Purchaser as to the matters set forth therein.
Section 2. Purchase, Sale and Delivery of the Securities.
(a) The Securities. On the basis of the representations, warranties
and agreements herein contained, and upon the terms but subject to the
conditions herein set forth, the Company agrees to issue and sell to the
several Initial Purchasers, severally and not jointly, all of the
Securities and the Initial Purchasers agree, severally and not jointly, to
purchase from the Company the aggregate principal amount of Securities set
forth opposite their names on Schedule A, at a discounted purchase price of
13 1/2% of the principal amount thereof payable on the Closing Date.
(b) The Closing Date. Delivery of certificates for the Securities in
definitive form to be purchased by the Initial Purchasers and payment
therefor shall be made at the
8
offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Chicago, Illinois (or such other place as may
be agreed to by the Company and the Initial Purchasers) at 9:00 a.m.
Chicago time, on January 29, 1999, or such other time and date not later
than 12:00 p.m., Chicago time, on February 2, 1999 as the Initial
Purchasers shall designate by notice to the Company (the time and date of
such closing are called the "Closing Date"). The Company hereby
acknowledges that circumstances under which the Initial Purchasers may
provide notice to postpone the Closing Date as originally scheduled
include, but are in no way limited to, any determination by the Company or
the Initial Purchasers to recirculate to investors copies of an amended or
supplemented Offering Memorandum or a delay as contemplated by the
provisions of Section 16.
(c) Delivery of the Securities. The Company shall deliver, or cause
to be delivered, to NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC for the accounts
of the several Initial Purchasers certificates for the Securities at the
Closing Date against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price therefor.
The certificates for the Securities shall be in such denominations and
registered in the name of Cede & Co., as nominee of the Depository,
pursuant to the DTC Agreement and shall be made available for inspection on
the business day preceding the Closing Date at a location in New York City
as the Initial Purchasers may designate. Time shall be of the essence, and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Initial Purchasers.
(d) Delivery of Offering Memorandum to the Initial Purchasers. Not
later than 12:00 p.m. on the second business day following the date of this
Agreement, the Company shall delivery or cause to be delivered copies of
the Offering Memorandum in such quantities and at such places as the
Initial Purchasers shall reasonably request.
(e) Initial Purchasers as Qualified Institutional Buyers. Each
Initial Purchaser severally and not jointly represents and warrants to, and
agrees with, the Company that it is a "qualified institutional buyer"
within the meaning of Rule 144A (a "Qualified Institutional Buyer") and an
"accredited investor" within the meaning of Rule 501(a) under the
Securities Act (an "Accredited Investor").
Section 3. Additional Covenants. The Company further covenants and agrees
with each Initial Purchaser as follows:
(a) Initial Purchasers' Review of Proposed Amendments and
Supplements. Prior to amending or supplementing the Offering Memorandum,
the Company shall furnish to the Initial Purchasers for review a copy of
each such proposed amendment or supplement, and the Company shall not file
any such proposed amendment or supplement to which the Initial Purchasers
reasonably object.
(b) Amendments and Supplements to the Offering Memorandum and Other
Securities Act Matters. If, prior to the completion of the placement of
the Securities by the Initial Purchasers with the Subsequent Purchasers,
any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Offering Memorandum in order to make
the statements therein, in the light of the circumstances when the Offering
Memorandum is delivered to a purchaser, not misleading, or if in the
written opinion of the Initial Purchasers or counsel for the Initial
Purchasers it is otherwise necessary to amend or supplement the Offering
Memorandum to comply with law, the Company agrees to promptly prepare
(subject to Section 3(a) hereof), and furnish at its own expense to the
Initial Purchasers, amendments or supplements to the Offering Memorandum so
that the statements in the Offering Memorandum as so amended or
9
supplemented will not, in the light of the circumstances when the Offering
Memorandum is delivered to a purchaser, be misleading or so that the
Offering Memorandum, as amended or supplemented, will comply with law.
Following the consummation of the Exchange Offer or the effectiveness
of an applicable shelf registration statement and for so long as the
Securities are outstanding if, in the reasonable judgment of the Initial
Purchasers, the Initial Purchasers or any of their affiliates (as such term
is defined in the rules and regulations under the Securities Act) are
required to deliver a prospectus in connection with sales of, or market-
making activities with respect to, such securities, (A) to periodically
amend the applicable registration statement so that the information
contained therein complies with the requirements of Section 10(a) of the
Securities Act, (B) to amend the applicable registration statement or
supplement the related prospectus or the documents incorporated therein
when necessary to reflect any material changes in the information provided
therein so that the registration statement and the prospectus 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 existing as of the date the prospectus is so
delivered, not misleading and (C) to provide the Initial Purchasers with
copies of each amendment or supplement filed and such other documents as
the Initial Purchasers may reasonably request.
The Company hereby expressly acknowledges that the indemnification and
contribution provisions of Sections 8 and 9 hereof are specifically
applicable and relate to each offering memorandum, registration statement,
prospectus, amendment or supplement referred to in this Section 3(b).
