EXHIBIT 1.1
COVAD COMMUNICATIONS GROUP, INC.
7,500,000 Shares of Common Stock
UNDERWRITING AGREEMENT
January . , 1999
BEAR, XXXXXXX & CO. INC.
BT ALEX. XXXXX INCORPORATED
XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES CORPORATION
XXXXXXX, SACHS & CO.
7,500,000 Shares of Common Stock
COVAD COMMUNICATIONS GROUP, INC.
UNDERWRITING AGREEMENT
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January , 1999
Bear, Xxxxxxx & Co. Inc.
BT Alex. Xxxxx Incorporated
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
Xxxxxxx, Sachs & Co.
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
Covad Communications Group, Inc., a corporation organized and existing
under the laws of Delaware (the "Company"), proposes, subject to the terms and
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conditions stated herein, to issue and sell to Bear, Xxxxxxx & Co. Inc. ("Bear
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Xxxxxxx"), BT Xxxx. Xxxxx Incorporated, Xxxxxxxxx, Lufkin & Xxxxxxxx Securities
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Corporation and Xxxxxxx, Sachs & Co. (collectively, the "Underwriters") an
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aggregate of 7,500,000 shares (the "Firm Shares") of its common stock, par value
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$0.001 per share (the "Common Stock") and, for the sole purpose of covering
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over-allotments in connection with the sale of the Firm Shares, at the option of
the Underwriters, up to an additional 1,125,000 shares (the "Additional Shares")
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of Common Stock. The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein as the "Shares". The Shares are more fully
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described in the Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company
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represents and warrants to, and agrees with, each of the Underwriters that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No.
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333-63899), and any amendments thereto, and related preliminary
prospectuses for the registration under the Securities Act of 1933 (the
"Securities Act") of shares of common stock, which registration statement,
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as so amended, has been declared effective by the Commission and copies of
which have heretofore been delivered to the Underwriters. Such registration
statement (and any registration statement increasing the size of the
offering (a "Rule 462(b) Registration Statement") filed pursuant to Rule
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462(b) under the Securities Act), in the respective forms in which they
were declared effective, as amended, including all exhibits thereto, are
each hereinafter referred to as the "Registration Statement". Other than a
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Rule 462(b) Registration Statement, which became effective upon filing, no
other document with respect
to the Registration Statement has heretofore been filed with the Commission
(other than prospectuses filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Securities Act (the "Securities Act
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Regulations"), each in the form heretofore delivered to the Underwriters).
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No stop order suspending the effectiveness of either Registration Statement
or the Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or, to the Company's
knowledge, threatened by the Commission. The Company, if required by the
Securities Act Regulations, proposes to file the Prospectus with the
Commission pursuant to Rule 424(b) of the Securities Act Regulations. The
Prospectus, in the form in which it is to be filed with the Commission
pursuant to Rule 424(b) of the Securities Act Regulations, is hereinafter
referred to as the "Prospectus", except that if any revised prospectus or
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prospectus supplement shall be provided to the Underwriters by the Company
for use in connection with the offering and sale of the Shares (the
"Offering") which differs from the Prospectus (whether or not such revised
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prospectus or prospectus supplement is required to be filed by the Company
pursuant to Rule 424(b) of the Securities Act Regulations), the term
"Prospectus" shall refer to such revised prospectus or prospectus
supplement, as the case may be, from and after the time it is first
provided to the Underwriters for such use; and, provided, further, that the
term "Prospectus" shall be deemed to include any wrapper or supplement
thereto prepared in connection with the distribution of any Reserved Shares
(as defined in Section 2(f), below). Any preliminary prospectus or
prospectus subject to completion included in the Registration Statement or
filed with the Commission pursuant to Rule 424 under the Securities Act is
hereafter called a "Preliminary Prospectus". All references in this
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Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a Preliminary Prospectus and the Prospectus, or any amendments
or supplements to any of the foregoing, shall be deemed to include any copy
thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("XXXXX").
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(ii) The Registration Statement and the Prospectus, at the time
the Registration Statement became effective and as of the Closing Date
referred to in Section 2 hereof, complied and comply in all material
respects with the requirements of the Securities Act and the Securities Act
Regulations, and did not and as of the Closing Date do not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. The Prospectus, as of the date hereof (unless the term
"Prospectus" refers to a prospectus which has been provided to the
Underwriters by the Company for use in connection with the offering of the
Shares which differs from the Prospectus filed with the Commission pursuant
to Rule 424(b) of the Securities Act Regulations, in which case at the time
it is first provided to the Underwriters for such use) and on the Closing
Date, does not and will not include an untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in
this Section (1)(ii) shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the
Company in writing by any Underwriter expressly for use in the Registration
Statement or the Prospectus. Each Preliminary Prospectus and Prospectus
filed as part of the Registration Statement, as part of any amendment
thereto or pursuant to Rule 424 under the Securities Act Regulations, if
filed by electronic transmission pursuant to XXXXX (except as may be
permitted by Regulation S-T under the Securities Act) was identical to the
copy
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thereof delivered to the Underwriters for use in connection with the offer
and sales of the Shares. There are no contracts or other documents required
to be described in the Prospectus or to be filed as exhibits to the
Registration Statement under the Securities Act that have not been
described or filed therein as required, and there are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required to be described in the Prospectus
that have not been described therein as required.
(iii) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus. Each of the Company and each
subsidiary is duly qualified as a foreign corporation to transact business
and is in good standing in the State of California and each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except for
such jurisdictions (other than the State of California) where the failure
to so qualify or to be in good standing would not, individually or in the
aggregate, result in a material adverse change, or any development that
could reasonably be expected to result in a material adverse change, in the
condition, financial or otherwise, or in the business, operations or
prospects, whether or not arising from transactions in the ordinary course
of business, of the Company and its subsidiaries, considered as one entity
(any such change is called a "Material Adverse Change"). The Company does
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not own or control, directly or indirectly, any corporation, association or
other entity other than Covad Communications Company, a California
corporation, and DIECA Communications, Inc., a Virginia corporation. As of
the date hereof, (a) the Company has obtained CLEC regulatory approval in
each of the following States: California, Illinois, Maryland,
Massachusetts, New York, Oregon, Texas, Virginia, Washington, Delaware,
Colorado, New Jersey, New Hampshire, District of Columbia, Pennsylvania,
Michigan and Florida, and no such regulatory approval has been withdrawn,
and to the Company's knowledge no such regulatory approval is the subject
of any legal challenge (except as disclosed in the Prospectus) and (b) the
Company has not received any notice of rejection or denial, nor has it
withdrawn, any of its applications for CLEC approval in 10 additional
States where such applications, as of the date of the Prospectus, are
pending approval.
(iv) All of the outstanding shares of capital stock of the Company
have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. The Shares, when issued, delivered and sold in accordance with this
Agreement, will be duly authorized and validly issued, fully paid and
nonassessable, and will not have been issued in violation of or subject to
any preemptive or similar rights. At September 30, 1998, after giving
effect to the issuance and sale of the Shares pursuant hereto and the
application of the net proceeds from the sale thereof, the Company had the
pro forma consolidated capitalization as set forth in the Prospectus under
the caption "Capitalization".
(v) All of the outstanding capital stock of each subsidiary of
the Company is owned, directly or indirectly, by the Company, free and
clear of any security interest, claim, lien, limitation on voting rights or
encumbrance; and all such securities have been duly authorized, validly
issued, and are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights.
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(vi) Except as disclosed in the Prospectus, there are not
currently, and will not be as a result of the Offering, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any capital
stock or other equity interest of the Company or any of its subsidiaries.
(vii) The Common Stock (including the Shares) is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act") and is listed for quotation on the Nasdaq National Market
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System ("Nasdaq"), and the Company has taken no action designed to, or
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likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or delisting the Common Stock from Nasdaq, nor
has the Company received any notification that the Commission or Nasdaq is
contemplating terminating such registration or listing.
(viii) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby, including, without
limitation, the corporate power and authority to issue, sell and deliver
the Shares as provided herein and the power to effect the Use of Proceeds
as described in the Prospectus.
(ix) This Agreement has been duly and validly authorized, executed
and delivered by the Company and is the legally valid and binding agreement
of the Company, enforceable against it in accordance with its terms, except
insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity.
