FIRSTWORLD COMMUNICATIONS, INC.
470,000 Units Consisting of
$470,000,000 Principal Amount at Maturity of
13% Senior Discount Notes due 2008
and
Warrants to Purchase 3,713,094 Shares of Series B Common Stock
PURCHASE AGREEMENT
April 6, 1998
BEAR, XXXXXXX & CO. INC.
ING BARING (U.S.) SECURITIES, INC.
X.X. XXXXXX SECURITIES INC.
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX INCORPORATED
FIRSTWORLD COMMUNICATIONS, INC.
470,000 Units Consisting of
$470,000,000 Principal Amount at Maturity of
13% Senior Discount Notes due 2008
and
Warrants to Purchase 3,713,094 Shares of Series B Common Stock
PURCHASE AGREEMENT
April 6, 1998
New York, New York
BEAR, XXXXXXX & CO. INC.
As Representative of
the Initial Purchasers
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies & Gentlemen:
FirstWorld Communications, Inc., a California corporation (the
"Company"), proposes to issue and sell to the parties named in Schedule I hereto
(the "Initial Purchasers"), for whom you are acting as representative (the
"Representative") 470,000 units (the "Units") consisting of $470,000,000
aggregate principal amount at maturity of 13% Senior Discount Notes due 2008
(the "Senior Discount Notes") and Warrants (the "Warrants") to purchase an
aggregate of 3,713,094 shares of Series B common stock, no par value (the
"Common Stock"), of the Company (the "Warrant Shares"), subject to the terms and
conditions set forth herein. Each Unit will consist of $1,000 principal amount
of the Senior Discount Notes and one Warrant to purchase 7.9002 shares of Common
Stock. The Senior Discount Notes will be issued pursuant to an indenture (the
"Indenture"), to be dated the Closing Date (as defined below), between the
Company and The Bank of New York, as trustee (the "Trustee"). The Warrants will
be issued pursuant to a warrant agreement (the "Warrant Agreement") to be dated
the Closing Date, between the Company and The Bank of New York, as warrant agent
(the "Warrant Agent"). The Senior Discount Notes and the Warrants comprising
each Unit will not trade separately until the earlier of (i) 90 days from the
date of issuance, (ii) such earlier date as the Initial Purchasers may, in their
discretion, deem appropriate, (iii) in the event a Change in Control (as defined
in the Indenture) occurs, the date the Company mails notice thereof to holders
of Senior Discount Notes, (iv) the date on which the Registered Exchange Offer
(as defined below) is consummated and (v) the date on which the Shelf
Registration Statement (as defined below) is declared
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effective (such date, the "Separation Date"). The Units, the Senior Discount
Notes and the Warrants are more fully described in the Offering Memorandum
referred to below.
1. ISSUANCE OF SECURITIES. The Company proposes to, upon the terms and
subject to the conditions set forth herein, issue and sell to the Initial
Purchasers the Units. The Senior Discount Notes forming a part of the Units and
the Senior Discount Exchange Notes (as defined below) issuable in exchange
therefor are hereinafter referred to as the Notes. The Units, the Notes and the
Warrants are collectively referred to herein as the "Securities." Capitalized
terms used but not otherwise defined herein shall have the meanings given to
such terms in the Indenture.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933
(as amended, the "Act"), the Units, the Notes, the Warrants and the Warrant
Shares (and all securities issued in exchange therefor or in substitution
thereof) shall bear the legends required to be set forth thereon in accordance
with the applicable provisions of the Warrant Agreement or the Indenture, as
applicable.
2. OFFERING. The Units will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under the
Act. The Company has prepared a preliminary offering memorandum, dated March 20,
1998 (the "Preliminary Offering Memorandum"), and a final offering memorandum,
dated April 6, 1998 (the "Offering Memorandum"), relating to the Company and the
Units.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers to resell (the "Exempt Resales") the Units on the
terms set forth in the Offering Memorandum, as amended or supplemented, solely
to persons whom any of the Initial Purchasers reasonably believe to be
"qualified institutional buyers," as defined in Rule 144A under the Act
("QIBs"). Such QIBs shall be referred to herein as the "Eligible Purchasers."
The Initial Purchasers will offer the Units to the Eligible Purchasers initially
at a purchase price per Unit equal to $532.35. Such price may be changed at any
time without notice.
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), and holders (including subsequent
transferees) of the Warrants and Warrant Shares will have the registration
rights set forth in the registration rights agreement relating thereto (the
"Warrant Registration Rights Agreement"), to be dated the Closing Date, for so
long as such Notes, Warrants or any Warrant Shares constitute "Transfer
Restricted Securities" (as defined in such agreements). Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Act (the "Exchange
Offer Registration Statement") with respect to an offer to exchange (the
"Registered Exchange Offer") the Senior Discount Notes for a new issue of 13%
Senior Discount Notes due 2008 (the "Exchange Senior Discount Notes") to be
offered in exchange for the Senior Discount Notes and (ii) a shelf registration
statement pursuant to Rule 415 under the Act (the "Shelf Registration
Statement") relating to the resale by certain holders of the Senior Discount
Notes, and to use its best efforts to
3
cause such Registration Statements to be declared effective and consummate the
Registered Exchange Offer. This Agreement, the Securities, the Indenture, the
Warrant Agreement, the Registration Rights Agreement and the Warrant
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Operative Documents."
3. PURCHASE, SALE AND DELIVERY. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell to
each Initial Purchaser, and each Initial Purchaser agrees severally and not
jointly to purchase from the Company, that number of Units set forth opposite
its name on Schedule I hereto. The purchase price for the Units shall be
$516.3795 per Unit.
(b) Delivery of, and payment of the purchase price for, the Units
shall be made, against payment of the purchase price, at the offices of
Cleary, Gottlieb, Xxxxx & Xxxxxxxx, 0 Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, or such other location as may be mutually acceptable. Such delivery
and payment shall be made at 10:00 A.M. New York time, on April 13, 1998 or
at such other time as shall be agreed upon by the Representative and the
Company. The time and date of such delivery and payment are herein called
the "Closing Date."
(c) Units sold to Eligible Purchasers will be represented by (x) one
or more permanent global Notes in definitive, fully registered form without
interest coupons (each a "Restricted Global Note") registered in the name
of Cede & Co., as nominee of DTC, having an aggregate amount corresponding
to the aggregate amount of the Notes sold to QIBs and (y) one or more
permanent global Warrants in definitive, fully registered form (each, a
"Restricted Global Warrant"), having an aggregate number corresponding to
the aggregate number of Warrants sold to QIBs. The Units shall be
delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct), against payment by the Initial Purchasers of the
purchase price therefor, by wire transfer of immediately available funds to
an account specified by the Company or as the Company may direct in
writing, PROVIDED that the Company shall give at least two business days'
prior written notice to the Representative of the information required to
effect such wire transfers. The Units shall be made available to the
Representative for inspection not later than 10:00 a.m., New York City
time, on the business day immediately preceding the Closing Date.
4. AGREEMENTS OF THE COMPANY. The Company covenants and agrees with each
of the Initial Purchasers as follows:
(a) To advise the Representative promptly and, if requested by the
Representative confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification
or exemption from qualification of any Securities for offering or sale in
any jurisdiction, or the initiation of any proceeding for such purpose by
any state securities commission or other regulatory authority and (ii) of
the happening of any event that, in the reasonable opinion of either
counsel to the Company or counsel to the Initial Purchasers, makes any
statement of a material fact made in the Preliminary Offering Memorandum or
the Offering Memorandum untrue or that requires the making of any additions
to or changes in the Preliminary Offering
4
Memorandum or the Offering Memorandum in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Company shall use its best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of any
Securities under any state securities or Blue Sky laws and, if at any time
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption of any Securities under
any state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish the Initial Purchasers and those persons identified by the
Initial Purchasers to the Company, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may reasonably
request. The Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection
with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum or the
Offering Memorandum prior to the Closing Date unless the Representative
shall previously have been advised thereof and shall not have objected
thereto within a reasonable time after being furnished a copy thereof. The
Company shall promptly prepare, upon the Representative's request, any
amendment or supplement to the Preliminary Offering Memorandum or the
Offering Memorandum that may be necessary or advisable in connection with
Exempt Resales.