(c) Copies of the Offering Memorandum. The Company agrees to furnish
the Initial Purchasers, without charge, as many copies of the Offering
Memorandum and any amendments and supplements thereto as they shall have
reasonably requested provided, that such request is made or can be
satisfied out of, the original printing of the Offering Memorandum, or the
applicable amendment or supplement.
(d) Blue Sky Compliance. The Company shall cooperate with the
Initial Purchasers and counsel for the Initial Purchasers to qualify or
register the Securities for sale under (or obtain exemptions from the
application of) the Blue Sky or state securities laws of those
jurisdictions designated by the Initial Purchasers, shall comply with such
laws and shall continue such qualifications, registrations and exemptions
in effect so long as required for the distribution of the Securities. The
Company shall not be required to qualify as a foreign corporation or to
take any action that would subject it to general service of process in any
such jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise the
Initial Purchasers promptly of the suspension of the qualification or
registration of (or any such exemption relating to) the Securities for
offering, sale or trading in any jurisdiction or any initiation or threat
of any proceeding for any such purpose, and in the event of the issuance of
any order suspending such qualification, registration or exemption, the
Company shall use its reasonable best efforts to obtain the withdrawal
thereof at the earliest possible moment.
(e) Use of Proceeds. The Company shall apply the net proceeds from
the sale of the Securities sold by it in the manner described under the
caption "Use of Proceeds" in the Offering Memorandum.
10
(f) The Depositary. The Company will cooperate with the Initial
Purchasers and use its best efforts to permit the Securities to be eligible
for clearance and settlement through the facilities of the Depositary.
(g) Additional Issuer Information. At any time when the Company is not
subject to Section 13 or 15(d) of the Exchange Act, for the benefit of
holders and beneficial owners from time to time of Securities, the Company
shall furnish, as promptly as practicable, at its expense, upon written
request, to holders and beneficial owners of Securities and prospective
purchasers of Securities information ("Additional Issuer Information")
satisfying the requirements of subsection (d)(4) of Rule 144A.
(h) Future Reports to the Initial Purchasers. For so long as any
Securities or Exchange Securities remain outstanding, the Company will
furnish to each of the Initial Purchasers (i) as soon as reasonably
practicable after the end of each fiscal year, copies of the Annual Report
of the Company containing the balance sheet of the Company as of the close
of such fiscal year and statements of income, stockholders' equity and cash
flows for the year then ended and the opinion thereon of the Company's
independent public or certified public accountants; (ii) as soon as
reasonably practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its capital stock or debt securities (including the
holders of the Securities).
(i) No Integration. The Company agrees that it will not and will cause
its Affiliates not to make any offer or sale of securities of the Company
of any class if, as a result of the doctrine of "integration" referred to
in Rule 502 under the Securities Act, such offer or sale would render
invalid (for the purpose of (i) the sale of the Securities by the Company
to the Initial Purchasers, (ii) the resale of the Securities by the Initial
Purchasers to Subsequent Purchasers or (iii) the resale of the Securities
by such Subsequent Purchasers to others) the exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof or by Rule 144A or by Regulation S thereunder or otherwise.
(j) Legended Securities. Each certificate for a Security will bear the
legend contained in "Transfer Restrictions" in the Offering Memorandum for
the time period and upon the other terms stated in the Offering Memorandum.
(k) PORTAL. The Company will use its best efforts to cause such
Securities to be eligible for the National Association of Securities
Dealers, Inc. PORTAL market (the "PORTAL market").
(l) Usury. Not to voluntarily claim, and to resist actively any
attempts to claim the benefits of any usury laws against the holders of any
Securities.
(m) Pledged Securities. To pledge at closing $ of Pledged Securities
(as defined in the Offering Memorandum) to the Trustee for the benefit of
the holders of the Securities in accordance with the terms and conditions
of the Pledge and Security Agreement.
(n) Subsequent Financial Statements. Prior to January 29, 1999, to
furnish to each of the Initial Purchasers, as soon as they have been
prepared in the ordinary course by the Company, copies of all available
financial statements or any unaudited interim
11
financial statements of the Company for any period subsequent to the
periods covered by the financial statements appearing in the Offering
Memorandum.
(o) Due Diligence. In connection with the original distribution of the
Securities, the Company agrees that, prior to any offer or resale of the
Securities by the Initial Purchasers, the Initial Purchasers and counsel
for the Initial Purchasers shall have the right to make reasonable
inquiries into the business of the Company. The Company also agrees to
provide answers to each prospective Subsequent Purchaser of Securities who
so requests concerning the Company (to the extent that such information is
available or can be acquired and made available to prospective Subsequent
Purchasers without unreasonable effort or expense and to the extent the
provision thereof is not prohibited by applicable law) and the terms and
conditions of the offering of the Securities, as provided in the Offering
Memorandum.