(x) Neither the Company nor any of its subsidiaries is, or, after
giving effect to the offering of the Shares, will be (a) in violation of
its charter or bylaws, (b) in default in the performance of any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or to which any
of its properties is subject, or (c) in violation of any local, state or
federal law, statute, ordinance, rule, regulation, requirement, judgment or
court decree (including, without limitation, the Communications Act and the
rules and regulations of the FCC and environmental laws, statutes,
ordinances, rules, regulations, judgments or court decrees) applicable to
the Company, its subsidiaries or any of their assets or properties (whether
owned or leased) other than, in the case of clauses (b) and (c), any
default or violation that could not reasonably be expected to (1)
individually or in the aggregate, result in a material adverse effect on
the properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of the Company and its subsidiaries, taken
as a whole, (2) interfere with or adversely affect the sale of the Shares
pursuant hereto or (3) in any manner draw into question the validity of
this Agreement (any of the events set forth in clauses (1), (2) or (3), a
"Material Adverse Effect"). There exists no condition that, with notice,
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the passage of time or otherwise, would constitute a default under any such
document or instrument, except as disclosed in the Prospectus, except for
any such condition which would not reasonably be expected to result in a
Material Adverse Effect.
(xi) None of (a) the execution, delivery or performance by the
Company of this Agreement, (b) the issuance and sale of the Shares and (c)
consummation by the Company of the transactions contemplated hereby
violate, conflict with or constitute a breach of any
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of the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or
require consent which has not been obtained under, or result in the
imposition of a lien on any properties of the Company or any of its
subsidiaries, or an acceleration of any indebtedness of the Company or any
of its subsidiaries pursuant to, (1) the charter or bylaws of the Company
or any of its subsidiaries, (2) any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
its subsidiaries or their properties is or may be bound, (3) any statute,
rule or regulation applicable to the Company or any of its subsidiaries or
any of their assets or properties or (4) any judgment, order or decree of
any court or governmental agency or authority having jurisdiction over the
Company or any of its subsidiaries or any of their assets or properties,
except in the case of clauses (2), (3) and (4) for such violations,
conflicts, breaches, defaults, consents, impositions of liens or
accelerations that (x) would not singly, or in the aggregate, have a
Material Adverse Effect or (y) which are disclosed in the Prospectus. Other
than as described in the Prospectus, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of or
with, (A) any court or governmental agency, body or administrative agency
(including, without limitation, the FCC) or (B) any other person is
required for (1) the execution, delivery and performance by the Company of
this Agreement, (2) the issuance and sale of the Shares and the
transactions contemplated hereby, except (x) such as have been obtained and
made under the Securities Act and state securities or Blue Sky laws and
regulations or such as may be required by the NASD or (y) where the failure
to obtain any such consent, approval, authorization or order of, or filing
registration, qualification, license or permit would not reasonably be
expected to result in a Material Adverse Effect.
(xii) Except as set forth in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to Company's
knowledge, threatened (a) against or affecting the Company or any of its
subsidiaries, (b) which has as the subject thereof any officer or director
(in any such capacity) of, or property owned or leased by, the Company or
any of its subsidiaries or (c) relating to environmental or discrimination
matters, where in any such case (1) there is a reasonable possibility that
such action, suit or proceeding might be determined adversely to the
Company or such subsidiary and (2) any such action, suit or proceeding, if
so determined adversely, would reasonably be expected to result in a
Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute with
the employees of the Company or any of its subsidiaries exists or, to the
Company's knowledge, is threatened or imminent.
(xiii) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Shares or prevents or suspends the use of the
Prospectus; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued that
prevents the issuance of the Shares, prevents or suspends the sale of the
Shares in any jurisdiction referred to in Section 4(d) hereof or that could
adversely affect the consummation of the transactions contemplated by this
Agreement or the Prospectus; and every request of any securities authority
or agency of any jurisdiction for additional information has been complied
with in all material respects.
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(xiv) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change, (a) to the
Company's knowledge, neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign law or regulation
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, petroleum and petroleum
products (collectively, "Materials of Environmental Concern"), or otherwise
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relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental
Concern (collectively, "Environmental Laws"), which violation includes, but
is not limited to, noncompliance with any permits or other governmental
authorizations required for the operation of the business of the Company or
its subsidiaries under applicable Environmental Laws, or noncompliance with
the terms and conditions thereof, nor has the Company or any of its
subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its subsidiaries is in violation of any
Environmental Law; (b) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to
which the Company or any of its subsidiaries has received written notice,
and no written notice by any person or entity alleging potential liability
for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, attorneys'
fees or penalties arising out of, based on or resulting from the presence,
or release into the environment, of any Material of Environmental Concern
at any location owned, leased or operated by the Company or any of its
subsidiaries, now or in the past (collectively, "Environmental Claims"),
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pending or, to Company's knowledge, threatened against the Company or any
of its subsidiaries or any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed either contractually or by operation of law; and (c) to the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law.
(xv) The Company and each of its subsidiaries has (a) good and
marketable title to all of the properties and assets described in the
Prospectus or the financial statements included in the Prospectus as owned
by it, free and clear of all liens, charges, encumbrances and restrictions,
except such as are described in the Prospectus or as would not have a
Material Adverse Effect, (b) peaceful and undisturbed possession to the
extent described in the Prospectus under all material leases to which it is
a party as lessee, (c) all licenses, certificates, permits, authorizations,
approvals, franchises and other rights from, and has made all declarations
and filings with, all federal, state and local authorities (including,
without limitation, the FCC), all self-regulatory authorities and all
courts and other tribunals (each an "Authorization") necessary to engage in
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the business conducted by the Company and its subsidiaries in the manner
described in the Prospectus, except as described in the Prospectus and
except insofar as the failure to obtain any such
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Authorization would not reasonably be expected to have a Material Adverse
Effect, and no such Authorization contains a materially burdensome
restriction that is not disclosed in the Prospectus and (d) not received
any notice that any governmental body or agency is considering limiting,
suspending or revoking any such Authorization. Except where the failure to
be in full force and effect would not have a Material Adverse Effect, all
such Authorizations are valid and in full force and effect and the Company
and each of its subsidiaries is in compliance in all material respects with
the terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with respect
thereto. All material leases to which the Company and each of its
subsidiaries is a party are valid and binding and no default by the Company
or any of its subsidiaries has occurred and is continuing thereunder and,
to the Company's knowledge, no material defaults by the landlord are
existing under any such lease that could reasonably be expected to result
in a Material Adverse Effect.
(xvi) Except as described in the Prospectus, the Company and its
subsidiaries own, possess or have the right to employ sufficient patents,
patent rights, licenses (including all FCC, state, local or other
jurisdictional regulatory licenses), inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, software, systems or procedures),
trademarks, service marks and trade names, inventions, computer programs,
technical data and information (collectively, the "Intellectual Property
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Rights") reasonably necessary to conduct their businesses as now conducted;
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and the expected expiration of any of such Intellectual Property Rights
would not result in a Material Adverse Change. The Intellectual Property
Rights presently employed by the Company and its subsidiaries in connection
with the businesses now operated by them or which are proposed to be
operated by them are owned, to the Company's knowledge, free and clear of
and without violating any right, claimed right, charge, encumbrance,
pledge, security interest, restriction or lien of any kind of any other
person and neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing except as would not reasonably be expected
to have a Material Adverse Effect. The use of the Intellectual Property in
connection with the business and operations of the Company and its
subsidiaries does not infringe on the rights of any person, except as could
not reasonably be expected to have a Material Adverse Effect.
(xvii) None of the Company or any of its subsidiaries, or, or to the
knowledge of the Company, any of their respective officers, directors,
partners, employees, agents or affiliates or any other person acting on
behalf of the Company or any of its subsidiaries has, directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a customer or
supplier, official or employee of any governmental agency (domestic or
foreign), instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who was, is or may be in a position to help or hinder the business
of the Company or any of its subsidiaries (or assist the Company or any of
its subsidiaries in connection with any actual or proposed transaction)
which (a) would reasonably be expected to subject the Company, or any other
individual or entity to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (b) if not
given in the past, would reasonably be expected to have had a Material
Adverse Effect or (c) if not continued in the future, would reasonably be
expected to have a Material Adverse Effect.
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(xviii) All material tax returns required to be filed by the Company
and its subsidiaries in all jurisdictions have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently
payable without penalty or interest. To the knowledge of the Company, there
are no material proposed additional tax assessments against the Company or
any of its subsidiaries or the assets or property of the Company or any of
its subsidiaries. The Company has made adequate charges, accruals and
reserves in the applicable financial statements included in the Prospectus
in respect of all federal, state and foreign income and franchise taxes for
all periods as to which the tax liability of the Company or any of its
consolidated subsidiaries has not been finally determined.