(d) If, after the date hereof and prior to completion of the Exempt
Resales, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of either counsel to the Company or
counsel to the Initial Purchasers, it becomes necessary or advisable to
amend or supplement the Preliminary Offering Memorandum or Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser which is a prospective purchaser, not misleading, or if it is
necessary or advisable to amend or supplement the Preliminary Offering
Memorandum or Offering Memorandum to comply with applicable law, (i) notify
the Representative and (ii) forthwith to prepare an appropriate amendment
or supplement to such Offering Memorandum so that the statements therein as
so amended or supplemented will not, in the light of the circumstances when
it is so delivered, be misleading, or so that such Offering Memorandum will
comply with applicable law.
(e) To cooperate with the Representative and counsel to the Initial
Purchasers in connection with the qualification or registration of the
Units under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may reasonably request and to continue such
qualification in effect so long as required for the Exempt Resales;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to service of
process in suits or taxation, in each case, other
5
than as to matters and transactions relating to the Preliminary Offering
Memorandum, the Offering Memorandum or Exempt Resales, in any jurisdiction
where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated, to pay
all costs, expenses, fees and taxes incident to the performance of the
obligations of the Company hereunder, including in connection with: (i) the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum and the Offering Memorandum (including, without limitation,
financial statements) and all amendments and supplements thereto required
pursuant hereto, (ii) the preparation (including, without limitation,
duplication costs) and delivery of all preliminary and final Blue Sky
memoranda prepared and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance, transfer and delivery by the Company of the
Securities to the Initial Purchasers, (iv) the qualification or
registration of the Securities for offer and sale under the securities or
Blue Sky laws of the several states (including, without limitation, the
cost of preparing, printing and mailing a preliminary and final Blue Sky
Memorandum and the reasonable fees and disbursements of counsel to the
Initial Purchasers relating thereto), (v) furnishing such copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and all
amendments and supplements thereto, as may be requested by the Initial
Purchasers for use in connection with Exempt Resales, (vi) the preparation
of certificates for the Securities (including, without limitation, printing
and engraving thereof), (vii) the fees, disbursements and expenses of the
Company's counsel and accountants, (viii) all expenses and listing fees in
connection with the application for quotation of the Securities in the
National Association of Securities Dealers, Inc. ("NASD") Automated
Quotation System - PORTAL ("PORTAL"), (ix) all fees and expenses (including
fees and expenses of counsel to the Company) of the Company in connection
with the approval of the Global Securities by DTC for "book-entry"
transfer, (x) the reasonable fees and expenses of the Trustee and its
counsel in connection with the Indenture and the Notes, (xi) the reasonable
fees and expenses of the Warrant Agent and its counsel in connection with
the Warrant Agreement and the Warrants, (xii) the performance by the
Company of its other obligations under this Agreement and the other
Operative Documents and (xiii) "roadshow" travel and other expenses
incurred in connection with the marketing and sale of the Units, the Notes
and the Warrants.
(g) To use the proceeds from the sale of the Units in the manner described
in the Offering Memorandum under the caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Securities.
(i) To do and perform all things required to be done and performed under
this Agreement by it prior to or after the Closing Date and to satisfy all
conditions precedent on its part to the delivery of the Units.
6
(j) Not to, and cause its affiliates not to, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Act) that would be integrated with the sale of the Units in
a manner that would require the registration under the Act of the sale to
the Initial Purchasers or the Eligible Purchasers of the Units, the Notes
or the Warrants or to take any other action that would result in the Exempt
Resales not being exempt from registration under the Act.
(k) For so long as any of the Securities remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any beneficial owner of Units, Notes or Warrants in connection
with any sale thereof and any prospective purchaser of such Units, Notes or
Warrants from such beneficial owner, the information required by Rule
144A(d)(4) under the Act.
(l) To cause the Registered Exchange Offer to be made in the appropriate
form to permit registered Senior Discount Exchange Notes to be offered in
exchange for the Senior Discount Notes and to comply with all applicable
federal and state securities laws in connection with the Registered
Exchange Offer.
(m) To comply with all of its agreements set forth in the Registration
Rights Agreement and the Warrant Registration Rights Agreement and all
agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Restricted Global Note and the Restricted
Global Warrant by DTC for "book-entry" transfer.
(n) To use its best efforts to effect the designation of the Securities as
eligible for PORTAL and to obtain approval of the Restricted Global Note
and the Restricted Global Warrant by DTC for "book-entry" transfer.
(o) For so long as any of the Securities remain outstanding, to deliver
without charge to each of the Initial Purchasers, as they may request,
promptly upon their becoming available, copies of (i) all reports or other
publicly available information that the Company shall mail or otherwise
make available to its shareholders and (ii) all reports, financial
statements and proxy or information statements filed by the Company with
the Commission or any national securities exchange and such other publicly
available information concerning the Company or its subsidiaries, including
without limitation, press releases.
(p) Prior to the Closing Date, to furnish to each of the Initial
Purchasers, as soon as they have been prepared in the ordinary course by
the Company, copies of any consolidated financial statements or any
unaudited interim financial statements of the Company for any period
subsequent to the periods covered by the financial statements appearing in
the Offering Memorandum.
(q) Not to take and to cause its subsidiaries not to take, directly or
indirectly, any action designed to, or that might reasonably be expected
to, cause or result in stabilization
7
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities. Except as permitted by the Act, the
Company will not distribute any Preliminary Offering Memorandum, Offering
Memorandum or other offering material in connection with the offering and
sale of the Securities.
(r) To comply with the agreements in the Indenture, the Warrant Agreement,
the Registration Rights Agreement, the Warrant Registration Rights
Agreement and any other Operative Document.
(s) To reserve and continue to reserve as long as any Warrants remain
outstanding, a sufficient number of shares of Common Stock for issuance
upon exercise of the Warrants.
(t) Not, until 180 days following the Closing Date, without the prior
written consent of the Representatives, to offer, sell or contract to sell,
or otherwise dispose of, directly or indirectly, or announce the offering
of, any debt securities issued or guaranteed by the Company (other than the
Securities).
(u) To cause each certificate for a Note or Warrant, as the case may be,
to bear the legends required by the Indenture or Warrant Agreement, as
applicable.
(v) Not to resell, and (i) to cause any of its subsidiaries not to, and
(ii) to use its best efforts to cause its non-subsidiary affiliates not to,
resell, any Securities that have been acquired by any of them.
(w) Not to, and (i) to cause its subsidiaries and any person acting on its
or their behalf not to, and (ii) to use its best efforts to cause its
non-subsidiary affiliates not to, directly or indirectly, make offers or
sales of any security, or solicit offers to buy any security, under
circumstances that would require the registration of the Securities under
the Act.
(x) Not to engage, and (i) to cause its subsidiaries not to engage and
(ii) to use its best efforts to cause its non-subsidiary affiliates not to
engage, any person acting on its or their behalf not to engage, in any form
of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of the Securities in the
United States.
5. REPRESENTATIONS AND WARRANTIES. (a) The Company represents and
warrants to each of the Initial Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales. The
Preliminary Offering Memorandum and the Offering Memorandum do not, and any
supplement or amendment to them will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
contained in this paragraph shall not apply to statements in or omissions
from the Preliminary Offering Memorandum and the Offering Memorandum (or
any supplement or amendment thereto) made in reliance upon and in
8
conformity with information relating to the Initial Purchasers furnished to
the Company in writing by the Initial Purchasers expressly for use therein.
Any projections and other information contained in the Preliminary Offering
Memorandum and the Offering Memorandum or provided to the Initial
Purchasers or any Eligible Purchaser have been prepared in good faith and
are based upon assumptions which, in light of the circumstances under which
they were made, are reasonable. No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(ii) When the Units, the Notes and the Warrants are issued and
delivered pursuant to this Agreement, no Unit, Note or Warrant will be of
the same class (within the meaning of Rule 144A under the Act) as
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a
United States automated inter-dealer quotation system.