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC, on behalf of the several
Initial Purchasers, may, in its sole discretion, waive in writing the
performance by the Company of any one or more of the foregoing covenants or
extend the time for their performance.
Section 4. Payment of Expenses. The Company agrees to pay all costs, fees
and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Securities (including all printing and engraving costs), (ii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Securities to the Initial Purchasers, (iii) all fees and expenses of the
Company's counsel, independent public or certified public accountants and other
advisors, (iv) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of each Preliminary
Offering Memorandum and the Offering Memorandum (including financial statements
and exhibits), and all amendments and supplements thereto, this Agreement, the
Registration Rights Agreement, the Pledge Agreement, the Indenture, the DTC
Agreement, and the Securities, (v) all filing fees, attorneys' fees (which shall
not exceed $10,000) and expenses incurred by the Company or the Initial
Purchasers in connection with qualifying or registering (or obtaining exemptions
from the qualification or registration of) all or any part of the Securities for
offer and sale under the Blue Sky laws and, if requested by the Initial
Purchasers, preparing and printing a "Blue Sky Survey" or memorandum, and any
supplements thereto, advising the Initial Purchasers of such qualifications,
registrations and exemptions, (vi) the fees and expenses of the Trustee,
including the fees and disbursements of counsel for the Trustee in connection
with the Indenture, the Securities and the Exchange Securities, (vii) any fees
payable in connection with the rating of the Securities or the Exchange
Securities with the ratings agencies and the listing of the Securities with the
PORTAL market, (viii) any filing fees incident to the review by the National
Association of Securities Dealers, Inc., if any, of the terms of the sale of the
Securities or the Exchange Securities, (ix) all fees and expenses (including
reasonable fees and expenses of counsel) of the Company in connection with
approval of the Securities by DTC for "book-entry" transfer, and (x) the
performance by the Company of its other obligations under this Agreement. Except
as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Initial Purchasers shall pay their own expenses, including the fees and
disbursements of their counsel.
Section 5. Conditions of the Obligations of the Initial Purchasers . The
obligations of the several Initial Purchasers to purchase and pay for the
Securities as provided herein on the Closing Date shall be subject to the
accuracy of the representations and warranties on the part of the Company set
forth in Section 1 hereof as of the date hereof and as of the Closing Date as
12
though then made and to the timely performance by the Company of its covenants
and other obligations hereunder, and to each of the following additional
conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Initial
Purchasers shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, independent
public or certified public accountants for the Company, a letter dated the
date hereof addressed to the Initial Purchasers, in form and substance
reasonably satisfactory to the Initial Purchasers, containing statements
and information of the type ordinarily included in accountant's "comfort
letters" to Initial Purchasers, delivered according to Statement of
Auditing Standards Nos. 72 and 76 (or any successor bulletins), with
respect to the audited and unaudited financial statements and certain
financial information contained in the Offering Memorandum.
(b) No Material Adverse Change. For the period from and after the date
of this Agreement and prior to the Closing Date: (i) in the judgment of the
Initial Purchasers, there shall not have occurred any Material Adverse
Change (including, without limitation, any ruling by the Federal
Communications Commission) the effect of which in the sole judgment of the
Initial Purchasers makes it impractical or inadvisable to proceed with the
Offering or the delivery of the Securities on the terms and in the manner
contemplated by the Offering Memorandum and this Agreement; and (ii) there
shall not have occurred any downgrading, nor shall any notice have been
given of any intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the possible
change, in the rating accorded any securities of the Company (including the
Securities) by any "nationally recognized statistical rating organization"
as such term is defined for purposes of Rule 436(g)(2) under the Securities
Act.
(c) Opinion of Counsel for the Company. On the Closing Date the
Initial Purchasers shall have received the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇,
counsel for the Company, dated as of such Closing Date, substantially in
the form attached as Exhibit A-1 and (ii) the opinion of Goodin, MacBride,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, regulatory counsel for the Company, dated
as of the Closing Date, substantially in the form attached as Exhibit A-2.
(d) Opinion of Counsel for the Initial Purchasers. On the Closing
Date the Initial Purchasers shall have received the opinion of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, counsel for the Initial Purchasers, dated as of such Closing Date,
with respect to such matters as may be reasonably requested by the Initial
Purchasers.
(e) Officers' Certificate. On the Closing Date the Initial
Purchasers shall have received a written certificate executed by the
Chairman of the Board, Chief Executive Officer or President of the Company
and the Chief Financial Officer or Chief Accounting Officer of the Company,
dated as of the Closing Date, to the effect set forth in subsection
(b)(ii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement and
prior to the Closing Date there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1 of this Agreement are true and correct with the same
force and effect as though expressly made on and as of the Closing Date;
and
13
(iii) the Company has complied in all material respects with all
the agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the Closing Date.
(f) Bring-down Comfort Letter. On the Closing Date, the Initial
Purchasers shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, independent
public or certified public accountants for the Company, a letter dated such
date, in form and substance reasonably satisfactory to the Initial
Purchasers, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5,
except that the specified date referred to therein for the carrying out of
procedures shall be no more than three business days prior to the Closing
Date.
