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EXHIBIT 1.1
EXECUTION COPY
COVAD COMMUNICATIONS GROUP, INC.
$425,000,000 Principal Amount of 12% Senior Notes due 2010
Purchase Agreement
January 21, 2000
BEAR, XXXXXXX & CO. INC.
XXXXXX XXXXXXX & CO. INCORPORATED
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COVAD COMMUNICATIONS GROUP, INC.
$425,000,000 Principal Amount of 12% Senior Notes due 2010
PURCHASE AGREEMENT
January 21, 2000
New York, New York
Bear, Steams & Co. Inc.
Xxxxxx Xxxxxxx & Co. Incorporated
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies & Gentlemen:
Covad Communications Group, Inc., a Delaware corporation (the "Company")
proposes to issue and sell to Bear, Xxxxxxx & Co. Inc. and Xxxxxx Xxxxxxx & Co.
Incorporated (together, the "Initial Purchasers") $425,000,000 aggregate
principal amount of 12% Senior Notes due 2010 (the "Senior Notes"), subject to
the terms and conditions set forth herein. The Senior Notes will be issued
pursuant to an indenture (the "Indenture"), to be dated the Closing Date (as
defined below), between the Company and United States Trust Company of New York,
as trustee (the "Trustee"). The Senior Notes are more fully described in the
Offering Memorandum referred to below.
1. Issuance of Notes. The Company proposes to, upon the terms and
subject to the conditions set forth herein, issue and sell to the Initial
Purchasers the Senior Notes. The Senior Notes and the Exchange Notes (as defined
below) issuable in exchange therefore are hereinafter collectively referred to
as the Notes. Capitalized terms used but not otherwise defined herein shall have
the meanings given to such terms in the Indenture.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"), the Notes shall bear the legends required to
be set forth in the Indenture.
2. Offering. The Notes will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under the
Securities Act. The Company will prepare a final offering memorandum (the
"Offering Memorandum"), relating to the Company and the Notes.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers to resell (the "Exempt Resales") the Notes on the
terms set forth in the Offering Memorandum, as amended or supplemented, solely
to (i) persons whom any of the Initial Purchasers reasonably believe to be
"qualified institutional buyers", as defined in Rule 144A under the Securities
Act ("QIBs"), (ii)
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persons who have represented to the Company that they are institutional
"Accredited Investors" referred to in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act ("Accredited Investors") and (iii) non-U.S. persons outside the
United States in reliance upon Regulation S ("Regulation S") under the
Securities Act ("Reg S Investors"). The QIBs, Accredited Investors and the Reg S
Investors are collectively referred to herein as the "Eligible Purchasers". Such
QIBs, Accredited Investors and Reg S Investors shall be collectively referred to
herein as the "Eligible Purchasers". The Initial Purchasers will offer the Notes
to such Eligible Purchasers initially at a purchase price equal to 100 % of the
amount thereof.
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), to be dated the Closing Date, for
so long as such Notes constitute "Transfer Restricted Securities" (as defined in
such agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "Commission"),
under the circumstances set forth therein, (i) a registration statement under
the Securities Act (the "Exchange Offer Registration Statement") with respect to
an offer to exchange (the "Exchange Offer") the Notes for a new issue of debt
securities of the Company (the "Exchange Notes") to be offered in exchange for
the Notes and (ii) under certain circumstances, a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement") relating to the resale by certain holders of the Notes, and to use
its best efforts to cause such Registration Statements to be declared effective
and consummate the Exchange Offer. This Agreement, the Notes, the Indenture and
the 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, the
aggregate principal amount of Notes set forth opposite such Initial Purchaser's
name on Schedule I hereto. The purchase price for the Notes shall be $973.75 per
$1,000 principal amount Note.
(b) Delivery of, and payment of the purchase price for, the Notes
shall be made at the offices of Covad Communications Group, Inc., 0000 Xxxxxxx
Xxxxxxxxxx, Xxxxx Xxxxx, XX 00000, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 10:00 a.m., New York City
time, on January 28, 2000 or at such other time as shall be agreed upon by the
Initial Purchasers and the Company. The time and date of such delivery and
payment are herein called the "Closing Date".