(iii) Each of the Company and its subsidiaries (A) has been duly
organized, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, (B) has all requisite corporate
power and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease and
operate its properties, and (C) 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 with respect to this clause (C), where the
failure to be so qualified or in good standing does not and could not
reasonably be expected to (x) individually or in the aggregate result in a
material adverse effect on the properties, business, result of operations,
condition (financial or otherwise), affairs or prospects of the Company and
its subsidiaries, taken as a whole, (y) interfere with or adversely affect
the issuance or marketability of the Units pursuant hereto or (z) in any
manner draw into question the validity of this Agreement or any other
Operative Document or the transactions described in the Offering Memorandum
under the caption "Use of Proceeds" (any of the events set forth in clauses
(x), (y) or (z) a "Material Adverse Effect").
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. At December 31, 1997 after giving effect to the issuance and sale
of the Units pursuant hereto, the consummation of the Equity Commitment (as
defined in the Offering Memorandum) and the events stated in the Offering
Memorandum, the Company had an authorized and outstanding consolidated
capitalization as set forth in the Offering Memorandum under the caption
"Capitalization."
(v) Except as disclosed in the Offering Memorandum, all of the
outstanding capital stock of each subsidiary is owned, directly or
indirectly, by the Company, free and clear of any lien, claim, encumbrance,
security interest, restriction on transfer,
9
shareholders' 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 non-assessable and were not issued in
violation of any preemptive or similar right.
(vi) Except as disclosed in the Offering Memorandum, there are
not currently, and will not be as a result of the Offering, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, any capital
stock or other equity interest of the Company or any subsidiary.
(vii) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and
the other Operative Documents and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the
corporate power and authority to issue, sell and deliver the Securities as
provided herein and therein and the power to effect the Use of Proceeds as
described in the Offering Memorandum.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and binding
agreement of the Company, enforceable against it in accordance with its
terms, except insofar as indemnification and contribution provisions may be
limited by applicable law or equitable principles and subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity.
(ix) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of
equity. The Offering Memorandum contains a fair summary in all material
respects of the terms of the Indenture.
(x) The Senior Discount Notes have been duly and validly
authorized by the Company, and have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant to this
Agreement and, when issued and authenticated in accordance with the terms
of the Indenture and delivered against payment therefor in accordance with
the terms hereof and thereof, will be the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The description of the Senior Discount Notes
in the Offering Memorandum contains a fair summary in all material respects
of the terms of the Senior Discount Notes.
10
(xi) The Senior Discount Exchange Notes have been duly and
validly authorized for issuance by the Company and, when issued and
authenticated pursuant to the Registered Exchange Offer and in accordance
with the terms of the Indenture, will be the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The description of the Senior Discount
Exchange Notes in the Offering Memorandum contains a fair summary in all
material respects of the terms of the Senior Discount Exchange Notes.
(xii) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The Offering Memorandum contains a fair
summary in all material respects of the terms of the Registration Rights
Agreement.
(xiii) The Warrant Agreement has been duly and validly authorized
by the Company, and, when duly executed and delivered by the Company, will
be the legal, valid binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of
equity. The Offering Memorandum contains a fair summary in all material
respects of the terms of the Warrant Agreement.
(xiv) The Warrants have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant to this
Agreement and, when issued and countersigned in accordance with the terms
of the Warrant Agreement and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Warrant
Agreement, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
Offering Memorandum contains a fair summary in all material respects of the
terms of the Warrants.
(xv) The Warrants will be exercisable for Warrant Shares in
accordance with the terms of the Warrant Agreement. The Warrant Shares have
been duly authorized for issuance by the Company and, when issued and paid
for upon exercise of the Warrants in accordance with the terms thereof,
will be validly issued, fully paid and nonassessable, free of any
preemptive or similar rights. The Company has reserved sufficient shares of
Common Stock for issuance upon the exercise of the Warrants (assuming the
exercise of the Warrants on the Closing Date).
11
(xvi) The Warrant Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered by
the Company, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity. The Offering Memorandum
contains a fair summary in all material respects of the terms of the
Warrant Registration Rights Agreement.
(xvii) Neither the Company nor any of its subsidiaries is, nor,
after giving effect to the Offering, 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 of
1934, as amended by the Telecommunications Act of 1996 (the
"Telecommunications Act") and the rules and regulations of the Federal
Communications Commission and environmental laws, statutes, ordinances,
rules, regulations, judgments or court decrees) applicable to the Company,
any of 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 individually or in the
aggregate have a Material Adverse Effect or (2) which is disclosed in the
Offering Memorandum. There exists no condition that, with notice, the
passage of time or otherwise, would constitute a default under any such
document or instrument, except as disclosed in the Offering Memorandum.
(xviii) None of (A) the execution, delivery or performance by the
Company of this Agreement and the other Operative Documents, (B) the
issuance and sale of the Securities and (C) consummation by the Company of
the transactions described in the Offering Memorandum under the caption
"Use of Proceeds" does or will violate, conflict with or constitute a
breach of any of the terms or provisions of, or a default under (or an
event that with notice or the lapse of time, or both, would constitute a
default), or require consent under, or result in the imposition of a lien
or encumbrance on any properties of the Company or any of its subsidiaries,
or an acceleration of any indebtedness of the Company or any of its
subsidiaries pursuant to, (i) the charter or bylaws of the Company or any
of its subsidiaries, (ii) any 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 any of its
subsidiaries or their property is or may be bound, (iii) any statute, rule
or regulation applicable to the Company or any of its subsidiaries or any
of their assets or properties or (iv) any judgment, order or decree of any
court or governmental agency or authority having jurisdiction over the
Company or any of its subsidiaries or any of their assets or properties,
except in the case of clauses (ii), (iii) and (iv) for such violations
conflicts, breaches, defaults, consents, impositions of liens or
accelerations that (x) would not singly, or in the aggregate, have a
Material Adverse Effect or (y) which are disclosed in the Offering
Memorandum. Other than as described in the Offering Memorandum, no consent,
approval, authorization or order of,
12
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 the California Public Utilities Commission)
or (B) any other person is required for (1) the execution, delivery and
performance by the Company of this Agreement and the other Operative
Documents or (2) the issuance and sale of the Securities and the
transactions contemplated hereby and thereby, except (x) such as have been
obtained and made (or, in the case of the Registration Rights Agreement or
Warrant Registration Rights Agreement, will be obtained and made) under the
Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") 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.
(xix) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of the Company, threatened
or contemplated to which the Company or any of its subsidiaries is a party
or to which the business or property of the Company or any of its
subsidiaries is subject, (ii) no statute, rule, regulation or order that
has been enacted, adopted or issued by any governmental agency or that has
been proposed by any governmental body or (iii) no injunction, restraining
order or order of any nature by a federal or state court or foreign court
of competent jurisdiction to which the Company or any of its subsidiaries
are or may be subject or to which the business, assets, or property of the
Company or any of its subsidiaries are or may be subject, that (x) is
required to be disclosed in the Preliminary Offering Memorandum and the
Offering Memorandum and that is not so disclosed or (y) could reasonably be
expected to individually or in the aggregate have a Material Adverse
Effect.
(xx) No action has been taken and no statute, rule, regulation
or order has been enacted, adopted or issued by any governmental agency
that prevents the issuance of the Securities or prevents or suspends the
use of the Offering Memorandum; no injunction, restraining order or order
of any nature by a federal or state court of competent jurisdiction has
been issued that prevents the issuance of the Securities, prevents or
suspends the sale of the Securities in any jurisdiction referred to in
Section 4(e) hereof or that could adversely affect the consummation of the
transactions contemplated by this Agreement, the Operative Documents or the
Offering Memorandum; and every request of any securities authority or
agency of any jurisdiction for additional information has been complied
with in all material respects.
(xxi) No labor dispute with the employees of the Company or any
of its subsidiaries exists or, to the best knowledge of the Company, is
threatened or imminent which is likely to result in a Material Adverse
Effect.