(g) PORTAL Listing. At the Closing Date the Notes shall have been
designated for trading on the PORTAL market.
(h) Additional Agreements. The Company shall have entered into the
Registration Rights Agreement, and the Pledge Agreement and the Initial
Purchasers shall have received executed counterparts thereof.
(j) Additional Documents. On or before the Closing Date, the Initial
Purchasers and counsel for the Initial Purchasers shall have received such
information, documents and opinions as they may reasonably require for the
purposes of enabling them to pass upon the issuance and sale of the
Securities as contemplated herein, or in order to evidence the accuracy of
any of the representations and warranties, or the satisfaction of any of
the conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the Initial
Purchasers by notice to the Company at any time on or prior to the Closing Date,
which termination shall be without liability on the part of any party to any
other party, except that Section 4, Section 6, Section 8 and Section 9 shall at
all times be effective and shall survive such termination.
Section 6. Reimbursement of Initial Purchasers' Expenses. If this
Agreement is terminated by the Initial Purchasers pursuant to Section 5 or
Section 6, or if the sale to the Initial Purchasers of the Securities on the
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse the Initial Purchasers (or
such Initial Purchasers as have terminated this Agreement with respect to
themselves), severally, upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by the Initial Purchasers in connection with the
proposed purchase and the offering and sale of the Securities, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, facsimile and telephone charges.
Section 7. Offer, Sale and Resale Procedures. Each of the Initial
Purchasers and the Company hereby establish and agree to observe the following
procedures in connection with the offer and sale of the Securities:
(i) Offers and Sales only to Qualified Institutional Buyers.
Offers and sales of the Securities will be made only by the Initial
Purchasers or Affiliates thereof qualified to do so in the
jurisdictions in which such offers or sales are made. Each such offer
or sale shall only be made (A) to persons whom the offeror or seller
reasonably believes to be qualified institutional buyers (as defined
in Rule 144A under the Securities Act) or (B) non-U.S. persons outside
14
the United States to whom the offeror or seller reasonably believes
offers and sales of the Securities may be made in reliance upon
Regulation S under the Securities Act, upon the terms and conditions
set forth in Annex I hereto, which Annex I is hereby expressly made a
part hereof.
(ii) No General Solicitation. The Securities will be offered by
approaching prospective Subsequent Purchasers on an individual basis.
No general solicitation or general advertising (within the meaning of
Rule 502(c) under the Securities Act) will be used in the United
States in connection with the offering of the Securities.
(iii) Purchases by Non-Bank Fiduciaries. In the case of a non-
bank Subsequent Purchaser of a Note acting as a fiduciary for one or
more third parties, in connection with an offer and sale to such
purchaser pursuant to clause (i) above, each third party shall, in the
judgment of the applicable Initial Purchaser, be a Qualified
Institutional Buyer or a non-U.S. person outside the United States.
(iv) Restrictions on Transfer. Upon original issuance by the
Company, and until such time as the same is no longer required under
the applicable requirements of the Securities Act, the Securities (and
all securities issued in exchange therefor or in substitution thereof,
other than the Exchange Securities) shall bear the following legend:
"THE NOTE (OR ITS PREDECESSORS) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER ▇▇▇▇▇▇▇ ▇ ▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ SECURITIES ACT OF 1933, AS AMENDED, AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER OR
ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE NOTE
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) (a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), PURCHASING
FOR ITS OWN ACCOUNT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A UNDER THE SECURITIES ACT, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 OF THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT PROVIDED THAT IN THE CASE OF A TRANSFER PURSUANT
TO CLAUSE (d) SUCH TRANSFER IS EFFECTED BY THE DELIVERY TO THE
TRANSFEREE OF DEFINITIVE SECURITIES REGISTERED IN ITS NAME (OR ITS
NOMINEES NAME) IN THE BOOKS MAINTAINED BY THE REGISTRAR, AND IS
15
SUBJECT TO THE RECEIPT BY THE REGISTRAR (AND THE COMPANY, IF IT SO
REQUESTS) OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF
COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (ii) TO THE COMPANY OR (iii) 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 OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE NOTE EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE."
Following the sale of the Securities by the Initial Purchasers to
Subsequent Purchasers pursuant to the terms hereof, the Initial
Purchasers shall not be liable or responsible to the Company for any
losses, damages or liabilities suffered or incurred by the Company,
including any losses, damages or liabilities under the Securities Act,
arising from or relating to any resale or transfer of any Security.
(v) Delivery of Offering Memorandum. Each Initial Purchaser will
deliver to each purchaser of the Securities from such Initial
Purchaser, in connection with its original distribution of the
Securities, a copy of the Offering Memorandum, as amended and
supplemented at the date of such delivery.
Section 8. Indemnification.