(c) On the Closing Date, Notes sold by the Initial Purchasers to
QIBs and Reg S Investors will be represented by one or more Notes in definitive
global form, registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Notes sold to such QIBs and Reg S Investors
(collectively, the "Global Notes"). Notes sold by the Initial Purchasers to
Accredited Investors will be represented by one or more Notes in definitive
form, registered in the
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name of such Accredited Investors, having an aggregate principal amount
corresponding to the aggregate principal amount of the Notes sold to such
Accredited Investors (collectively, the "Accredited Investor Notes"). The Global
Notes and the Accredited Investor Notes shall be delivered by the Company to the
Initial Purchasers (or as the Initial Purchasers direct), against payment by the
Initial Purchasers of the purchase price therefor by wire transfer of
immediately available funds, to an account specified by the Company or as the
Company may direct in writing; provided that the Company shall give at least two
business days' prior written notice to the Initial Purchasers of the information
required to effect such wire transfer. The Global Notes and the Accredited
Investor Notes shall be made available to the Initial Purchasers for inspection
not later than 10:00 a.m., New York City time, on the business day immediately
preceding the Closing Date.
4. Agreements of the Company. The Company covenants and agrees with each
of the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested
by the Initial Purchasers, confirm such advice in writing, (i) of the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Notes for offering or sale
in any jurisdiction, or the initiation of any proceeding for such purpose by any
state securities commission or other regulatory authority and (ii) of the
happening of any event that, in the reasonable opinion of counsel to the
Company, makes any statement of a material fact made in the Offering Memorandum
untrue in any material respect or that requires the making of any additions to
or changes in the Offering Memorandum in order to make the statements therein,
in the light of the circumstances under which they are made, not misleading in
any material respect. The Company shall use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption of
any Notes under any state securities or Blue Sky laws and, if at any time any
state securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any Notes under any state
securities or Blue Sky laws, the Company shall use its best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company, without charge, as many
copies of the Offering Memorandum, and any amendments or supplements thereto, as
the Initial Purchasers may reasonably request. The Company consents to the use
of 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 Offering Memorandum prior to
the Closing Date unless the Initial Purchasers shall previously have been
advised thereof and shall not have objected thereto within a reasonable time
after being furnished a copy of the applicable amendment or supplement. The
Company shall promptly prepare, upon the Initial Purchasers' request, any
amendment or supplement to the Offering Memorandum that may be necessary or
advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resale, any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of either counsel to the Company or
counsel to the Initial Purchasers, it becomes necessary or
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advisable to amend or supplement the 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 in any material respect, or if it is necessary or
advisable to amend or supplement the Offering Memorandum to comply with
applicable law, (i) to notify the Initial Purchasers of such occurrence and (ii)
forthwith to prepare an appropriate amendment or supplement to such Offering
Memorandum so that the statements therein as so amended or supplemented will
not, in the light of the circumstances when it is so delivered, be misleading in
any material respect, or so that such Offering Memorandum will comply with
applicable law.
(e) To cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the qualification or registration of the
Notes under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may reasonably request and to continue such qualification in effect
so long as required for the Exempt Resales; provided, however that the Company
shall not be required in connection therewith to register or qualify as a
foreign corporation where it is not now so qualified or to take any action that
would subject it to service of process in suits or taxation, in each case, other
than as to matters and transactions relating to the 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 Offering Memorandum
(including, without limitation, financial statements) and all amendments and
supplements thereto required pursuant hereto, (ii) the issuance, transfer and
delivery by the Company of the Notes to the Initial Purchasers, (iii) the
qualification or registration of the Notes for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the cost of preparing, printing and mailing a preliminary and final
Blue Sky Memorandum and the reasonable fees and disbursements of counsel to the
Initial Purchasers relating thereto), (iv) furnishing such copies of the
Offering Memorandum, and all amendments and supplements thereto, as may be
requested by the Initial Purchasers for use in connection with Exempt Resales,
(v) the preparation of certificates for the Notes, (vi) the fees, disbursements
and expenses of the Company's counsel and accountants, (vii) all expenses and
listing fees in connection with the application for quotation of the Notes in
the National Association of Securities Dealers, Inc. ("NASD") Automated
Quotation System - PORTAL ("PORTAL"), (viii) all fees and expenses (including
fees and expenses of counsel to the Company) of the Company in connection with
the approval of the Notes by DTC for "book-entry" transfer, (ix) the reasonable
fees and expenses of the Trustee and its counsel in connection with the
Indenture and the Notes, (x) the performance by the Company of its other
obligations under this Agreement and the other Operative Documents and (xi)
"roadshow" travel and other expenses incurred in connection with the marketing
and sale of the Notes.