(xxii) The Company and its subsidiaries are in compliance with and
have not violated any environmental, safety or similar law or regulation
applicable to any of them or their business or property relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), do not lack any permit, license or other approval required of any
13
of them under applicable Environmental Laws and are not violating any term
or condition of such permit, license or approval, any of which could
reasonably be expected to, either individually or in the aggregate, have a
Material Adverse Effect. No facilities owned or leased by the Company or
any of its subsidiaries, or to the knowledge of the Company, any facilities
of any predecessor in interest of the Company or any of its subsidiaries,
is listed or, to the knowledge of the Company, formally proposed for
listing on the National Priorities List or the Comprehensive Environmental
Response, Compensation, and Liability Information System, both as
promulgated under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), or on any comparable state list, or listed
or, to the knowledge of the Company, formally proposed for listing, on any
comparable local list, and the Company or any of its subsidiaries have not
received any written notification of potential or actual liability, or any
written request for information, pursuant to CERCLA or any comparable
state, local or foreign environmental law.
(xxiii) Each of the Company and its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the Offering
Memorandum or as would not have a Material Adverse Effect, (ii) peaceful
and undisturbed possession under all material leases to which any of them
is a party as lessee, (iii) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has made
all declarations and filings with, all federal, state and local authorities
(including, without limitation, the FCC and the California Public Utilities
Commission), all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
conducted by the Company and its subsidiaries in the manner described in
the Offering Memorandum, except as described in the Offering Memorandum or
where the failure to hold such Authorizations would not, individually or in
the aggregate, have a Material Adverse Effect, and no such Authorization
contains a materially burdensome restriction that is not disclosed in the
Offering Memorandum and (iv) no reason to believe 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 each of the Company and 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 any of the Company or its subsidiaries is a party
are valid and binding, and no default by the Company or any of its
subsidiaries has occurred and is continuing thereunder and, to the best
knowledge of the Company and its subsidiaries, no material defaults by the
landlord are existing under any such lease that could reasonably be
expected to result in a Material Adverse Effect.
(xxiv) Each of the Company and its subsidiaries owns, possesses or
has the right to employ all 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,
14
software, systems or procedures), trademarks, service marks and trade
names, inventions, computer programs, technical data and information
(collectively, the "Intellectual Property") presently employed by it in
connection with the businesses now operated by it or which are proposed to
be operated by it free and clear of and to the knowledge of the Company
without violating any right, claimed right, charge, encumbrance, pledge,
security interest, restriction or lien of any kind of any other person, and
none of the Company or its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing, except, with respect to all of the foregoing, as
could 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.
(xxv) None of the Company or any of its subsidiaries, or to the
best knowledge of the Company, any of their officers, directors, partners,
employees, agents or affiliates or any other person acting on behalf of the
Company or any of its subsidiaries has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, official
or employee of any governmental agency (domestic or foreign),
instrumentality of any government (domestic or foreign) or any political
party or candidate for office (domestic or foreign) or other person who
was, is or may be in a position to help or hinder the business of the
Company or any of its subsidiaries (or assist the Company or any of its
subsidiaries in connection with any actual or proposed transaction) which
(i) might subject the Company or any of its subsidiaries, or any other
individual or entity to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign), (ii) if not
given in the past, might have had a Material Adverse Effect on the assets,
business or operations of the Company or any of its subsidiaries or (iii)
if not continued in the future, might have a Material Adverse Effect.
(xxvi) All material tax returns required to be filed by the
Company or any of 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, their assets or their
property.
(xxvii) None of the Company or any of its subsidiaries is (i) 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"), or (ii) a "holding company" or a "subsidiary
company" or an "affiliate" of a holding company within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
15
(xxviii) Except as disclosed in the Offering Memorandum, there are
no holders of securities of the Company or any of its subsidiaries who, by
reason of the execution by the Company of this Agreement or any other
Operative Document to which it is a party or the consummation by the
Company of the transactions contemplated hereby or thereby, have the right
to request or demand that the Company or any of its subsidiaries register
under the Act or analogous foreign laws and regulations securities held by
them.
(xxix) Each of the Company and its subsidiaries maintains a system
of internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
(xxx) Each of the Company and its subsidiaries maintains
insurance covering its properties, operations, personnel and businesses.
Except as disclosed in the Offering Memorandum, such insurance insures
against such losses and risks in accordance with customary industry
practice. None of the Company or any of its subsidiaries has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to
continue such insurance. All such insurance is outstanding and duly in
force on the date hereof, subject only to changes made in the ordinary
course of business, consistent with past practice, which do not, singly or
in the aggregate, materially alter the coverage thereunder or the risks
covered thereby.
(xxxi) None of the Company or any of its subsidiaries has (i)
taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Units, the Notes or the Warrants or (ii) since the date of
the Preliminary Offering Memorandum (A) sold, bid for, purchased or paid
any person any compensation for soliciting purchases of, the Units, the
Notes or the Warrants or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(xxxii) No registration under the Act of the Units, the Notes or
the Warrants is required for the sale of the Units to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming (i)
that the purchasers who buy the Units in the Exempt Resales are either QIBs
or Accredited Investors and (ii) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in connection
with the sale of the Units to the Initial Purchasers and the Exempt Sales
contained herein. No form of general solicitation or general advertising
was used by the Company or any of its representatives (other than the
Initial Purchasers, as to which the Company makes no representation or
warranty) in connection with the offer and sale of any of the Securities
16
in connection with Exempt Resales, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising.
(xxxiii) ERISA:
(A) DEFINITIONS:
"Code" means the United States Internal Revenue Code of 1986, as
amended, and the regulations promulgated and the rulings issued thereunder.
"ERISA" means the United States Employee Retirement Income Security
Act of 1974, as amended, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) that would be treated together with the Company as a single
employer under Title IV or Section 302 of ERISA or Section 412 of the Code.
"ERISA Event" means (i) the occurrence of a "reportable event"
described in Section 4043 of ERISA (other than a "reportable event" not
subject to the provision for 30-day notice), or (ii) the provision or
filing of a notice of intent to terminate a Plan (other than in a standard
termination within the meaning of Section 4041 of ERISA) or the treatment
of a Plan amendment as a distress termination under Section 404l of ERISA,
or (iii) the institution of proceedings to terminate a Plan by the Pension
Benefit Guaranty Corporation, or (iv) the existence of any "accumulated
funding deficiency" or "liquidity shortfall" (within the meaning of Section
302 of ERISA or Section 412 of the Code), whether or not waived, or the
filing of an application pursuant to Section 412(e) of the Code or Section
304 of ERISA for any extension of an amortization period, or (v) the
receipt of notice by the Company or any ERISA Affiliate that any
Multiemployer Plan may be terminated, partitioned or reorganized or that
any Multiple Employer Plan may be terminated, or (vi) the occurrence of any
transaction which might reasonably be expected to constitute grounds for
the imposition of liability under Section 4069 or 4212 of ERISA.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Multiple Employer Plan" means an employee benefit plan described in
Section 4063 of ERISA.
"Plan" means an employee benefit plan, other than a Multiemployer
Plan, with respect to which the Company or any of its ERISA Affiliates
could be subject to any liability under Title IV of ERISA, Section 302 of
ERISA or Section 412 of the Code.
"Underfunding" means, with respect to any Plan, the excess, if any, of
the "projected benefit obligations" (within the meaning of Statement of
Financial Accounting
17
Standards 87) under such Plan (determined using the actuarial assumptions
used for purposes of calculating funding requirements in the most recent
actuarial report for such plan) over the fair market value of the assets
held under the Plan.
(B) No ERISA Event has occurred, is planned or is reasonably expected
to occur and no condition or event currently exists or currently is
expected to occur that could result in any such ERISA Event. The aggregate
Underfunding with respect to all Plans which have any Underfunding does not
exceed $100,000.
(C) Neither the Company nor any of its ERISA Affiliates has incurred
unsatisfied liabilities in connection with withdrawals from Multiemployer
Plans and Multiple Employer Plans, if any, in excess of an aggregate amount
of $100,000. If the Company and each of its ERISA Affiliates were to
completely withdraw on the date hereof from all Multiemployer Plans and
Multiple Employer Plans to which such entity is contributing or has an
obligation to contribute, the Company would not incur, directly or
indirectly, liability in excess of an aggregate amount of $100,000.
(xxxiv) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement
thereto, as of its date, contains the information specified in, and meets
the requirements of, Rule 144A(d)(4) under the Act.