(xix) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
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(xx) Except as disclosed in the Prospectus, there are no holders
of securities of the Company or any of its subsidiaries who, by reason of
the execution by the Company of this Agreement to which it is a party or
the consummation by the Company or any of its subsidiaries of the
transactions contemplated hereby, have the right to request or demand that
the Company or any of its subsidiaries register under the Securities Act or
analogous foreign laws and regulations securities held by them, other than
such that have been duly waived.
(xxi) The Company and its subsidiaries each maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that: (a) transactions are executed in accordance with management's general
or specific authorizations; (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity in all material
respects with generally accepted accounting principles and to maintain
accountability for assets; and (c) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxii) Each of the Company and its subsidiaries are insured by
recognized, financially sound institutions with policies in such amounts
and with such deductibles and covering such risks as are customary for
similarly situated businesses including, but not limited to, policies
covering real and personal property owned or leased by the Company and its
subsidiaries against theft, damage, destruction and acts of vandalism. The
Company has no reason to believe that it or any subsidiary will not be able
(a) to renew its existing insurance coverage as and when such policies
expire or (b) 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.
(xxiii) The Company has not (a) taken, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares or (b) since the
date of the Preliminary Prospectus (1) sold, bid for, purchased or paid any
person any compensation for soliciting purchases of, the Shares or (2) paid
or agreed to pay to any
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person any compensation for soliciting another to purchase any other
securities of the Company.
(xxiv) The Company and its subsidiaries and any "employee benefit
plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations
thereunder (collectively, "ERISA")) established or maintained by the
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Company, its subsidiaries or their "ERISA Affiliates" (as defined below)
are in compliance in all material respects with ERISA. "ERISA Affiliate"
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means, with respect to the Company or a subsidiary, any member of any group
of organizations described in Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended, and the regulations and
published interpretations thereunder (the "Code") of which the Company or
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such subsidiary is a member. No "reportable event" (as defined under ERISA)
has occurred or is reasonably expected to occur with respect to any
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would
have any "amount of unfunded benefit liabilities" (as defined under ERISA).
Neither the Company, its subsidiaries nor any of their ERISA Affiliates has
incurred or reasonably expects to incur any liability under (a) Title IV of
ERISA with respect to termination of, or withdrawal from, any "employee
benefit plan" or (b) Sections 412, 4971, 4975 or 4980B of the Code. Each
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates that is intended to be
qualified under Section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or failure to act, which would cause the loss
of such qualification.
(xxv) Except as otherwise disclosed in the Prospectus, subsequent
to the respective dates as of which information is given in the Prospectus:
(a) there has been no Material Adverse Change; (b) the Company and its
subsidiaries, considered as one entity, have not incurred any material
liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; (c) there has been no
dividend or distribution of any kind declared, paid or made by the Company
or, except for dividends paid to the Company or other subsidiaries, any of
its subsidiaries on any class of capital stock or repurchase or redemption
by the Company or any of its subsidiaries of any class of capital stock;
(d) there has been no capital expenditure or commitment by the Company or
any of its subsidiaries exceeding $100,000, either individually or in the
aggregate except in the ordinary course of business as generally
contemplated by the Prospectus; (e) there has been no change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by the Company or any of its subsidiaries; (f) there has
been no revaluation by the Company or any of its subsidiaries of any of
their assets; (g) there has been no increase in the salary or other
compensation payable or to become payable by the Company or any of its
subsidiaries to any of their officers, directors, employees or advisors,
nor any declaration, payment or commitment or obligation of any kind for
the payment by the Company or any of its subsidiaries of a bonus or other
additional salary or compensation to any such person; (h) there has been no
amendment or termination of any material contract, agreement or license to
which the Company or any subsidiary is a party or by which it is bound; (i)
there has been no waiver or release of any material right or claim of the
Company or any subsidiary, including any write-off or other compromise of
any material account receivable of the Company or any subsidiary; and (j)
there has been no change in pricing or
9
royalties set or charged by the Company or any subsidiary to their
respective customers or licensees or in pricing or royalties set or charged
by persons who have licensed Intellectual Property Rights to the Company or
any of its subsidiaries.
(xxvi) Ernst & Young LLP, who have expressed their opinion with
respect to the financial statements (which term as used in this Agreement
includes the related notes thereto) and supporting schedules included in
the Prospectus are independent public or certified public accountants
within the meaning of Regulation S-X under the Securities Act and the
Exchange Act.
(xxvii) The financial statements, together with the related notes,
included in the Prospectus present fairly in all material respects the
consolidated financial position of the Company and its subsidiaries as of
and at the dates indicated and the results of their operations and cash
flows for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
may be expressly stated in the related notes thereto. The financial data
set forth in the Prospectus under the captions "Prospectus 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 Prospectus.
(xxviii) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company and any other person that
would give rise to a valid claim against the Company or either of the
Underwriters for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Shares.
(xxix) The statements (including the assumptions described therein)
included in the Prospectus (a) are within the coverage of Rule 175(b) under
the Securities Act to the extent such data constitute forward looking
statements as defined in Rule 175(c) and (b) were made by the Company with
a reasonable basis and reflect the Company's good faith estimate of the
matters described therein.
(xxx) Each of the (i) Series C-1 Preferred Stock Purchase
Agreement, dated as of December 30, 1998, by and among the Company and AT&T
Venture Fund II, LP, Special Partners Fund, LP and Special Partners Fund
International, LP (collectively, "AT&T Ventures"); (ii) Series D-1
-------------
Preferred Stock Purchase Agreement, dated as of December 30, 1998, by and
among the Company and AT&T Venture Fund II, LP, Special Partners Fund, LP
and Special Partners Fund International, LP; (iii) Series C-1 Preferred
Stock Purchase Agreement, dated as of December 30, 1998, by and among the
Company and NEXTLINK Communications, Inc. ("Nextlink"); (iv) Series D-1
--------
Preferred Stock Purchase Agreement, dated as of December 30, 1998, by and
among the Company and Nextlink; (v) Series C-1 Stock Purchase Agreement,
dated as of January 19, 1999, by and between the Company and U.S.
Telesource, Inc., a wholly owned subsidiary of Qwest Communications
Corporation (as used herein, "Qwest" refers to U.S. Telesource, Inc. or
-----
Qwest Communications Corporation, as applicable); and (vi) Series D-1 Stock
Purchase Agreement, dated as of January 19, 1999, by and between the
Company and Qwest has been duly authorized, executed and delivered by each
of the Company and each of the other parties thereto, and each of the
purchases and sales of Series C-1 and D-1 Preferred Stock pursuant thereto
has been consummated in accordance with the terms and provisions of such
stock purchase agreements and the Amended and Restated Certificate of
Incorporation of the Company (such shares of Series C-1 and D-1 Preferred
Stock issued by the Company
10
and sold to AT&T Ventures, Nextlink and Qwest shall be herein collectively
referred to as the "Strategic Investor Preferred Shares", and such stock
-----------------------------------
purchase agreements shall be herein collectively referred to as the
"Strategic Investor Stock Purchase Agreements").
--------------------------------------------
(xxxi) Each of the __________ Agreement, dated as of December 31,
1998, between the Company and AT&T Corp.; the ___________________________
Agreement between the Company and AT&T Corp., dated as of December 30,
1998; the ___________ Agreement, dated as of December 29, 1998, between the
Company and Nextlink; and the ________ Agreement, dated as of January 19,
1999, between the Company and Qwest (together, the "Strategic Alliance
------------------
Agreements"), has been duly authorized, executed and delivered by the
----------
Company, AT&T, Nextlink and Qwest, as the case may be, and is in full force
and effect, and no party to any such agreement has given any notice of
termination or amendment of any material provisions thereof, or of any
intention to terminate or amend any material provision thereof, to any
other party.
(xxxii) No registration under the Securities Act of the Strategic
Investor Preferred Shares, or the Class B Common Stock, par value $0.001
per share (the "Class B Common Stock"), into which the Strategic Investor
--------------------
Preferred Shares are convertible upon consummation of the Offering, is
required for the offer or sale of the Strategic Investor Preferred Shares
to AT&T Ventures, Nextlink or Qwest, as contemplated by the respective
Strategic Investor Stock Purchase Agreements.