(g) To use the proceeds from the sale of the Notes in the manner
described in the Offering Memorandum under the caption "Use of Proceeds".
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(h) Not to voluntarily claim, and to resist actively any attempts
to claim, the benefit of any usury laws against the holders of any Notes.
(i) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent on its part to the delivery of the Notes.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) that would be integrated with the sale of the Notes in a manner that would
require the registration under the Securities Act of the sale to the Initial
Purchasers or the QIBs of the Notes or to take any other action that would
result in the Exempt Resales not being exempt from registration under the
Securities Act.
(k) For so long as any of the Notes remain outstanding and during
any period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available upon request to any beneficial owner of Notes in connection with any
sale thereof and any prospective purchaser of such Notes from such beneficial
owner, the information required by Rule 144A(d)(4) under the Securities Act.
(l) To comply with all of its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the representation
letters of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(m) To use its best efforts to effect the designation of the
Notes as eligible for PORTAL and to obtain approval of the Notes by DTC for
"book-entry" transfer.
(n) For so long as any of the Notes remain outstanding, to
deliver without charge to each of the Initial Purchasers, promptly upon request,
copies of (i) any reports or other publicly available information that the
Company shall mail or otherwise make available to its securityholders generally
and (ii) all reports, financial statements and proxy or information statements
filed by the Company with the Commission or any national securities exchange and
other information made publicly available by the Company, including without
limitation, press releases.
(o) Prior to the Closing Date, to furnish to each of the Initial
Purchasers, as soon as they have been prepared in the ordinary course by the
Company, copies of any consolidated financial statements or any unaudited
interim financial statements of the Company for any period subsequent to the
periods covered by the financial statements appearing in the Offering
Memorandum.
(p) Not to take, directly or indirectly, any action designed to,
or that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Notes.
(q) Not to distribute any Offering Memorandum or other offering
material in connection with the offering and sale of the Notes, except as
permitted by the Securities Act.
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(r) To comply with the agreements in the Indenture, the
Registration Rights Agreement and any other Operative Document.
(s) To cause each certificate for a Note to bear the legend
contained in the Indenture for the time period and upon the other terms stated
in the Indenture.
(t) To file with the Commission, not later than 15 days after the
Closing Date, five copies of a notice on Form D under the Securities Act (one of
which will be manually signed by a person duly authorized by the Company); to
otherwise comply with the requirements of Rule 503 under the Securities Act; and
to furnish promptly to the Initial Purchasers evidence of each such required
timely filing (including a copy thereof).
5. Representations and Warranties of the Company; Representations,
Warranties and Covenants of the Initial Purchasers.
(a) The Company represents and warrants to each of the Initial
Purchasers that:
(i) The Offering Memorandum is being prepared in connection with
the Exempt Resales. Such Offering Memorandum, in the form used by the Initial
Purchasers to confirm sales on the Closing Date, will not, and any supplement or
amendment to it 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 Offering
Memorandum (or any supplement or amendment thereto) made in reliance upon and in
conformity with information relating to the Initial Purchasers furnished to the
Company in writing by the Initial Purchasers expressly for use therein. No stop
order preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements of
the Securities Act, has been issued.