(xxxv) Subsequent to the respective dates as of which information
is given in the Offering Memorandum and up to the Closing Date, except as
set forth in the Offering Memorandum, (i) none of the Company or any of its
subsidiaries has incurred any liabilities or obligations, direct or
contingent, which are material, individually or in the aggregate, to the
Company and its subsidiaries taken as a whole, nor entered into any
transaction not in the ordinary course of business, (ii) none of the
Company or any subsidiary has incurred any liabilities or obligations,
direct or contingent, which will be material to the Company and its
subsidiaries, taken as a whole, (iii) there has not been, singly or in the
aggregate, any change or development which could reasonably be expected to
result in a Material Adverse Effect, (iv) there has been no dividend or
distribution of any kind declared, paid or made by the Company or any of
its subsidiaries on any class of its capital stock, (v) there has been no
capital expenditure or commitment by the Company or any of its subsidiaries
exceeding $100,000, either individually or in the aggregate except in the
ordinary course of business as generally contemplated by the Offering
Memorandum, (vi) 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, (vii) there has been no
revaluation by the Company or any of its subsidiaries of any of their
assets, (viii) except in the ordinary course of business consistent with
past practice, 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, (ix) there has been
no material amendment or termination of any material contract, agreement
18
or license to which the Company or any subsidiary is a party or by which it
is bound, (x) 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 (xi) there has been no material change in pricing or
royalties set or charged by the Company or any subsidiary to their
respective customers or licensees or in pricing or royalties set or charged
by persons who have licensed intellectual property to the Company or its
subsidiaries.
(xxxvi) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the application of the
proceeds from the issuance and sale of the Securities and the consummation
of the transactions contemplated thereby as set forth in the Offering
Memorandum, will violate Regulations G, T, U or X promulgated by the Board
of Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(xxxvii) The accountants who have certified or will certify the
financial statements (which term as used in this Agreement includes the
related notes thereto) included or to be included as part of the Offering
Memorandum are independent accountants. The historical consolidated
financial statements of the Company comply as to form in all material
respects with the requirements applicable to registration statements on
Form S-1 under the Act and present fairly in all material respects the
consolidated financial position and results of operations of the Company at
the respective dates and for the respective periods indicated. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods presented. The pro forma financial statements included in the
Offering Memorandum have been prepared on a basis consistent with such
historical statements, except for the pro forma adjustments specified
therein, and give effect to assumptions made on a reasonable basis and
present fairly in all material respects the historical and proposed
transactions contemplated by this Agreement and the other Operative
Documents; and such pro forma financial statements comply as to form in all
material respects with the requirements applicable to pro forma financial
statements included in registration statements on Form S-1 under the Act.
The other financial and statistical information and data included in the
Offering Memorandum, historical and pro forma, are accurately presented in
all material respects and prepared on a basis consistent with the financial
statements, historical and pro forma, included in the Offering Memorandum
and the books and records of the Company and its subsidiaries, as
applicable.
(xxxviii) The Company does not intend to, nor does it believe that it
or any of its subsidiaries will, incur debts beyond their ability to pay
such debts as they mature. The present fair saleable value of the assets of
the Company on a consolidated basis exceeds the amount that will be
required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Company on a
consolidated basis as they become absolute and matured. The assets of the
Company on a consolidated basis do not constitute unreasonably small
capital to carry out the business of the Company and its subsidiaries,
taken as a whole, as conducted or as proposed to be conducted. Upon the
19
issuance of the Units, the present fair saleable value of the assets of the
Company on a consolidated basis will exceed the amount that will be
required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Company on a
consolidated basis as they become absolute and matured. Upon the issuance
of the Units, the assets of the Company on a consolidated basis will not
constitute unreasonably small capital to carry out its businesses as now
conducted, including the capital needs of the Company on a consolidated
basis, taking into account the projected capital requirements and capital
availability.
(xxxix) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company or any of its subsidiaries
and any other person that would give rise to a valid claim against the
Company or any of its subsidiaries or any of the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Securities.
(xl) There are no business relationships or related party
transactions involving the Company or any subsidiary or any other person
that would be required to be described in the Offering Memorandum were it
to be filed as part of a Registration Statement on Form S-1 under the Act
which have not been so described.
(xli) The information provided by the Company pursuant to this
Agreement will not, at the date thereof, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(xlii) The statements (including the assumptions described
therein) included in the Offering Memorandum under the heading "Business"
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" were made by the Company with a reasonable basis and
reflect the Company's good faith estimate of the matters described therein.
(xliii) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
shall be deemed to be a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
The Company acknowledges that each of the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel to the Company and counsel to the Initial Purchasers,
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
(b) Each of the Initial Purchasers severally and not jointly
represents, warrants and covenants to the Company and agrees that:
20
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Units.
(ii) Such Initial Purchaser (A) is not acquiring the Units with a
view to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Units only to
persons it reasonably believes are QIBs in reliance on the exemption from
the registration requirements of the Act provided by Rule 144A.
(iii) No form of general solicitation or general advertising has
been or will be used by any of the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the Units,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
(iv) Each of the Initial Purchasers understands that the Company
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 8 hereof, counsel to the Company and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless (i) each of
the Initial Purchasers, (ii) each person, if any, who controls one of the
Initial Purchasers within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and (iii) the respective officers, directors,
partners, employees, representatives and agents of any of the Initial
Purchasers or any controlling person to the fullest extent lawful, from and
against any and all losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any investigation or litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim
or litigation), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or the Offering Memorandum, or in any supplement thereto or
amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
however, that (i) the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, liability, claim,
damage or expense arises out of or is based upon any such untrue statement
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of
21
the Initial Purchasers expressly for use therein and (ii) the foregoing
indemnity with respect to any untrue statement contained in or omitted from
the Preliminary Offering Memorandum shall not inure to the benefit of any
Initial Purchaser (or persons controlling such Initial Purchaser) from whom
the person asserting any such loss, liability claim, damage or expense
purchased any Units which are the subject thereof if it is not finally
judicially determined that such loss, liability, claim, damage or expense
resulted solely from the fact that such Initial Purchaser sold Units to the
person asserting loss, claim, damage or expense, who was not sent or given,
at or prior to the written confirmation of such sale, a copy of the
Offering Memorandum, as amended and supplemented. This indemnity agreement
will be in addition to any liability which the Company may otherwise have,
including under this Agreement.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any losses, liabilities, claims, damages
and expenses whatsoever (including but not limited to attorneys' fees and
any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened,
or any claim whatsoever and any and all amounts paid in settlement of any
claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum, or in any amendment thereof
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that any such loss, liability, claim,
damage or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Initial Purchaser expressly for use
therein; PROVIDED, however, that in no case shall any Initial Purchaser be
liable or responsible for any amount in excess of the discounts and
commissions received by such Initial Purchaser from the sale of Securities.
This indemnity will be in addition to any liability which any Initial
Purchaser may otherwise have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not
relieve it from any liability which it may have under this Section 6 except
to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may otherwise have). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent it may elect by
22
written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have
the right to employ its or their own counsel in any such case (and where
the Initial Purchasers are the indemnified parties, the Representative
shall have the right to select such counsel for the Initial Purchasers),
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in
connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such
action within a reasonable time after notice of commencement of the action,
or (iii) such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them which are different from
or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying party or parties shall not have the right
to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of counsel shall be
borne by the indemnifying parties; PROVIDED, however, that the indemnifying
party under subsection (a) or (b) above, shall only be liable for the legal
expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or
action effected without its prior written consent; PROVIDED, however, that
such consent was not unreasonably withheld.
7. CONTRIBUTION. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 6 is for any reason held to
be unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and the Initial Purchasers shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Initial Purchasers, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) to which the Company and one or
more of the Initial Purchasers may be subject, in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Initial Purchasers from the offering of the Units or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 6, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Initial
Purchasers in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Initial Purchasers shall be deemed to be in the same proportion as (x) the total
proceeds from the offering of Units (net of discounts but before deducting
expenses) received by the Company and (y) the discounts received by the Initial
Purchasers, respectively, from the sale of the Securities.