(a) Indemnification of the Initial Purchasers. The Company agrees to
indemnify and hold harmless each Initial Purchaser, its officers and
employees, and each person, if any, who controls any Initial Purchaser
within the meaning of the Securities Act and the Exchange Act against any
loss, claim, damage, liability or expense, as incurred, to which such
Initial Purchaser or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering Memorandum
or any information provided by the Company to any Holder or prospective
purchaser of Securities pursuant to Section 3(h) (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
to reimburse each Initial Purchaser and each such controlling person for
any and all expenses (including the reasonable fees and disbursements of
counsel chosen by NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC) as such expenses
are reasonably incurred by such Initial Purchaser or such controlling
person in connection with investigating, defending, settling, compromising
or paying any such loss, claim, damage, liability, expense or action;
provided, however, that the foregoing indemnity agreement shall not apply
to any loss, claim, damage, liability or expense to the extent, but only to
the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and
in conformity with written information furnished to the Company by the
Initial Purchasers expressly for use in any Preliminary Offering Memorandum
or the Offering Memorandum (or any amendment or
16
supplement thereto) and provided further, that the Company will not be
liable to the Initial Purchasers or any person controlling the Initial
Purchasers or any of their respective affiliates, directors, officers,
agents, representatives or employees with respect to any such untrue
statement or omission made in the Preliminary Offering Memorandum that is
corrected in the final Offering Memorandum (or any amendment or supplement
thereto) if (i) the person asserting any such loss, claim, damage or
liability purchased Securities from the Initial Purchasers in reliance upon
the Preliminary Offering Memorandum but was not delivered or sent a copy of
the final Offering Memorandum (as amended or supplemented) at or prior to
the written confirmation of the sale of such Securities to such person,
unless such failure to deliver or send the final Offering Memorandum (as
amended or supplemented) was a result of noncompliance by the Company with
Section 3(c) of this Agreement and (ii) it shall have been determined that
the Initial Purchasers, and each such controlling person, if any, would not
have incurred such losses, claims, damages or liabilities had the final
Offering Memorandum been delivered or sent. The indemnity agreement set
forth in this Section 8(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Initial Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company and each of its directors and each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company or any such director, or controlling person
may become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of such Initial Purchaser), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto), or arises out of or is 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 not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any
Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Initial Purchasers
expressly for use therein; and to reimburse the Company, or any such
director or controlling person for any legal and other expenses reasonably
incurred by the Company, or any such director or controlling person in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action. The Company
hereby acknowledges that the only information that the Initial Purchasers
have furnished to the Company expressly for use in any Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or supplement
thereto) are the statements set forth (A) as the paragraph preceding the
"Notice to New Hampshire Residents" on the inside front cover page of the
Offering Memorandum concerning stabilization by the Initial Purchasers and
(B) in the third, fourth, seventh and eighth paragraphs under the caption
"Plan of Distribution" in the Offering Memorandum; and the Initial
Purchasers confirm that such statements are correct. The indemnity
agreement set forth in this Section 8(b) shall be in addition to any
liabilities that each Initial Purchaser may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly
after receipt by an indemnified party under this Section 8 of notice of the
commencement of any
17
action, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof, but the omission
to so notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party under the indemnity agreement
contained in this Section 8 except to the extent it is prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends
to seek indemnity from an indemnifying party, the indemnifying party will
be entitled to participate in and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, 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; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (NationsBanc ▇▇▇▇▇▇▇▇▇▇
Securities LLC in the case of Section 8(b) and Section 9), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying
party.
(d) Settlements. The indemnifying party under this Section 8 shall
not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
nonappealable judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party against any loss, claim, damage, liability
or expense by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel as contemplated by Section 8(c) hereof, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to
the date of such settlement or delivered notice to the indemnified party of
its good faith objection to such claim of indemnification. No indemnifying
party shall, without the prior written consent of the indemnified party,
effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which
any indemnified party is or could have been a party and indemnity was or
could have been
18
sought hereunder by such indemnified party, unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
action, suit or proceeding.
Section 9. Contribution.
If the indemnification provided for in Section 8 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Initial Purchasers,
on the other hand, from the offering of the Securities pursuant to this
Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Initial Purchasers, on the other
hand, in connection with the statements or omissions or inaccuracies in the
representations and warranties herein 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, on the one hand,
and the Initial Purchasers, on the other hand, in connection with the offering
of the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company, and the total discount received by the Initial Purchasers bear to
the aggregate initial offering price of the Securities. The relative fault of
the Company, on the one hand, and the Initial Purchasers, on the other hand,
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company, on
the one hand, or the Initial Purchasers, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Initial Purchaser
shall be required to contribute any amount in excess of the discount received by
such Initial Purchaser in connection with the Securities distributed by it. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute pursuant to this Section 9 are several, and not joint,
in proportion to their respective commitments as set forth opposite their names
in Schedule A. For purposes of this
19
Section 9, each officer and employee of an Initial Purchaser and each person, if
any, who controls an Initial Purchaser within the meaning of the Securities Act
and the Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company, and each person, if any, who
controls the Company with the meaning of the Securities Act and the Exchange Act
shall have the same rights to contribution as the Company.