(ii) When the Notes are issued and delivered pursuant to this
Agreement, no Note will be of the same class (within the meaning of Rule 144A
under the Securities Act) as securities of the Company that are listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that are quoted in a United States automated inter-dealer quotation system.
(iii) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as it is currently being conducted and as will be described in the Offering
Memorandum. Each of the Company and each subsidiary is duly qualified as a
foreign corporation to transact business and is in good standing in the State of
California and each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions (other than the State of California)
where the failure to so qualify or to be in good standing would not,
individually or in the aggregate, result in a material adverse
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change, or any development that could reasonably be expected to result in a
material adverse change, in the condition, financial or otherwise, or in the
business, operations or prospects, whether or not arising from transactions in
the ordinary course of business, of the Company and its subsidiaries, considered
as one entity (any such change is called a "Material Adverse Change"). The
Company does not own or control, directly or indirectly, any corporation,
association or other entity other than Covad Communications Company, a
California corporation, DIECA Communications, Inc., a Virginia corporation, and
Covad Communications Investment Corp., a Delaware corporation. As of the date
hereof, (a) the Company has obtained CLEC regulatory approval in each of the
following States: Arizona, California, Colorado, Connecticut, Delaware, District
of Columbia, Florida, Georgia, Illinois, Indiana, Kansas, Maryland,
Massachusetts, Michigan, Minnesota, Missouri, Montana, New Hampshire, New
Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Utah,
Virginia, Washington, West Virginia and Wisconsin and no such regulatory
approval has been withdrawn, and to the Company's knowledge no such regulatory
approval is the subject of any legal challenge (except as disclosed in the
Offering Memorandum) and (b) the Company has not received any notice of
rejection or denial, nor has it withdrawn, any of its applications for CLEC
approval in any of the 5 additional States where such applications, as of the
date hereof, are pending approval.
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. At September 30, 1999, after giving effect to the issuance and sale of
the Notes pursuant hereto and the application of the net proceeds therefrom, the
Company had the pro forma consolidated capitalization as will be set forth in
the Offering Memorandum under the caption "Capitalization", under the column
entitled "As Adjusted".
(v) All of the outstanding capital stock of each subsidiary of
the Company is owned, directly or indirectly, by the Company, free and clear of
any security interest, claim, lien, limitation on voting rights or encumbrance;
and all such securities have been duly authorized, validly issued, and are fully
paid and nonassessable and were not issued in violation of any preemptive or
similar rights.
(vi) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
other Operative Documents and to consummate the transactions contemplated hereby
and thereby, including, without limitation, the corporate power and authority to
issue, sell and deliver the Notes as provided herein and therein and the power
to effect the Use of Proceeds as will be described in the Offering Memorandum.
(vii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legally valid and binding
agreement of the Company, enforceable against it in accordance with its terms,
except insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles and subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.
(viii) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be the
legally valid and binding obligation
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of the Company, enforceable against the Company in accordance with its terms,
subject to (A) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally, (B)
general principles of equity (whether considered in a proceeding in equity or at
law) or (C) applicable public policy considerations. The Offering Memorandum
will contain a fair summary of the principal terms of the Indenture.
(ix) The Senior Notes have been duly and validly authorized by
the Company for issuance and sale to the Initial Purchasers by the Company
pursuant to this Agreement and, when issued and authenticated in accordance with
the terms of the Indenture and delivered against payment therefor in accordance
with the terms hereof and thereof, will be the legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms and entitled to the benefits of the Indenture, subject to (A)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally, (B) general principles
of equity (whether considered in a proceeding in equity or at law) or (C)
applicable public policy considerations. The Offering Memorandum will contain a
fair summary of the terms of the Senior Notes.
(x) The Exchange Notes have been duly and validly authorized for
issuance by the Company and, when issued and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, will be the legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture,
subject to (A) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally, (B)
general principles of equity (whether considered in a proceeding in equity or at
law) or (C) applicable public policy considerations. The Offering Memorandum
will contain a fair summary of the terms of the Exchange Notes.