23
The relative fault of the Company and of the Initial Purchasers shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Initial
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 7, (i) in no case shall any Initial Purchaser be required to
contribute any amount in excess of the amount by which the discount applicable
to the Units purchased by such Initial Purchaser pursuant to this Agreement
exceeds the amount of any damages which such Initial Purchaser has otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, (A) each person, if any, who
controls any of the Initial Purchasers within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and (B) the respective officers,
directors, partners, employees, representatives and agents of any of the Initial
Purchasers or any controlling person shall have the same rights to contribution
as such Initial Purchaser, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 7. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 7, notify such party
or parties from whom contribution may be sought, but the failure to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 7 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its prior written consent; PROVIDED,
however, that such written consent was not unreasonably withheld.
8. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The several obligations
of the Initial Purchasers to purchase and pay for the Units, if any, as provided
herein, shall be subject to the satisfaction of the following conditions:
(a) All of the representations and warranties of the Company contained in
this Agreement shall be true and correct on the date hereof and on the
Closing Date with the same force and effect as if made on and as of the
date hereof and the Closing Date, respectively. The Company shall have
performed or complied with all of the agreements herein contained and
required to be performed or complied with by it at or prior to the Closing
Date.
(b) The Offering Memorandum shall have been printed and copies distributed
to the Initial Purchasers not later than 10:00 a.m., New York City time, on
the day following the date of this Agreement or at such later date and time
as to which the Representative may agree, and no stop order suspending the
qualification or exemption from qualification of
24
the Units, the Notes or the Warrants in any jurisdiction referred to in
Section 4(e) shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Units, the
Notes or the Warrants; no action, suit or proceeding shall have been
commenced and be pending against or affecting or, to the best knowledge of
the Company, threatened against, the Company or any of its subsidiaries
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 or (2) has not been disclosed in the Offering Memorandum; and no
stop order shall have been issued preventing the use of the Offering
Memorandum, or any amendment or supplement thereto, or which could
reasonably be expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material adverse change, or
any development that is reasonably likely to result in a material adverse
change, in the capital stock or the long-term debt, or material increase in
the short-term borrowings, of the Company or any of its subsidiaries from
that set forth in the Offering Memorandum, (ii) no dividend or distribution
of any kind shall have been declared, paid or made by the Company or any of
its subsidiaries on any class of its capital stock, (iii) neither the
Company nor any of its subsidiaries shall have incurred any liabilities or
obligations, direct or contingent, other than in the ordinary course of
business, that are material, individually or in the aggregate, to the
Company or any of its subsidiaries, taken as a whole, and that are required
to be disclosed on a balance sheet or notes thereto in accordance with
generally accepted accounting principles and are not disclosed on the
latest balance sheet or notes thereto included in the Offering Memorandum.
Since the date hereof and since the dates as of which information is given
in the Offering Memorandum, there shall not have occurred any Material
Adverse Effect.
(e) The Representative shall have received a certificate, dated the
Closing Date, signed on behalf of the Company by (i) Xxxxxx X. Xxxxx,
Chairman of the Board, Chief Executive Officer and President (ii) Xxxxxx X.
Xxxxxxx, Executive Vice President, Chief Operating Officer and Acting Chief
Financial Officer, in form and substance reasonably satisfactory to the
Representative, confirming, as of the Closing Date, the matters set forth
in paragraphs (a), (b), (c) and (d) of this Section 8 and that, as of the
Closing Date, the obligations of the Company to be performed hereunder on
or prior thereto have been duly performed in all material respects.
(f) The Representative shall have received on the Closing Date an opinion,
dated the Closing Date, in form and substance satisfactory to the
Representative and counsel to the Initial Purchasers, of Xxxxxx & Xxxxxxx,
counsel for the Company, to the effect set forth in Exhibit A hereto.
25
(g) The Representative shall have received on the Closing Date an opinion,
dated the Closing Date, in form and substance satisfactory to the
Representative and counsel to the Initial Purchasers, of Xxxxxxxxxx &
Xxxxx, special regulatory counsel to the Company, to the effect set forth
in Exhibit B hereto.
(h) The Representative shall have received an opinion, dated the Closing
Date, in form and substance reasonably satisfactory to the Representative,
of Xxxxxx, Xxxxxxxx, Xxxxx & Xxxxxxxx, counsel to the Initial Purchasers,
covering such matters as the Representative may reasonably request.
(i) At the time this Agreement is executed and at the Closing Date the
Representative shall have received from Price Waterhouse LLP, independent
public accountants for the Company, dated as of the date of this Agreement
and as of the Closing Date, customary comfort letters addressed to the
Representative and in form and substance satisfactory to the Representative
and counsel to the Initial Purchasers with respect to the financial
statements and certain financial information of the Company contained in
the Offering Memorandum.
(j) Xxxxxx, Xxxxxxxx, Xxxxx & Xxxxxxxx shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 8 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(k) Prior to the Closing Date, the Company shall have furnished to the
Representative such further information, certificates and documents as the
Representative may reasonably request.
(l) The Company and the Trustee shall have entered into the Indenture and
the Representative shall have received counterparts, conformed as executed,
thereof.
(m) The Company shall have entered into the Registration Rights Agreement
and the Representative shall have received counterparts, conformed as
executed, thereof.
(n) The Company shall have entered into the Warrant Agreement and the
Representative shall have received counterparts, conformed as executed,
thereof.
(o) The Company shall have entered into the Warrant Registration Rights
Agreement and the Representative shall have received counterparts,
conformed as executed, thereof.
(p) The Company shall have consummated the Equity Commitment and provided
the Representative with evidence, in form and substance satisfactory to
them, that proceeds have been received by the Company thereunder in the
amounts and in the manner set forth in the Offering Memorandum.
(q) The Company shall have furnished to the Representative evidence, in
form and substance satisfactory to them, that all amounts outstanding under
the Company's Credit
26
Facility (as defined in the Offering Memorandum) have been repaid in full,
that such Facility has been terminated and that the security interests
created in connection therewith have been released.
(r) The Amended and Restated Investor Rights Agreement, a copy of which
has been furnished to the Representative, has been duly authorized,
executed and delivered by each of the parties thereto.
All opinions, certificates, letters and other documents required by
this Section 8 to be delivered by the Company will be in compliance with
the provisions hereof only if they are reasonably satisfactory in form and
substance to the Representative. The Company will furnish the
Representative with such conformed copies of such opinions, certificates,
letters and other documents as it shall reasonably request.
9. INITIAL PURCHASERS' INFORMATION. The Company and the Initial
Purchasers severally acknowledge that the statements with respect to the
offering of the Units set forth in the last paragraph of the cover page and the
last sentence of the third paragraph and the fifth paragraph under the caption
"Plan of Distribution," in such Offering Memorandum constitute the only
information furnished in writing by the Initial Purchasers expressly for use in
the Offering Memorandum.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including the agreements contained in Sections 4(f)
and 11(d), the indemnity agreements contained in Section 6 and the contribution
agreements contained in Section 7, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Initial
Purchasers or any controlling person thereof or by or on behalf of the Company
or any controlling person thereof, and shall survive delivery of and payment for
the Units to and by the Initial Purchasers. The representations contained in
Section 5 and the agreements contained in Sections 4(f), 6, 7 and 11(d) shall
survive the termination of this Agreement, including any termination pursuant to
Section 11.
11. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective upon execution and delivery of a
counterpart hereof by each of the parties hereto.