Section 10. Termination of this Agreement. Prior to the Closing Date, this
Agreement maybe terminated by the Initial Purchasers by notice given to the
Company if at any time (i) trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal or New York
authorities; or (iii) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any change
in the United States or international financial markets, or any substantial
change or development involving a prospective substantial change in United
States' or international political, financial or economic conditions, as in the
judgment of the Initial Purchasers is material and adverse and makes it
impracticable to market the Securities in the manner and on the terms described
in the Offering Memorandum or to enforce contracts for the sale of securities.
Any termination pursuant to this Section 10 shall be without liability on the
part of (a) the Company to any Initial Purchaser, except that the Company shall
be obligated to reimburse the expenses of the Initial Purchasers pursuant to
Sections 4 and 6 hereof, (b) any Initial Purchaser to the Company, or (c) of any
party hereto to any other party except that the provisions of Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
Section 11. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Initial Purchasers
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Initial
Purchaser or the Company or any of its or their partners, officers or directors
or any controlling person, as the case may be, and will survive delivery of and
payment for the Securities sold hereunder and any termination of this Agreement.
Section 12. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Initial Purchasers:
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Sleigh
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: 312/993-9767
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
20
If to the Company:
Pac-West Telecomm, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 13. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Initial Purchasers
pursuant to Section 16 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Securities as such from any of the Initial Purchasers merely by reason of
such purchase.
Section 14. Partial Unenforceability. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 15. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
Section 16. Default of One or More of the Several Initial Purchasers. If
any one or more of the several Initial Purchasers shall fail or refuse to
purchase Securities that it or they have agreed to purchase hereunder on the
Closing Date, and the aggregate number of Securities which such defaulting
Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase
does not exceed 10% of the aggregate number of the Securities to be purchased on
such date, the other Initial Purchasers shall be obligated, severally, in the
proportions that the number of Securities set forth opposite their respective
names on Schedule A bears to the aggregate number of Securities set forth
opposite the names of all such non-defaulting Initial Purchasers, or in such
other proportions as may be specified by the Initial Purchasers with the consent
of the non-defaulting Initial Purchasers, to purchase the Securities which such
defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused
to purchase on such date. If any one or more of the Initial Purchasers shall
fail or refuse to purchase Securities and the aggregate number of Securities
with respect to which such default occurs exceeds 10% of the aggregate number of
Securities to be purchased on the Closing Date, and arrangements satisfactory to
the Initial Purchasers and the Company for the purchase of such Securities are
not made within 48 hours
21
after such default, this Agreement shall terminate without liability of any
party to any other party except that the provisions of Section 4, Section 6,
Section 8 and Section 9 shall at all times be effective and shall survive such
termination. In any such case either the Initial Purchasers or the Company shall
have the right to postpone the Closing Date, as the case may be, but in no event
for longer than seven days in order that the required changes, if any, to the
Offering Memorandum or any other documents or arrangements may be effected.
As used in this Agreement, the term "Initial Purchaser" shall be
deemed to include any person substituted for a defaulting Initial Purchaser
under this Section 10. Any action taken under this Section 16 shall not relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this Agreement.
Section 17. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
22
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
PAC-WEST TELECOMM, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
__________________________
[Title]
The foregoing Purchase Agreement is hereby confirmed and accepted by
the Initial Purchasers in Chicago, Illinois as of the date first above written.
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
CIBC ▇▇▇▇▇▇▇▇▇▇▇ CORP.
FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST
SECURITIES, INC. As the several Initial Purchasers
By NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
By:__________________________
[Title]
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
PAC-WEST TELECOMM, INC.
By: __________________________
[Title]
The foregoing Purchase Agreement is hereby confirmed and accepted by
the Initial Purchasers in Chicago, Illinois as of the date first above written.
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
CIBC ▇▇▇▇▇▇▇▇▇▇▇ CORP.
FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST
SECURITIES, INC. As the several Initial Purchasers
By NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________
[Title] ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Director
SCHEDULE A
Aggregate
Principal Amount
Initial Purchasers of Securities to
be Purchased
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities LLC........... $ 90,000,000
CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp........................... 30,000,000
First Union Capital Markets..................... 30,000,000
Total........................................ $150,000,000
EXHIBIT A
Opinion of counsel for the Company to be delivered pursuant to Section
5(c) of the Purchase Agreement.
References to the Offering Memorandum in this Exhibit A include any
supplements thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum and to enter into and perform its obligations under the Purchase
Agreement, the Registration Rights Agreement, the Pledge Agreement, the
Indenture, the Securities, the Exchange Securities and the DTC Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except 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.
(iv) The authorized, issued and outstanding capital stock of the Company
conform in all material respects to the descriptions thereof set forth in the
Offering Memorandum. All of the outstanding shares of Common Stock and
Preferred Stock have been duly authorized and validly issued, are fully paid and
nonassessable and, to the best of such counsel's knowledge, have been issued in
compliance with the registration and qualification requirements of federal and
state securities laws. The description of the Company's stock option, stock
bonus and other stock plans or arrangements, and the options or other rights
granted and exercised thereunder, set forth in the Offering Memorandum
accurately and fairly describes such plans, arrangements, options and rights.