(xxxiii) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters pursuant to
this Agreement shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
The Company acknowledges that each of the Underwriters and, for
purposes of the opinions to be delivered to the Underwriters pursuant to Section
8 hereof, counsel to the Company and counsel to the Underwriters, will rely upon
the accuracy and truth of the foregoing representations and hereby consents to
such reliance.
2. Purchase, Sale and Delivery of the Shares.
-----------------------------------------
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters and the Underwriters,
severally and not jointly, agree to purchase from the Company, at a purchase
price per share of $ , the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any additional
number of Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the office of Bear, Xxxxxxx &
Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or at such other place as shall
be agreed upon by the Underwriters and the Company, at 10:00 A.M. on , 1999
(unless postponed in accordance with the provisions of Section 9 hereof) after
the determination of the public offering price of the Firm Shares, or such other
time not later than ten business days after such date as shall be agreed upon by
the Underwriters and the Company (such time and date of payment and delivery
being herein called the "Closing Date").
11
Payment shall be made to the Company by wire transfer in same day funds, against
delivery to the Underwriters of certificates for the Shares to be purchased by
them. Certificates for the Firm Shares shall be registered in such name or names
and in such authorized denominations as the Underwriters may request in writing
at least two full business days hours prior to the Closing Date. The Company
will permit the Underwriters to examine and package such certificates for
delivery at least one full business day prior to the Closing Date.
(c) In addition, the Company hereby grants to the Underwriters the
option to purchase up to 1,125,000 Additional Shares at the same purchase price
per share to be paid by the Underwriters to the Company for the Firm Shares as
set forth in this Section 2, for the sole purpose of covering over-allotments in
the sale of Firm Shares by the Underwriters. This option may be exercised at any
time, in whole or in part, on or before the thirtieth day following the date of
the Prospectus, by written notice by the Underwriters to the Company. Such
notice shall set forth the aggregate number of Additional Shares as to which the
option is being exercised and the date and time, as reasonably determined by the
Underwriters, when the Additional Shares are to be delivered (such date and time
being herein sometimes referred to as the "Additional Closing Date"); provided,
-----------------------
however, that the Additional Closing Date shall not be earlier than the Closing
Date or earlier than the second full business day after the date on which the
option shall have been exercised nor later than the eighth full business day
after the date on which the option shall have been exercised (unless such time
and date are postponed in accordance with the provisions of Section 9 hereof).
Certificates for the Additional Shares shall be registered in such name or names
and in such authorized denominations as the Underwriters may request in writing
at least two full business days prior to the Additional Closing Date. The
Company will permit the Underwriters to examine and package such certificates
for delivery at least one full business day prior to the Additional Closing
Date.
(d) The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to the total number of Firm
Shares being purchased from the Company, subject, however, to such adjustments
to eliminate any fractional shares as the Underwriters in their sole discretion
shall make.
(e) Payment for the Additional Shares shall be made by wire
transfer in same day funds each payable to the order of the Company at the
office Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, or such
other location as may be mutually acceptable, upon delivery of the certificates
for the Additional Shares to the Underwriters.
(f) The Company and the Underwriters agree that up to 450,000 of
the Firm Shares to be purchased by the Underwriters (the "Reserved Shares")
---------------
shall be reserved for sale by the Underwriters to certain individuals and
entities having business relationships with the Company, as part of the
distribution of the Shares by the Underwriters, subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the National
Association of Securities Dealers, Inc. (the "NASD") and all other applicable
----
laws, rules and regulations. To the extent that such Reserved Shares are not
orally confirmed for purchase by such individuals and entities having business
relationships with the Company by the end of the first business day after the
date of this Agreement, such Reserved Shares may be offered to the public as
part of the public offering contemplated hereby.
12
3. Offering. Upon the Underwriters' authorization of the release
--------
of the Firm Shares, the Underwriters propose to offer the Shares for sale to the
public upon the terms set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees with
------------------------
each of the Underwriters that:
(a) The Company will notify the Underwriters immediately (and,
if requested by the Underwriters, will confirm such notice in writing) (i)
when any post-effective amendment to the Registration Statement becomes
effective, (ii) of any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for any
additional information, (iii) of the mailing or the delivery to the
Commission for filing of the Prospectus or any amendment of or supplement
to the Registration Statement or the Prospectus or any document to be filed
pursuant to the Exchange Act during any period when the Prospectus is
required to be delivered under the Securities Act, (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of either
Registration Statement or any post-effective amendment thereto or of the
initiation, or the threatening, of any proceedings therefor, (v) of the
receipt of any comments or inquiries from the Commission, and (vi) of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for that purpose. If the
Commission shall propose or enter a stop order at any time, the Company
will make every reasonable effort to prevent the issuance of any such stop
order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any post-effective amendment to the
Registration Statement or any amendment of or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Shares which differs
from the prospectus filed with the Commission pursuant to Rule 424(b) of
the Securities Act Regulations, whether or not such revised prospectus is
required to be filed pursuant to Rule 424(b) of the Securities Act
Regulations) to which the Underwriters or Underwriters' Counsel (as
hereinafter defined) shall reasonably object, will furnish the Underwriters
with copies of any such amendment or supplement a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file
any such amendment or supplement or use any such prospectus to which the
Underwriters or counsel for the Underwriters shall reasonably object.
(b) If any event shall occur as a result of which the Prospectus
would, in the judgment of the Underwriters or the Company include an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or if it
shall be necessary at any time to amend or supplement the Prospectus or
either Registration Statement to comply with the Securities Act or the
Securities Act Regulations, the Company will notify the Underwriters
promptly and prepare and file with the Commission an appropriate amendment
or supplement (in form and substance satisfactory to the Underwriters)
which will correct such statement or omission or which will effect such
compliance.
(c) The Company has delivered to the Underwriters five signed
copies of the Registration Statement as originally filed, including
exhibits, and all amendments thereto, and the Company will promptly deliver
to each of the Underwriters,
13
from time to time during the period that the Prospectus is required to be
delivered under the Securities Act, such number of copies of the Prospectus
and the Registration Statement, and all amendments of and supplements to
such documents, if any, as the Underwriters may reasonably request.
(d) The Company will endeavor in good faith, in cooperation with
the Underwriters, to qualify the Shares for offering and sale under the
securities laws relating to the offering or sale of the Shares of such
jurisdictions as the Underwriters may designate and to maintain such
qualification in effect for so long as required for the distribution
thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a
general consent to service of process.
(e) The Company will make generally available (within the
meaning of Section 11(a) of the Securities Act) to its security holders and
to the Underwriters as soon as practicable, but not later than 45 days
after the end of its fiscal quarter in which the first anniversary date of
the effective date of the Registration Statement occurs (or if such fiscal
quarter is the Company's fourth fiscal quarter, not later than 90 days
after the end of such quarter), an earnings statement (in form complying
with the provisions of Rule 158 of the Regulations) covering a period of at
least twelve consecutive months beginning after the effective date of the
Registration Statement (as defined in Rule 158(c) under the Securities
Act).
(f) During the period of 180 days from the date of the
Prospectus, the Company will not, directly or indirectly, without the prior
written consent of Bear Xxxxxxx, offer, sell, contract to sell, grant any
option to purchase, pledge or otherwise dispose (or announce any offer,
sale, contract to sell, grant of an option to purchase, pledge or other
disposition) of any shares of Common Stock of the Company or any securities
convertible into or exercisable or exchangeable for such Common Stock,
except that the Company may issue (i) shares of Common Stock and options to
purchase Common Stock under its 1997 Stock Plan and its 1998 Purchase Plan
(as such terms are defined in the Prospectus), (ii) shares of Common Stock
upon exercise of warrants to purchase Common Stock that were issued and
outstanding on the date of the Prospectus or (iii) shares of Common Stock
issued in connection with strategic relationships and acquisitions of
businesses, technologies and products complementary to those of the
Company, so long as the recipients of such shares agree to be bound by a
lock-up agreement (which shall provide that any transferees and assigns of
such recipients shall be bound by the lock-up agreement) for the remainder
of the 180-day lock-up period.
(g) During a period of three years from the date of the
Prospectus, the Company will furnish to the Underwriters copies of (i) all
reports to its stockholders; and (ii) all reports, financial statements and
proxy or information statements filed by the Company with the Commission or
any national securities exchange.
(h) The Company will apply the proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.
(i) If the Company elects to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement, no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission, and all requests for
additional information on the part of the Commission shall have been
complied with to the Underwriters' reasonable satisfaction.