(b) The Representative shall have the right to terminate this Agreement at
any time prior to the Closing Date by notice to the Company from the
Representative, without liability (other than with respect to Sections 6
and 7) on the Initial Purchasers' part to the Company if, on or prior to
such date, (i) the Company shall have failed, refused or been unable to
perform in any material respect any agreement on its part to be performed
hereunder, (ii) any other condition to the obligations of the Initial
Purchasers hereunder as provided in Section 8 is not fulfilled when and as
required in any material respect, (iii) in the reasonable judgment of the
Representative any material adverse change shall have occurred since the
respective dates as of which information is given in the Offering
27
Memorandum in the condition (financial or otherwise), business, properties,
assets, liabilities, prospects, net worth, results of operations or cash
flows of the Company taken as a whole, other than as set forth in the
Offering Memorandum, or (iv)(A) any domestic or international event or act
or occurrence has materially disrupted, or in the opinion of the Initial
Purchasers will in the immediate future materially disrupt, the market for
the Company's securities or for securities in general; or (B) trading in
securities generally on the New York or American Stock Exchanges shall have
been suspended or materially limited, or minimum or maximum prices for
trading shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange, or by such exchange
or other regulatory body or governmental authority having jurisdiction; or
(C) a banking moratorium shall have been declared by Federal or state
authorities, or a moratorium in foreign exchange trading by major
international banks or persons shall have been declared; or (D) there is an
outbreak or escalation of armed hostilities involving the United States on
or after the date hereof, or if there has been a declaration by the United
States of a national emergency or war, the effect of which shall be, in the
Representative's judgment, to make it inadvisable or impracticable to
proceed with the offering or delivery of the Units on the terms and in the
manner contemplated in the Offering Memorandum; or (E) there shall have
been such a material adverse change in general economic, political or
financial conditions or if the effect of international conditions on the
financial markets in the United States shall be such as, in the
Representative's judgment, makes it inadvisable or impracticable to proceed
with the delivery of the Units as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing
by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof, or if the sale of the Units provided for herein is not
consummated because any condition to the obligations of the Initial
Purchasers set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement
herein or comply with any provision hereof, the Company will, subject to
demand by the Representative, reimburse the Initial Purchasers for all
out-of-pocket expenses (including the reasonable fees and expenses of
Initial Purchasers' counsel), incurred by the Initial Purchasers in
connection herewith.
28
12. NOTICE. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the
Representative shall be mailed, delivered, or telexed, telegraphed or telecopied
and confirmed in writing to Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Corporate Finance Department, telecopy number: (212)
272-3092; and if sent to the Company, shall be mailed, delivered or telexed,
telegraphed or telecopied and confirmed in writing to FirstWorld Communications,
Inc., 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxxx X. Xxxxxxx, telecopy number: (000) 000-0000, with a copy to Xxxxxx &
Xxxxxxx, 000 X Xxxxxx, 00xx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000-0000, telecopy
number: (000) 000-0000, Attention: Xxxxx X. Xxxx.
13. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers and the Company and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Units from the Initial Purchasers.
14. CONSTRUCTION. This Agreement shall be construed in accordance with
the internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
15. CAPTIONS. The captions included in this Agreement are included solely
for convenience of reference and are not to be considered a part of this
Agreement.
16. COUNTERPARTS. This Agreement may be executed in various counterparts
which together shall constitute one and the same instrument.
[Signature page to follow]
29
If the foregoing correctly sets forth your understanding of our
agreement, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the Initial Purchasers.
Very truly yours,
FIRSTWORLD COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
BEAR, XXXXXXX & CO. INC.
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name:
Title:
For themselves and the other Initial
Purchasers named in Schedule I to the
foregoing Agreement
30
Schedule I
Initial Purchaser Number of Units
----------------- to be Purchased
---------------
Bear, Xxxxxxx & Co. Inc. . . . . . . . . . . . . . . . . . . 235,000
ING Baring (U.S.) Securities, Inc. . . . . . . . . . . . . . 94,000
X.X. Xxxxxx Securities Inc.. . . . . . . . . . . . . . . . . 47,000
Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx & Xxxxx
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . 94,000
---------------
---------------
Total: 470,000
31
EXHIBIT A
Form of Opinion of Xxxxxx & Xxxxxxx
1. The Company and each of the subsidiaries listed on an appendix to the
opinion have been duly incorporated and are validly existing and in good
standing under the laws of its jurisdiction of incorporation with corporate
power and authority to own, lease and operate their properties and to conduct
their businesses as described in the Offering Memorandum. The Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the other Operative Documents, as
applicable, and to consummate the transactions contemplated thereby, including,
without limitation, the corporate power and authority to issue, sell and deliver
the Securities. Based solely on certificates from public officials, such counsel
shall confirm that the Company is qualified to do business in the State of
Texas.
2. All of the outstanding shares of capital stock of the Company have
been duly authorized, validly issued, and are fully paid and nonassessable. The
authorized, issued and outstanding capital stock of the Company conforms in all
material respects to the description thereof set forth in the Offering
Memorandum. All of the issued and outstanding shares of capital stock of each
of the subsidiaries listed on the appendix referenced above have been duly and
validly issued, are fully paid and nonassessable, are owned of record by the
Company, and, to the best of such counsel's knowledge, are free from any lien,
claim, encumbrance, security interest, restriction on transfer, shareholders'
agreement or voting trust, except as described in the Offering Memorandum.
3. Except as described in the Offering Memorandum, to the best of such
counsel's knowledge, there is no commitment or arrangement to issue, and there
are no outstanding options, warrants or other rights calling for the issuance
of, any share of capital stock of the Company or any security or other
instrument that by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company.
4. When the Units are issued and delivered pursuant to this Agreement, no
Unit, Note or Warrant will be of the same class (within the meaning of Rule 144A
under the Act) as securities of the Company that are listed on a national
securities exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
5. This Agreement has been duly and validly authorized, executed and
delivered by the Company.
6. Each of the Indenture, the Registration Rights Agreement, the Warrant
Agreement, the Warrant Registration Rights Agreement and the Amended and
Restated Investor
Rights Agreement has been duly and validly authorized, executed and delivered by
the Company and is the legally valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors; (ii) the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or law, and the discretion of the court
before which any proceeding therefor may be brought; (iii) the unenforceability
under certain circumstances under law or court decisions of provisions providing
for the indemnification of or contribution to a party with respect to a
liability where such indemnification or contribution is contrary to public
policy; (iv) such counsel need not express any opinion concerning the
enforceability of the specific performance remedy contained in the Registration
Rights Agreement; (v) such counsel need not express any opinion concerning the
enforceability of the waiver of rights or defenses contained in Section 6.11 of
the Indenture; and (vi) the manner by which the acceleration of the Securities
may affect the collectibility of that portion of the stated principal amount
thereof which might be determined to constitute unearned interest thereon.
7. The Notes have been duly and validly authorized for issuance and sale
to the Initial Purchasers by the Company pursuant to this Agreement and, when
executed and authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the terms
of this Agreement and the Indenture, will be legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except (i) as limited by the effect of bankruptcy, insolvency,
reorganization, moratoriurn or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors, (ii) as limited
by the effect of general principles of equity, whether enforcement is considered
in a proceeding in equity or at law, and the discretion of the court before
which any proceeding therefor may be brought; and (iii) as limited by the
unenforceability under certain circumstances under law or court decisions of
provisions providing for the indemnification of or contribution to a party with
respect to a liability where such indemnification or contribution is contrary to
public policy; and (iv) the manner by which the acceleration of the Securities
may affect the collectibility of that portion of the stated principal amount
thereof which might be determined to constitute unearned interest thereon.
8. The Exchange Notes have been duly and validly authorized for issuance
by the Company and, when issued and authenticated in accordance with the terms
of the Exchange Offer and the Indenture, will be legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except (i) as limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors, (ii) as limited
by the effect of general principles of equity, whether enforcement is considered
in a proceeding in equity or at law, and the discretion of the court before
which any proceeding therefor may be brought and (iii) as limited by the
unenforceability under certain circumstances under law or court decisions of
provisions providing for the indemnification of or contribution to a party with
respect to a liability where such indemnification or contribution is contrary to
public policy; and (iv) the manner by which the acceleration of the Securities
may affect the collectibility of that
33
portion of the stated principal amount thereof which might be determined to
constitute unearned interest thereon.
9. The Warrants have been duly and validly authorized for issuance and
sale to the Initial Purchasers by the Company pursuant to this Agreement and,
when issued and countersigned in accordance with the terms of the Warrant
Agreement and delivered against payment therefor in accordance with the terms of
this Agreement and the Warrant Agreement, will he legally valid and binding
agreements of the Company, enforceable against the Company in accordance with
their terms, except (i) as limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors, (ii) as limited
by the effect of general principles of equity, whether enforcement is considered
in a proceeding in equity or at law and the discretion of the court before which
any proceeding therefor may be brought and (ii) as limited by the
unenforceability under certain circumstances under law or court decisions of
provisions providing for the indemnification of or contribution to a party with
respect to a liability where such indemnification or contribution is contrary to
public policy.