(v) No stockholder of the Company or any other person has any preemptive
right, right of first refusal or other similar right to subscribe for or
purchase securities of the Company arising (i) by operation of the charter or
by-laws of the Company or the General Corporation Law of the State of California
or (ii) to the best knowledge of such counsel, otherwise.
(vi) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(vii) Each of the Registration Rights Agreement, the Pledge Agreement and
the DTC Agreement has been duly authorized, executed and delivered by, and is a
valid and binding agreement of, the Company, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
A-1
(viii) The Indenture has been duly authorized, executed and delivered by
the Company and (assuming the due authorization, execution and delivery thereof
by the Trustee) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general principles of equity.
(ix) The Notes are in the form contemplated by the Indenture, have been
duly authorized by the Company for issuance and sale pursuant to this Agreement
and the Indenture and, when executed by the Company and authenticated by the
Trustee in the manner provided in the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee) and delivered against
payment of the purchase price therefor, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or affecting
enforcement of the rights and remedies of creditors or by general principles of
equity and will be entitled to the benefits of the Indenture.
(x) The Exchange Securities have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in accordance with
the terms of the Indenture, the Registration Rights Agreement and the Exchange
Offer, will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or affecting enforcement of the rights and remedies of
creditors or by general principles of equity and will be entitled to the
benefits of the Indenture.
(xi) The Securities and the Indenture conform in all material respects to
the descriptions thereof contained in the Offering Memorandum.
(xii) The statements in the Offering Memorandum under the captions
"Description of the Notes," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Business--Intellectual Property," "Certain Relationships and Related
Transactions," "Certain United States Federal Tax Considerations" and "Notice to
Investors," insofar as such statements constitute matters of law, summaries of
legal matters, the Company's charter or by-law provisions, documents or legal
proceedings, or legal conclusions, have been reviewed by such counsel and fairly
present and summarize, in all material respects, the matters referred to
therein.
(xiii) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance of the
Purchase Agreement, the Registration Rights Agreement, the Pledge Agreement, the
DTC Agreement, the Securities, the Exchange Securities or the Indenture, or the
issuance and delivery of the Securities or the Exchange Securities, or
consummation of the transactions contemplated hereby and thereby and by the
Offering Memorandum, except such as have been obtained or made by the Company
and are in full force and effect under the Securities Act, applicable state
securities or blue sky laws and except such as may be required by federal and
state securities laws with respect to the Company's obligations under the
Registration Rights Agreement.
A-2
(xiv) The execution and delivery of the Purchase Agreement, the
Registration Rights Agreement, the Pledge Agreement, the DTC Agreement, the
Securities, the Exchange Securities and the Indenture by the Company and the
performance by the Company of its obligations thereunder (other than performance
by the Company of its obligations under the indemnification section of the
Purchase Agreement, as to which no opinion need be rendered) (i) have been duly
authorized by all necessary corporate action on the part of the Company; (ii)
will not result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary; (iii) will not constitute a breach of, or Default
[or a Debt Repayment Triggering Event] under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company pursuant to the best knowledge of such counsel, any material Existing
Instrument; or (iv) to the best knowledge of such counsel, will not result in
any violation of any law, administrative regulation or administrative or court
decree applicable to the Company or any subsidiary.
(xv) The Company is not, and after receipt of payment for the Securities
will not be, an "investment company" within the meaning of Investment Company
Act.
(xvi) To the best knowledge of such counsel, the Company is not in
violation of its charter or by-laws or any law, administrative regulation or
administrative or court decree applicable to it or is in Default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate, result in
a Material Adverse Change.
(xvii) Assuming the accuracy of the representations, warranties and
covenants of the Company and the Initial Purchasers contained herein, no
registration of the Notes under the Securities Act, and no qualification of an
indenture under the Trust Indenture Act with respect thereto, is required for in
connection with the purchase of the Initial Securities by the Initial Purchasers
or the initial resale of the Initial Securities by the Initial Purchasers to
Qualified Institutional Buyers or Institutional Accredited Investors in the
manner contemplated by this Agreement and the Offering Memorandum other than any
registration or qualification that may be required in connection with the
Exchange Offer contemplated by the Offering Memorandum or in connection with the
Registration Rights Agreement. Such counsel need express no opinion, however,
as to when or under what circumstances any Initial Notes initially sold by the
Initial Purchasers may be reoffered or resold.
(xviii) Each of the Preliminary Offering and the Offering Memorandum, as
of its date, and each amendment or supplement thereto, as of its date (except
for the financial statements included or incorporated by reference therein, as
to which no opinion need be expressed), contained all of the information
required under Rule 144A(d)(A) of the Securities Act.