14
(j) The Company, during the period when the Prospectus is
required to be delivered under the Securities Act or the Exchange Act, will
file all documents required to be filed with the Commission pursuant to
Sections 13, 14 or 15 of the Exchange Act within the time periods required
by the Exchange Act and the rules and regulations thereunder.
5. Payment of Expenses. Whether or not the transactions
-------------------
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company hereby agrees to pay all costs and expenses incident to the
performance of the obligations of the Company hereunder, including those in
connection with (i) preparing, printing, duplicating, filing and distributing
the Registration Statement, as originally filed and all amendments thereto
(including all exhibits thereto), any Preliminary Prospectus, the Prospectus and
any amendments or supplements thereto (including, without limitation, fees and
expenses of the Company's accountants and counsel), the underwriting documents
(including this Agreement, the Agreement Among Underwriters and the Selling
Agreement) and all other documents related to the public offering of the Shares
(including those supplied to the Underwriters in quantities as hereinabove
stated), (ii) the issuance, transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
qualification of the Shares under state or foreign securities or Blue Sky laws,
including the costs of printing and mailing a preliminary and final "Blue Sky
Memorandum" and the fees of counsel in connection therewith and such counsel's
disbursements in relation thereto, (iv) listing of the Shares for quotation on
the Nasdaq, (v) filing fees of the Commission and the NASD, (vi) the cost of
printing certificates representing the Shares, (vii) the cost and charges of any
transfer agent or registrar and (viii) all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, in connection with matters related to the Reserved Shares.
6. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company herein contained, as of the date hereof and as of the
Closing Date (for purposes of this Section 6, "Closing Date" shall refer to the
------------
Closing Date for the Firm Shares and any Additional Closing Date, if different,
for the Additional Shares), to the absence from any certificates, opinions,
written statements or letters furnished to the Underwriters or to Xxxxxx &
Xxxxxxx ("Underwriters' Counsel") pursuant to this Section 6 of any material
---------------------
misstatement or omission, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) On the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the Securities Act or proceedings therefor initiated or, to the Company's
knowledge, threatened by the Commission. The Prospectus shall have been
filed or transmitted for filing with the Commission pursuant to Rule 424(b)
of the Securities Act Regulations within the prescribed time period, and
prior to Closing Date the Company shall have provided evidence satisfactory
to the Underwriters of such timely filing or transmittal.
(b) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof
and on the Closing Date with the same force and effect as if made on and as
of the date hereof and the Closing Date, respectively. The Company shall
have performed or complied with all of the agreements
15
herein contained and required to be performed or complied with by it at or
prior to the Closing Date.
(c) The Prospectus shall have been printed and copies
distributed to the Underwriters not later than 10:00 a.m., New York City
time, on the second business day following the date of this Agreement or at
such later date and time as to which the Underwriters may agree, and no
stop order suspending the qualification or exemption from qualification of
the Shares in any jurisdiction referred to in Section 4(d) shall have been
issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
(d) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of the Shares; no action, suit or proceeding shall have been
commenced and be pending against or affecting or, to the best knowledge of
the Company, threatened against, the Company before any court or arbitrator
or any governmental body, agency or official that (1) could reasonably be
expected to result in a Material Adverse Effect and (2) has not been
disclosed in the Prospectus.
(e) Since the respective dates as of which information is given
in the Prospectus, (i) there shall not have been any Material Adverse
Change, or any development that is reasonably likely to result in a
Material Adverse Change, in the capital stock or the long-term debt, or
material increase in the short-term debt, of the Company or any of its
subsidiaries from that set forth in the Prospectus, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the
Company or any of its subsidiaries on any class of its capital stock, other
than as described in the Prospectus, (iii) neither the Company nor any of
its subsidiaries shall have incurred any liabilities or obligations, direct
or contingent, that are material, individually or in the aggregate, to the
Company and its subsidiaries, taken as a whole, and that are required to be
disclosed on the latest balance sheet or notes thereto included in the
Prospectus in accordance with generally accepted accounting principles and
are not so disclosed. Since the date hereof and since the dates as of which
information is given in the Prospectus, there shall not have occurred any
Material Adverse Effect.
(f) The Underwriters shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by each of the Company's
Chief Executive Officer and Chief Financial Officer in form and substance
reasonably satisfactory to the Underwriters, confirming, as of the Closing
Date, the matters set forth in paragraphs (a), (b), (d) and (e) of this
Section 6 and that, as of the Closing Date, the obligations of the Company
to be performed hereunder on or prior thereto have been duly performed in
all material respects.
(g) The Underwriters shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Underwriters and counsel to the Underwriters, of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, P.C., counsel for the Company, to the effect set forth in Exhibit A
---------
hereto.
(h) The Underwriters shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Underwriters and counsel to the Underwriters, of Xxxxx Xxxxxx, General
Counsel of the Company, to the effect set forth in Exhibit B hereto.
---------
16
(i) All proceedings taken in connection with the sale of the
Firm Shares and the Additional Shares as herein contemplated shall be
satisfactory in form and substance to the Underwriters and to Underwriters'
Counsel, and the Underwriters shall have received from Underwriters'
Counsel a favorable opinion, dated as of the Closing Date with respect to
the issuance and sale of the Shares, the Registration Statement and the
Prospectus and such other related matters as the Underwriters may
reasonably require, and the Company shall have furnished to Underwriters'
Counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(j) At the time this Agreement is executed and at the Closing
Date, the Underwriters shall have received a letter from Ernst & Young LLP,
independent public accountants for the Company, dated, respectively, as of
the date of this Agreement and as of the Closing Date addressed to the
Underwriters and in form and substance reasonably satisfactory to the
Underwriters, containing statements and information of the type ordinarily
included in auditors' "comfort letters" to underwriters with respect to
financial statements and certain information of the Company and its
subsidiaries contained or incorporated by reference (if any) in the
Registration Statement and the Prospectus.
(k) At the time this Agreement is executed, the Underwriters
shall have received a "lock-up" agreement, substantially in the form
attached as Exhibit C hereto, from each of the officers, directors and
---------
stockholders of the Company identified on Exhibit D hereto.
---------
(l) At the Closing Date, the Shares shall have been approved
for quotation on the Nasdaq.
(m) At the time this Agreement is executed and at the Closing
Time, the NASD shall not have withdrawn, or given notice of an intention to
withdraw, its approval of the fairness of the underwriting terms and
arrangements of the offering of the Shares by the Underwriters.
(n) All opinions, certificates, letters and other documents
required by this Section 6 to be delivered by the Company will be in
compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Underwriters. The Company will
furnish the Underwriters with such conformed copies of such opinions,
certificates, letters and other documents as Bear Xxxxxxx shall reasonably
request. Prior to the Closing Date, the Company shall have furnished to the
Underwriters such further information, certificates and documents as the
Underwriters may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to the Underwriters or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to the Underwriters and
to Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by the Underwriters at, or at any time prior to, the Closing Date and
the obligations of the Underwriters to purchase the Additional Shares may be
canceled by the Underwriters at, or at any time prior to, the Additional Closing
Date. Notice of such cancellation shall be given to the Company in writing, or
by telephone, telex or telegraph, confirmed in writing.
17
7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
against any and all losses, liabilities, claims, damages and expenses whatsoever
as incurred (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
either Registration Statement, as originally filed or any amendment thereof, or
any related Preliminary Prospectus or the Prospectus, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that the Company will not be liable in any such case (i) to the extent but only
to the extent that any such loss, liability, claim, damage or expense arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any
Underwriter expressly for use therein and (ii) with respect to any preliminary
prospectus or preliminary prospectus supplement to the extent that any such
loss, claim, damage or liability results from the fact that an Underwriter sold
Shares to a person as to whom it shall be established that there was not sent or
given, at or prior to written confirmation of such sale, a copy of the
prospectus or prospectus supplement as then amended or supplemented in any case
where such delivery is required by the Securities Act if the Company has
previously furnished copies thereof in sufficient quantity to such Underwriter
and with sufficient time to effect a recirculation pursuant to Rule 461 under
the Securities Act and the loss, claim, damage or liability of the Underwriters
results from an untrue statement or omission of a material fact contained in the
preliminary prospectus or preliminary prospectus supplement which was identified
in writing prior to the effective date of the registration statement to such
underwriter and corrected in the prospectus or prospectus supplement as then
amended, and such correction would have cured the defect giving rise to such
loss, claim, damage or liability. This indemnity agreement will be in addition
to any liability which the Company may otherwise have including under this
Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in either Registration Statement, as originally filed or any amendment
thereof, or any related preliminary prospectus, preliminary prospectus
supplement or prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission
18
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 any such loss, liability, claim,
damage or expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter expressly for use therein; provided,
however, that in no case shall any Underwriter be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares purchased
by such Underwriter hereunder. This indemnity will be in addition to any
liability which any Underwriter may otherwise have including under this
Agreement.