(xi) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the Company,
will be the legally valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (A) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws
affecting the rights of creditors generally, (B) general principles of equity
(whether considered in a proceeding in equity or at law) or (C) applicable
public policy considerations. The Offering Memorandum will contain a fair
summary of the principal terms of the Registration Rights Agreement.
(xii) Neither the Company nor any of its subsidiaries is, or,
after giving effect to the offering of the Notes, will be (A) in violation of
its charter or bylaws, (B) in default in the performance of any bond, debenture,
note, indenture, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its properties is
subject, or (C) in violation of any local, state or federal law, statute,
ordinance, rule, regulation, requirement, judgment or court decree (including,
without limitation, the Communications Act and the rules and regulations of the
FCC and environmental laws, statutes, ordinances, rules, regulations, judgments
or court decrees) applicable to the Company, its subsidiaries or any of their
assets or properties (whether owned or leased) other than, in the case of
clauses (B) and (C), any default or violation that could not reasonably be
expected to (x) individually or in the aggregate, result in a material adverse
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effect on the properties, business, results of operations, condition (financial
or otherwise), affairs or prospects of the Company and its subsidiaries, taken
as a whole, (y) interfere with or adversely affect the sale of the Notes
pursuant hereto or (z) in any manner draw into question the validity of this
Agreement or any other Operative Document (any of the events set forth in
clauses (x), (y) or (z), a "Material Adverse Effect"). There exists no condition
that, with notice, the passage of time or otherwise, would constitute a default
under any such document or instrument, except as will be disclosed in the
Offering Memorandum, except for any such condition which would not reasonably be
expected to result in a Material Adverse Effect.
(xiii) None of (A) the execution, delivery or performance by the
Company of this Agreement and the other Operative Documents, (B) the issuance
and sale of the Notes and (C) consummation by the Company of the transactions
contemplated hereby violate, conflict with or constitute a breach of any of the
terms or provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default), or require consent which
has not been obtained under, or result in the imposition of a lien or
encumbrance other than a "Permitted Lien", as defined in the Indenture on any
properties of the Company or any of its subsidiaries, or an acceleration of any
indebtedness of the Company or any of its subsidiaries pursuant to, (i) the
charter or bylaws of the Company or any of its subsidiaries, (ii) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or its subsidiaries or their properties is or may be bound,
(iii) any statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their assets or properties or (iv) any judgment, order or
decree of any court or governmental agency or authority having jurisdiction over
the Company or any of its subsidiaries or any of their assets or properties,
except in the case of clauses (ii), (iii) and (iv) for such violations,
conflicts, breaches, defaults, consents, impositions of liens or accelerations
that (x) would not singly, or in the aggregate, have a Material Adverse Effect
or (y) which will be disclosed in the Offering Memorandum. Other than as will be
described in the Offering Memorandum, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of or with,
(A) any court or governmental agency, body or administrative agency (including,
without limitation, the FCC) or (B) any other person is required for (1) the
execution, delivery and performance by the Company of this Agreement and the
other Operative Documents, (2) the issuance and sale of the Notes and the
transactions contemplated hereby and thereby, except (x) such as have been
obtained and made (or, in the case of the Registration Rights Agreement, will be
obtained and made) under the Securities Act, the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act" ) and state securities or Blue Sky laws and
regulations or such as may be required by the NASD or (y) where the failure to
obtain any such consent, approval, authorization or order of, or filing
registration, qualification, license or permit would not reasonably be expected
to result in a Material Adverse Effect.
(xiv) Except as will be set forth in the Offering Memorandum,
there are no legal or governmental actions, suits or proceedings pending or, to
Company's knowledge, threatened (i) against or affecting the Company or any of
its subsidiaries, (ii) which has as the subject thereof any officer or director
(in any such capacity) of, or property owned or leased by, the Company or any of
its subsidiaries or (iii) relating to environmental or discrimination matters,
where in any such case (A) there is a reasonable possibility that such action,
suit or proceeding might be determined
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adversely to the Company or such subsidiary and (B) any such action, suit or
proceeding, if so determined adversely, would reasonably be expected to result
in a Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute with the
employees of the Company or any of its subsidiaries exists or, to the Company's
knowledge, is threatened or imminent.