10. The Warrant Shares have been duly authorized and reserved for issuance
upon exercise of the Warrants in accordance with the terms of the Warrant
Agreement, are free of preemptive rights and, when issued upon exercise of the
Warrants in accordance with the terms of the Warrant Agreement, will be validly
issued, fully paid and nonassessable.
11. The statements set forth in the Offering Memorandum under the headings
"Description of the Units," "Description of the Notes," "Description of the
Warrants," and "Exchange Offer; Registration Rights," insofar as such statements
constitute a summary of legal matters, documents or proceedings, are accurate in
all material respects. The statements in the Offering Memorandum under the
heading "Notice to Investors," insofar as they purport to summarize matters of
United States federal law, are accurate in all material respects.
12. Assuming (i) the accuracy of the representations and warranties of the
Initial Purchasers contained in Section 5(b) of this Agreement and (ii)
compliance by the Initial Purchasers with the covenants contained in Section
5(b) of this Agreement, no registration of the Units under the Securities Act is
required in connection with the purchase of the Units by the Initial Purchasers,
or the initial resale of the Units by the Initial Purchasers, in each case in
the manner contemplated by this Agreement and the Offering Memorandum and, prior
to effectiveness of the Exchange Registration Statement or the Shelf
Registration Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA. Such counsel, however,
need not express any opinion as to when or under what circumstances any
Securities initially sold by the Initial Purchasers may be reoffered or resold.
13. The execution and delivery of this Agreement and the Operative
Documents, the issuance and sale of the Securities pursuant to this Agreement
and the issuance and sale of shares of Common Stock and warrants to purchase
Common Stock pursuant to the Equity Commitment will not result (a) in the
violation by the Company of its Amended and Restated Certificate of
Incorporation or Bylaws or any federal, or California or New York statute, rule
or regulation
34
known to us to be applicable to the Company, (b) in the breach of or a default
under any indenture, note, loan agreement, deed of trust, security agreement or
other written agreement or instrument identified to such counsel by an officer
of the Company as material to the Company and listed in an appendix to such
counsel's opinion (the "Material Agreements"), or (c) to the best of such
counsel's knowledge, based solely on the docket searches set forth on an
appendix and certificates from officers of the Company, in the breach of or a
default under any court and administrative orders, writs, judgments and decrees
specifically directed to the Company, except as disclosed in the Offering
Memorandum.
To the best of such counsel's knowledge, no consent, approval,
authorization or order of, or filing with, any federal, California or New York
court or governmental agency or body is required for the execution, delivery and
performance of the Purchase Agreement and the other Operative Documents, the
issuance and sale of the Securities or the issuance and sale of shares of Common
Stock and warrants to purchase Common Stock pursuant to the Equity Commitment,
except (x) such as may be required (i) in connection with the registration under
the Securities Act of the Exchange Notes, if any, pursuant to the Registration
Rights Agreement or under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) in connection with the registration under the Securities
Act of the Warrants and Warrant Shares pursuant to the Warrant Registration
Rights Agreement or under the Exchange Act, (iii) in connection with the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA") in connection with the registration of the Exchange Notes, if any,
pursuant to the Registration Rights Agreement, (iv) under the blue sky laws of
any jurisdiction; (y) those which have been obtained and are in full force and
effect; and (z) those identified in the Offering Memorandum.
14. The Company is not and, after giving effect to the sale of the Units
and the application of the net proceeds therefrom will not be, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act").
15. Except as set forth in this Agreement, the Registration Rights
Agreement or the Warrant Registration Rights Agreement or as disclosed in the
Offering Memorandum, to the best of such counsel's knowledge, there are no
holders of securities of the Company who, by reason of the execution by the
Company of this Agreement or any other Operative Document to which it is a party
or the consummation by the Company of the transactions contemplated thereby,
have the right to request or demand that the Company register securities held by
them under the Act.
16. Neither the execution or delivery of this Agreement or any of the
Operative Documents, the issuance and sale of the Securities, or the application
of the proceeds from the issuance and sale of the Securities in the manner set
forth under the caption "Use of Proceeds" in the Offering Memorandum will
violate Regulations G, T, U or X promulgated by the Board of Governors of the
Federal Reserve System. Such counsel may assume for purposes of such opinion
that the Company will not use any of the proceeds from the sale and issuance of
the Units to purchase "margined securities" within the meaning of Regulations G,
T, U and X.
17. To the best of our knowledge, based solely on docket searches in the
jurisdictions set forth on an appendix to such opinion for the entities
indicated on such appendix and
35
certificates from officers of the Company, there are no actions, suits,
proceedings or investigations pending or threatened against the Company or any
of its subsidiaries before or by any court, governmental agency or arbitrator.
18. The statements contained in the Offering Memorandum under the caption
"Certain Federal Income Tax Consequences," insofar as such statements continue a
summary of legal matters, documents or proceedings, are accurate in all material
respects.
Such counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, and representatives of the Initial Purchasers, at
which the contents of the Offering Memorandum and related matters were discussed
and, although such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum and has not made any independent check or
verification thereof, during the course of such participation, no facts came to
such counsel's attention that caused it to believe that the Offering Memorandum,
as of its date, contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statement therein, in the light of
the circumstances under which they were made, not misleading; it being
understood that such counsel expresses no belief with respect to the financial
statements or other financial data included in, or omitted from, the Offering
Memorandum.
35
Exhibit B
Form of Opinion of Xxxxxxxxxx & Xxxxx
1. All of the licenses, permits and authorizations required by the
FCC for the provision of telecommunications services by the Company or any
of its subsidiaries, as such counsel understands those services to be
provided currently based upon the attached certificate and the Offering
Memorandum, have been issued to and are validly held by the Company or the
applicable subsidiary. All of the licenses, permits and authorizations
required by any "state commissions" as defined in Section 3 of the
Communications Act of 1934, as amended (the "State Telecommunications
Agencies") for the provision of telecommunications services by the Company
and its subsidiaries, as such counsel understands those services to be
provided currently based upon the attached certificate and the Offering
Memorandum, have been issued to and, to the best knowledge of such counsel,
are validly held by the Company or the applicable subsidiary, except where
the failure to obtain or hold such license, permit or authority would not
have a Material Adverse Effect. All such licenses, permits and
authorizations are in full force and effect.
2. None of the Company or any of its subsidiaries is the subject of
any proceeding (including a rule making proceeding), pending complaint or
investigation, or, to the best of such counsel's knowledge, any threatened
complaint or investigation, before the FCC, or, to the best of such
counsel's knowledge after oral inquiry, of any proceeding (including a rule
making proceeding), pending complaint or investigation, or any threatened
complaint or investigation, before the State Telecommunications Agencies
based, in each case, on any alleged violation of any statutes governing the
FCC or the State Telecommunications Agencies and the rules and regulations
promulgated thereunder (the "Telecommunications Laws") by the Company or
any of its subsidiaries in connection with their provision of or failure to
provide telecommunications services of a character required to be disclosed
in the Offering Memorandum which is not disclosed in the Offering
Memorandum.
3. The statements in the Offering Memorandum under the headings of
"Risk Factors -- Competition -- Telephony," "Risk Factors--Government
Regulation," and "Business -- Regulation" accurately summarize the matters
therein described.
4. The Company has the consents, approvals, authorizations,
licenses, certificates, permits, or orders of the FCC and the State
Telecommunications Agencies, if any is required, for the consummation of
the transactions contemplated in the Offering Memorandum, except where the
failure to obtain the consents, approvals, authorizations, licenses,
certificates, permits or orders would not have a Material Adverse Effect.
5. Neither the execution and delivery of the Operative Documents nor
the sale of the Securities contemplated thereby will conflict with or
result in a violation of any order or regulation of the FCC or the State
Telecommunications Agencies applicable to the Company, except where the
conflict with or the violation of which would not have a Material Adverse
Effect.