(c) Promptly after receipt by an indemnified party under
Subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying
party from any liability which it may have under this Section 7, except to the
extent that the indemnifying party has been prejudiced in any material respect
by such failure or from any liability that it may have otherwise). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the indemnifying parties.
Anything in this Subsection to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
unreasonably withheld.
8. Contribution. In order to provide for contribution in
-- ------------
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company) as incurred to which the Company and one
or more of the Underwriters may be subject, in such proportions as is
appropriate to reflect the
19
relative benefits received by the Company and the Underwriters from the offering
of the Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 7 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand shall be deemed to be in the same proportion as
(x) the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and (y) the
underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this Section
8, (i) in no case shall any Underwriter be liable or responsible for any amount
in excess of the underwriting discount applicable to the Shares purchased by
such Underwriter hereunder, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section 8
and the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act shall have the same rights to contribution
as such Underwriter, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties, notify each party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
9. Default by an Underwriter.
-------------------------
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
do not (after giving effect to
20
arrangements, if any, made by the Underwriters pursuant to Subsection (b) below)
exceed in the aggregate 10% of the number of Firm Shares or Additional Shares,
the Firm Shares or Additional Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase shall be purchased by the
non-defaulting Underwriters in proportion to the respective proportions which
the numbers of Firm Shares set forth opposite their respective names in Schedule
I hereto bear to the aggregate number of Firm Shares set forth opposite the
names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, the Underwriters may
in their discretion arrange for themselves or for another party or parties
(including any non-defaulting Underwriter or Underwriters who so agree) to
purchase such Firm Shares or Additional Shares, as the case may be, to which
such default relates on the terms contained herein. In the event that within 5
calendar days after such a default the Underwriters do not arrange for the
purchase of the Firm Shares or Additional Shares, as the case may be, to which
such default relates as provided in this Section 9, this Agreement, or in the
case of a default with respect to the Additional Shares, the obligations of the
Underwriters to purchase and of the Company to sell the Additional Shares, shall
thereupon terminate, without liability on the part of the Company with respect
thereto (except in each case as provided in Section 5, 7(a) and 8 hereof) or the
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the other
Underwriters and the Company for damages occasioned by its or their default
hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
the Underwriters or the Company shall have the right to postpone the Closing
Date or Additional Closing Date, as the case may be for a period, not exceeding
five business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements, and the Company agrees to file promptly any
amendment or supplement to the Registration Statement or the Prospectus which,
in the opinion of Underwriters' Counsel, may thereby be made necessary or
advisable. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 9 with like effect as if it had originally
been a party to this Agreement with respect to such Firm Shares or Additional
Shares.
10. Survival of Representations and Agreements. All representations
------------------------------------------
and warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Section 5,
the indemnity agreements contained in Section 7 and the contribution agreements
contained in Section 8, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
controlling person thereof or by or on behalf of the Company, any of its
officers and directors, or any controlling person of the Company, and shall
survive delivery of and payment for the Shares to and by the Underwriters. The
representations contained in Section 1 and the agreements contained in Sections
5, 7, 8, 11(d) and 12 hereof shall survive the termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
----------------------------------------
(a) This Agreement shall become effective upon the execution
and delivery of a counterpart hereof by each of the parties hereto.
21
(b) The Underwriters shall have the right to terminate this
Agreement at any time prior to the Closing Date or the obligations of the
Underwriters to purchase the Additional Shares at any time prior to the
Additional Closing Date, as the case may be, if on or prior to such date, (i)
the Company shall have failed, refused or been unable to perform in any material
respect any agreement on its part to be performed hereunder, (ii) any other
condition to the obligations of the Underwriters hereunder as provided in
Section 6 is not fulfilled when and as required in any material respect, (iii)
in the reasonable judgment of the Underwriters any Material Adverse Change shall
have occurred since the respective dates as of which information is given in the
Prospectus, other than as set forth in the Prospectus, (iv) any downgrading
shall have in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Securities Act, or
any such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's debt securities, or (v)(A) any domestic or international event
or act or occurrence has materially disrupted, or in the opinion of the
Underwriters will in the immediate future materially disrupt, the market for the
Company's securities or for securities in general; or (B) trading in securities
generally on the New York Stock Exchange ("NYSE") or quotations on the
----
Nasdaq shall have been suspended or materially limited, or minimum or maximum
prices for trading shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange, or by such exchange or
other regulatory body or governmental authority having jurisdiction; or (C) a
banking moratorium shall have been declared by federal or state authorities, or
a moratorium in foreign exchange trading by major international banks or persons
shall have been declared; or (D) there is an outbreak or escalation of armed
hostilities involving the United States on or after the date hereof, or if there
has been a declaration by the United States of a national emergency or war, the
effect of which shall be, in the Underwriters' judgment, to make it inadvisable
or impracticable to proceed with the offering, sale and delivery of the Firm
Shares or the Additional Shares, as the case may be, on the terms and in the
manner contemplated by the Prospectus; or (E) there shall have been such a
material adverse change in general economic, political or financial conditions
or if the effect of international conditions on the financial markets in the
United States shall be such as, in the Underwriters' judgment, makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Firm Shares or the Additional Shares, as the case may be, on the terms and
in the manner contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall
be by telephone, telex, telegraph or telephonic facsimile, confirmed in writing
by letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (other than pursuant to Section 9(b) or 11(b) hereof), or
if the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by the Underwriters, reimburse the Underwriters
for all out-of-pocket expenses (including the fees and expenses of their
counsel), incurred by the Underwriters in connection herewith.
12. Underwriters' Information. The Company and the Underwriters
-------------------------
severally acknowledge that the statements set forth in (i) the last paragraph of
the outside front cover of the Prospectus concerning the delivery of the shares
of Common Stock to the Underwriters and the offering of such shares by the
Underwriters; (ii) the paragraph on the inside front cover of the
22
Prospectus Supplement concerning transactions that stabilize, maintain, or
otherwise affect the price of the Common Stock; (iii) the third paragraph under
the caption "Underwriting" in the Prospectus concerning the proposed public
offering price, discount and concession; and (iv) the tenth and eleventh
paragraphs under the caption "Underwriting" in the Prospectus concerning
transactions that stabilize, maintain, or otherwise affect the price of the
Common Stock, constitute the only information furnished in writing by or on
behalf of any Underwriter expressly for use in the Registration Statement, as
originally filed or in any amendment thereof, any related Preliminary Prospectus
or preliminary prospectus supplement or the Prospectus or in any amendment
thereof or supplement thereto, as the case may be.
13. Notices. All communications hereunder, except as may be
-------
otherwise specifically provided herein, shall be in writing and, if sent to the
Underwriters shall be mailed, delivered, or telexed, telegraphed or telecopied
and confirmed in writing to Bear, Xxxxxxx & Co. Inc., BT Alex. Xxxxx
Incorporated, Xxxxxxxxx Lufkin Xxxxxxxx Securities Corporation and Xxxxxxx,
Sachs & Co., c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Corporate Finance Department, telecopy number: (000) 000-0000,
with a copy, which shall not constitute notice, to Xxxxxx & Xxxxxxx, Attn:
Xxxxxxx X. Xxxxxx, 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx
00000; telecopy number: (000) 000-0000; and if sent to the Company, shall be
mailed, delivered or telexed, telegraphed or telecopied and confirmed in writing
to Covad Communications Group, Inc., 0000 Xxxxxxx Xxxxxxxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000, Attention: Chief Executive Office, telecopy number: (408) 844-
7501, with a copy, which shall not constitute notice, to Xxxxxx Xxxxxxx Xxxxxxxx
& Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, Attn: Xxxxx
Xxxxxx, telecopy number: (000) 000-0000.
14. Parties. This Agreement shall inure solely to the benefit of,
-------
and shall be binding upon, the Underwriters, the Company and the controlling
persons, directors, officers, employees and agents referred to in Section 7 and
8, and their respective successors and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Shares from any of the Underwriters.