(xix) The provisions of the Pledge Agreement are effective to create in
favor of the Collateral Agent (as defined in the Pledge Agreement) as agent of
and securities intermediary for the Trustee, for the benefit of the holders of
the Notes, a valid security interest in that portion of the Collateral (as
defined in the Pledge Agreement) that is subject to Article 9 of the Uniform
Commercial Code of the State of New York (the "New York UCC") as security for
the payment of the Obligations (as defined in the Pledge Agreement) to the
extent set forth in the Pledge Agreement.
A-3
(xx) With respect to that portion of the Collateral which is Government
Securities (as defined in the Pledge Agreement) consisting of obligations of the
United States Treasury which constitute Book-Entry Securities (as defined below)
issued by the Federal Reserve Bank of New York ("FRBNY"), the Pledge Agreement,
together with (i) the crediting by book entry on the records of the FRBNY
transferring such Government Securities to the Collateral Agent's Account at the
FRBNY and (ii) the crediting by book entry of such Government Securities to the
Pledge Account (as defined in the Pledge Agreement) by the Collateral Agent, in
the manner contemplated by the Pledge Agreement, are effective to create in
favor of the Collateral Agent as agent of and securities intermediary for the
Trustee (for the benefit of the holders of the Notes), a perfected security
interest in the rights and property interest of the Company in and to such
Government Securities in accordance with the terms of the Pledge Agreement. As
used herein, "Book-Entry Securities" means securities, including bills, notes or
bonds (each as defined in 31. C.F.R. (S)357.2) or qualifying components of
securities eligible for the Separate Trading of Registered Interest and
Principal of Securities ("STRIPS") program or the Coupons Under Book-Entry
Safekeeping Program ("CUBES") of the U.S. Treasury referred to in 31 C.F.R.
(S)357.2, which security is issued by the United States of America or an agency
or instrumentality thereof in the form of an entry on the records of a Federal
Reserve Bank and is maintained through registration on the books of the FRBNY
pursuant to 31 C.F.R. (S)357.12(c)(2) or to other applicable Federal book-entry
regulations identical to such regulation in all material respects.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Initial Purchasers at which the
contents of the Offering Memorandum, and any supplements or amendments thereto,
and related matters were discussed and, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering Memorandum (other than as
specified above), and any supplements or amendments thereto, on the basis of the
foregoing, nothing has come to their attention which would lead them to believe
that either the Offering Memorandum, as of its date or at the Closing Date,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no belief as to the financial
statements or other financial data derived therefrom, included in the Offering
Memorandum or any amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the laws of the State of New York or
the federal law of the United States, to the extent they deem proper and
specified in such opinion, upon the opinion (which shall be dated the Closing
Date shall be satisfactory in form and substance to the Initial Purchasers,
shall expressly state that the Initial Purchasers may rely on such opinion as if
it were addressed to them and shall be furnished to the Initial Purchasers) of
other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Initial Purchasers; provided, however, that such
counsel shall further state that they believe that they and the Initial
Purchasers are justified in relying upon such opinion of other counsel, and (B)
as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials.
A-4
ANNEX I
Resale Pursuant to Regulation S or Rule 144A. Each Initial Purchaser
understands that:
(a) Such Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Securities in the United States or to, or for
the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Securities Act (i) as part of
its distribution at any time and (ii) otherwise until 40 days after the
later of the commencement of the offering of the Securities pursuant hereto
and the Closing Date, other than in accordance with Regulation S of the
Securities Act or another exemption from the registration requirements of
the Securities Act. Such Initial Purchaser agrees that, during such 40-day
restricted period, it will not cause any advertisement with respect to the
Securities (including any "tombstone" advertisement) to be published in any
newspaper or periodical or posted in any public place and will not issue
any circular relating to the Securities, except such advertisements as
permitted by and include the statements required by Regulation S.
(b) Such Initial Purchaser agrees that, at or prior to confirmation
of a sale of Securities by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the 40-day
restricted period referred to in Rule 903(c)(3) under the Securities Act,
it will send to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of your distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the Offering and the Closing Date, except in either
case in accordance with Regulation S under the Securities Act (or Rule
144A or to Accredited Institutions in transactions that are exempt
from the registration requirements of the Securities Act), and in
connection with any subsequent sale by you of the Notes covered hereby
in reliance on Regulation S during the period referred to above to any
distributor, dealer or person receiving a selling concession, fee or
other remuneration, you must deliver a notice to substantially the
foregoing effect. Terms used above have the meanings assigned to them
in Regulation S."
(c) Such Initial Purchaser agrees that the Securities offered and sold
in reliance on Regulation S will be represented upon issuance by a global
security that may not be exchanged for definitive securities until the
expiration of the 40-day restricted period referred to in Rule 903(c)(3) of
the Securities Act and only upon certification of beneficial ownership of
such Securities by non-U.S. persons or U.S. persons who purchased such
Securities in transactions that were exempt from the registration
requirements of the Securities Act.]
Annex I-1