15. GOVERNING LAW; Construction. This Agreement shall be construed
---------------------------
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed within such State, without giving any effect
to any provisions thereof relating to conflicts of law. TIME IS OF THE ESSENCE
IN THIS AGREEMENT.
16. Captions. The captions included in this Agreement are included
--------
solely for convenience of reference and are not to be considered a part of this
Agreement.
17. Counterparts. This Agreement may be executed in various
------------
counterparts which together shall constitute one and the same instrument.
23
If the foregoing correctly sets forth the understanding among the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
COVAD COMMUNICATIONS GROUP, INC.
By_______________________________
Name_____________________________
Title____________________________
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
BT ALEX. XXXXX INCORPORATED
XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES CORPORATION
XXXXXXX, SACHS & CO.
BEAR, XXXXXXX & CO. INC.
By _______________________________
Name_____________________________
Title____________________________
SCHEDULE I
Number of Firm
Name of Underwriter Shares to be Purchased
----------------------------------------------------------------------
Bear, Xxxxxxx & Co. Inc. .............................
BT Alex. Xxxxx Incorporated...........................
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation...
Xxxxxxx, Sachs & Co. .................................
Total............................................... 7,500,000
Exhibit A
Form of Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
1. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect
on the Company on a consolidated basis.
2. Each of Covad California and Covad Virginia is a corporation duly
incorporated and validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, has all requisite corporate
power and authority to carry on its business as it is currently being
conducted and as described in the Prospectus and to own, lease and operate
its properties. Each of Covad California and Covad Virginia is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect on the Company on a consolidated basis.
3. All of the outstanding shares of capital stock of the Company
(including, without limitation, the Strategic Investor Preferred Shares)
have been, to such counsel's knowledge, duly authorized and validly issued,
are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights contained in the Amended and Restated
Certificate of Incorporation, Bylaws of the Company or any Reviewed
Agreement (as defined). As of September 30, 1998, the authorized, issued
and outstanding capital stock of the Company is as set forth in the
Prospectus in the column entitled "Actual" under the caption
"Capitalization". Upon consummation of the Offering, (i) each of the
Strategic Investor Preferred Shares shall have been converted into Class B
Common Stock of the Company and (ii) each share of Class B Common Stock
shall have been duly authorized and validly issued, fully paid and
nonassessable and shall not have been issued in violation of any preemptive
or similar rights contained in the Amended and Restated Certificate of
Incorporation, Bylaws of the Company or any Reviewed Agreement.
4. To such counsel's knowledge, there are not currently, and will not
be following the offering of the Shares, any outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for, any capital stock or
other equity interest of the Company, except as described in the Prospectus
and except as contained in the Amended and Restated Certificate of
Incorporation, Bylaws of the Company or any Reviewed Agreement.
5. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby, including, without
limitation, the corporate power and authority to issue, sell and deliver
the Shares.
6. This Agreement has been duly and validly authorized, executed and
delivered by the Company.
7. Each of the Strategic Alliance Agreements and the Strategic Investor
Stock Purchase Agreements has been duly and validly authorized, executed
and delivered by the Company.
8. The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement and the issuance
and sale of the Shares will not contravene any provision of (a) the
Delaware General Corporation Law or any federal statute, rule or regulation
known to us to be applicable to the Company (other than federal or state
securities laws, which are specifically addressed elsewhere herein, and
other than as are specifically addressed in the opinion of Xxxxx Xxxxxx,
General Counsel of the Company, separately delivered to you pursuant to
Section 6(h) of the Underwriting Agreement), (b) the Amended and Restated
Certificate of Incorporation or bylaws of the Company, (c) any Reviewed
Agreement (as defined) binding upon the Company that is material to the
Company on a consolidated basis or (d) to such counsel's knowledge, any
order, judgment, or decree of any governmental body, agency or court having
jurisdiction over the Company. No consent, approval, authorization or order
of or qualification with any governmental body or agency is required for
the performance by the Company of its obligations under this Agreement,
except such as has been obtained under the Securities Act and as may be
required by the securities or "blue sky" laws of the various states in
connection with the offer and sale of the Shares as contemplated by the
Prospectus.
9. The Company is not and, after giving effect to the offering of the
Shares and the application of the proceeds therefrom as described in the
Prospectus, will not be an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
10. The Registration Statement, Preliminary Prospectus and Prospectus
comply as to form in all material respects with the requirements for
registration statements on Form S-1 under the Securities Act and the
Securities Act Regulations; it being understood, however, that such counsel
need not express an opinion with respect to the financial statements,
schedules and other financial data included in the Registration Statement,
Preliminary Prospectus or Prospectus. To such counsel's knowledge, there
are no contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein, and, to such counsel's knowledge, the
descriptions thereof or references thereto are correct in all material
respects.
11. Except as set forth in this Agreement, to such counsel's knowledge,
there are no holders of securities of the Company who, by reason of the
execution by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby, have the right to request
or demand that the Company register securities held by them under the
Securities Act.
12. To such counsel's knowledge, there is no legal or governmental
proceeding pending or threatened to which the Company or any of its
Subsidiaries is a party or to which any of the properties of the Company or
any of its Subsidiaries is subject other than proceedings fairly summarized
in all material respects in the Prospectus and proceedings
ii
which we believe are not likely to have a Material Adverse Effect on the
Company and its subsidiaries, taken as a whole, or on the power or ability
of the Company to perform its obligations under this Agreement or to
consummate the offering of the Shares as contemplated by the Prospectus.
13. The statements contained in the Prospectus under the captions
"Management - Employment Agreements and Change in Control Arrangements",
"Management - 1997 Stock Plan", "Management - 1998 Employee Stock Purchase
Plan", "Certain Relationships and Related Transactions - Series C Preferred
Stock and Warrant Subscription Agreement", "Certain Relationships and
Related Transactions - The Intel Stock Purchase", "Certain Relationships
and Related Transactions - Equipment Lease Financing", "Management -
Limitation on Liability and Indemnification Matters" and "Description of
Capital Stock", in each case, insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to
therein, fairly present the information required with respect to such legal
matters, documents and proceedings and fairly summarize the matters
referred to therein in all material respects.
14. Such counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent
certified public accountants of the Company and the Underwriters and its
representatives at which the contents of the Registration Statement,
Preliminary Prospectus and the Prospectus and related matters were
discussed and, although such counsel is not passing upon and assumes no
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement, Preliminary Prospectus
or the Prospectus (except as indicated above), on the basis of the
foregoing, no facts have come to such counsel's attention which led such
counsel to believe that the Registration Statement, at the time it became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, or that the Prospectus, as of its
date or the Closing Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading (except as to financial statements and
schedules and other financial data, included therein).
In rendering such opinion, such counsel may rely as to matters
involving the application of laws other than the laws of the United States,
California and any other jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably satisfactory
to Underwriters' Counsel) of other counsel familiar with the applicable laws and
reasonably acceptable to Underwriters' Counsel; provided, that such opinion
shall expressly state that the Underwriters may rely on such opinion as if it
were addressed to them. In rendering such opinion, such counsel may rely as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and its subsidiaries and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the existence or good standing of the Company and its
subsidiaries, provided that such opinion shall state that such counsel and the
Underwriters are justified in so relying upon any such certificate. The opinion
of such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, the
Underwriters and they are justified in relying thereon.
iii
Exhibit B
Form of Opinion of Xxxxx Xxxxxx, General Counsel of the Company
1. Neither the execution and delivery of this Agreement nor the sale
of the Shares contemplated hereby will violate (i) the Communications Act
of 1934 (the "Communications Act") as interpreted as of this date, (ii) the
Telecommunications Act of 1996 (the "Telecom Act of 1996") as interpreted
as of this date, (iii) any rules or regulations of the Federal
Communications Commission (the "FCC") applicable to the Company as
interpreted as of this date or (iv) any rules or regulations of the
California Public Utilities Commission, New York Public Service Commission,
Massachusetts Department of Public Utilities, Washington Utilities and
Transportation Commission, Illinois Commerce Commission, the Oregon Public
Utilities Commission or any other jurisdiction where the Company has
obtained CLEC regulatory approval (collectively, the "State
Telecommunications Agencies") as interpreted as of this date.
2. The Company (i) has made all reports and filings, and paid all
fees, required by the FCC and any of the State Telecommunications Agencies
and (ii) has all certificates, orders, permits, licenses, authorizations,
consents and approvals of and from, and has made all filings and
registrations with, the FCC and any of the State Telecommunications
Agencies necessary to own, lease, license and use its properties and assets
and to conduct its business as described in the Prospectus; and, except as
described in the Prospectus, there is no pending or, to my knowledge,
threatened proceedings before the FCC or any State Telecommunications
Agency relating to the revocation or modification or any such certificates,
orders, permits, licenses, authorizations, consents or approvals which, if
determined adversely, would have a Material Adverse Effect.
3. No decree or order of the FCC or any State Telecommunications
Agency is outstanding against the Company and no litigation, proceeding,
inquiry or investigation has been commenced or, to such counsel's
knowledge, threatened, and no formal notice of violation or order to show
cause has been issued, against the Company before the FCC or any of the
State Telecommunications Agencies.
4. The statements in the Prospectus under the headings of "Risk
Factors--Uncertain Availability of Collocation Space and Dependence on
ILECs to Provide Collocation Space and Collocation Facilities and Unbundled
Network Elements ("UNEs")", "Risk Factors--Dependence on ILECs to Provide
Transmission Facilities and to Provision Copper Lines", "Risk Factors--
Uncertain Quality and Availability of the ILEC Copper Lines Used by the
Company", "Risk Factors--Government Regulation and Current Industry
Litigation", "Business--Industry Background--Impact of the
Telecommunications Act of 1996" and "Business--Government Regulation", to
the extent such statements constitute summaries of the Telecom Act of 1996
or rules and regulations of the FCC or any of the State Telecommunications
Agencies, fairly and accurately summarize the matters therein described.
5. Neither the execution and delivery of this Agreement nor the sale
of the Shares contemplated hereby will conflict with or result in a
violation of any of the Material
Agreements (as defined), except for such conflicts or violations which
would not have a Material Adverse Effect.
6. As of the date hereof, (A) the Company has obtained CLEC regulatory
approval in each of the following States: California, Illinois, Maryland,
Massachusetts, New York, Oregon, Texas, Virginia, Washington, Delaware,
Colorado, New Jersey, New Hampshire, District of Columbia, Pennsylvania,
Michigan and Florida, and no such regulatory approval has been withdrawn,
and no such regulatory approval is the subject of any legal challenge
(except as disclosed in the Prospectus) and (B) the Company has not
received any notice of rejection or denial, nor has it withdrawn, any of
its applications for CLEC approval in 10 additional States where such
applications, as of the date of the Prospectus, are pending approval.
7. The Company has the consents, approvals, authorizations, licenses,
certificates, permits, or orders of the FCC or the State Telecommunications
Agencies, if any is required, for the sale of the Shares as contemplated in
the Prospectus, except where the failure to obtain the consents, approvals,
authorizations, licenses, certificates, permits or orders would not have a
Material Adverse Effect.
In rendering such opinion, such counsel may rely as to matters
involving the application of laws other than the laws of the United States,
California and any other jurisdictions in which he is admitted, to the extent
such counsel deems proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably satisfactory
to Underwriters' Counsel) of other counsel familiar with the applicable laws and
reasonably acceptable to Underwriters' Counsel; provided, that such opinion
shall expressly state that the Underwriters may rely on such opinion as if it
were addressed to them. In rendering such opinion, such counsel may rely as to
matters of fact, to the extent he deems proper, on certificates of responsible
officers of the Company and its subsidiaries and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the existence or good standing of the Company, and its
subsidiaries, provided that such opinion shall state that such counsel and the
Underwriters are justified in so relying upon any such certificate. The opinion
of such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, the
Underwriters and they are justified in relying thereon.
ii
Exhibit C
Covad Communications Group, Inc.
0000 Xxxxxxx Xxxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Lock-Up Agreement
_________________, 1999
Bear, Xxxxxxx & Co. Inc.
BT Alex. Xxxxx Incorporated
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
Xxxxxxx, Sachs & Co.
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Ladies and Gentlemen:
The undersigned understands that Bear, Xxxxxxx & Co. Inc. (the
"Representative") of the several underwriters (the "Underwriters"), proposes to
enter into an Underwriting Agreement with Covad Communications Group, Inc. (the
"Company") providing for the initial public offering (the "Initial Public
Offering") by the Underwriters, including the Representative, of the Company's
Common Stock, par value $.001 per share (the "Common Stock").
In consideration of the Underwriters' agreement to purchase and
undertake the Initial Public Offering and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned,
pursuant to this letter agreement (this "Agreement"), agrees that, without the
prior written consent of the Representative, the undersigned will not, directly
or indirectly, offer, sell, contract to sell, grant any option to purchase,
pledge or otherwise dispose of any shares of Common Stock of the Company
(including, without limitation, shares of Common Stock of the Company that may
be deemed to be beneficially owned by the undersigned in accordance with the
rules and regulations of the Securities and Exchange Commission and shares of
Common Stock that may be issued upon exercise of a stock option or warrant) or
any securities convertible into or exercisable or exchangeable for such Common
Stock (such Common Stock and securities are referred to herein as, collectively,
"Securities"), or, in any manner, transfer all or a portion of the economic
consequences associated with the ownership of Securities, for a period (the
"Lock-Up Period") of 180 days after the date of the Prospectus used by the
Company in connection with the Initial Public Offering (any of the foregoing, a
"Disposition"); provided, however, that the undersigned may make a Disposition:
(i) as a bona fide gift or gifts, provided that the donee or donees thereof
agree in writing to be bound by the terms of this Agreement; (ii) as a
distribution to limited partners or shareholders of the undersigned, provided
that the distributees thereof agree in writing to be bound by the terms of this
Agreement; (iii) if the undersigned is an individual, either during his or her
lifetime or on death by will or intestacy to his or her immediate family or to a
trust the beneficiaries of which are exclusively the undersigned and/or a member
or members of his or her immediate family, provided that prior to any such
transfer each transferee agrees in writing to be bound by the terms of this
Agreement; or (iv) with the prior written consent of the
Representative. For the purposes of this paragraph, "immediate family" shall
mean spouse, lineal descendant, father, mother, brother or sister of the
transferor.
In addition, the undersigned agrees that the Company may, and that the
undersigned will, (i) with respect to any shares for which the undersigned is
the record holder, cause the transfer agent for the Company to note stop
transfer instructions with respect to such shares on the transfer books and
records of the Company and (ii) with respect to any shares for which the
undersigned is the beneficial holder but not the record holder, cause the record
holder of such shares to cause the transfer agent for the Company to note stop
transfer instructions with respect to such shares on the transfer books and
records of the Company.
The foregoing restrictions are expressly agreed to preclude the holder
of any Securities from engaging in any hedging or other transaction that is
designed to or is reasonably expected to lead to or result in a Disposition of
Securities during the Lock-Up Period even if such Securities would be disposed
of by someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any of the Securities or any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from any of the
Securities.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Agreement, and that, upon
request, the undersigned will execute any additional documents necessary or
desirable in connection with the enforcement hereof. All authority herein
conferred or agreed to the conferred shall survive the death or incapacity of
the undersigned and any obligations of the undersigned shall be binding upon the
heirs, personal representatives, successors, and assigns of the undersigned.
[signature page follows]
ii
The undersigned hereby executes this Agreement and agrees to its terms
as of the date first written above.
Very truly yours,
____________________________________
(Signature)
Please type: ____________________________________
(Name)
____________________________________
(Address)
____________________________________
(Social Security or
Taxpayer Identification No.)
Number of shares owned or Certificate numbers:
subject to warrants, options
or convertibles securities: ____________________________________
__________________________ ____________________________________
iii
Exhibit D
Individuals Delivering a Lock-Up Agreement Pursuant to Section 6(k)
Xxxxxxx XxXxxx
Xxxxxx Xxxxxxxx Xx.
Xxxxxx Xxxx
Xxxxx Xxxxxxx
Xxxxxx Xxxxx
Xxxxxx Xxxxx
Xxxxx Xxxxxxxx
Xxxx Xxxxxxx
Xxxxxxx Xxxx
Xxxxx Xxxxxx
Warburg, Xxxxxx Ventures, L.P.
Crosspoint Venture Partners 1996
Intel Corporation
Xxx Xxxxxxxxx
Xxxxxxx Xxxxx
Xxxxxxxxx Xxxxxx
Xxxxxx Xxxxxxx
Xxxxxx Xxxxxx
Xxxxxxxx & Struggles International, Inc.