(xv) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Notes or prevents or suspends the use of the
Offering Memorandum; no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction has been issued that prevents
the issuance of the Notes, prevents or suspends the sale of the Notes in any
jurisdiction referred to in Section 4(e) hereof or that could adversely affect
the consummation of the transactions contemplated by this Agreement, the
Operative Documents or the Offering Memorandum; and every request of any
securities authority or agency of any jurisdiction for additional information
has been complied with in all material respects.
(xvi) Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change, (i) to the
Company's knowledge, neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign law or regulation relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products (collectively, "Materials of Environmental
Concern" ), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of the
Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or any
of its subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges that
the Company or any of its subsidiaries is in violation of any Environmental Law;
(ii) there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the Company or
any of its subsidiaries has received written notice, and no written notice by
any person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, attorneys' fees or penalties arising out of, based
on or resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated by
the Company or any of its subsidiaries, now or in the past (collectively,
"Environmental Claims"), pending or, to the Company's knowledge, threatened
against the Company or any of its subsidiaries or any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries has
retained or assumed either contractually or by operation of law; and (iii) to
the Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that reasonably could result in a violation of any
Environmental Law or form the basis of a potential Environmental Claim against
the Company or any of its subsidiaries or against any person or entity whose
liability
12
for any Environmental Claim the Company or any of its subsidiaries has retained
or assumed either contractually or by operation of law.
(xvii) The Company and each of its subsidiaries has (i) good and
marketable title to all of the properties and assets to be described in the
Offering Memorandum or the financial statements to be included in the Offering
Memorandum as owned by it, free and clear of all liens, charges, encumbrances
and restrictions, except such as will be described in the Offering Memorandum or
as would not have a Material Adverse Effect, (ii) peaceful and undisturbed
possession to the extent described in the Offering Memorandum under all material
leases to which it is a party as lessee, (iii) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from, and has
made all declarations and filings with, all federal, state and local authorities
(including, without limitation, the FCC), all self-regulatory authorities and
all courts and other tribunals (each an "Authorization") necessary to engage in
the business conducted by the Company and its subsidiaries in the manner as will
be described in the Offering Memorandum, except as will be described in the
Offering Memorandum and except insofar as the failure to obtain any such
Authorization would not reasonably be expected to have a Material Adverse
Effect, and no such Authorization contains a materially burdensome restriction
that will not be disclosed in the Offering Memorandum and (iv) not received any
notice that any governmental body or agency is considering limiting, suspending
or revoking any such Authorization. Except where the failure to be in full force
and effect would not have a Material Adverse Effect, all such Authorizations are
valid and in full force and effect and the Company and each of its subsidiaries
is in compliance in all material respects with the terms and conditions of all
such Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto. All material leases to
which the Company and each of its subsidiaries is a party are valid and binding
and no default by the Company or any of its subsidiaries has occurred and is
continuing thereunder and, to the Company's knowledge, no material defaults by
the landlord are existing under any such lease that could reasonably be expected
to result in a Material Adverse Effect.
(xviii)Except as will be set forth in the Offering Memorandum,
the Company and its subsidiaries own, possess or have the right to employ
sufficient patents, patent rights, licenses (including all FCC, state, local or
other jurisdictional regulatory licenses), inventions, copyrights, know-how
(including trade secrets and other unpatented, and/or unpatentable proprietary
or confidential information, software, systems or procedures), trademarks,
service marks and trade names, inventions, computer programs, technical data and
information (collectively, the "Intellectual Property Rights") reasonably
necessary to conduct their businesses as now conducted; and the expected
expiration of any of such Intellectual Property Rights would not result in a
Material Adverse Change. Except as will be disclosed in the Offering Memorandum,
the Intellectual Property Rights presently employed by the Company and its
subsidiaries in connection with the businesses now operated by them or which are
proposed to be operated by them are owned, to the Company's knowledge, free and
clear of and without violating any right, claimed right, charge, encumbrance,
pledge, security interest, restriction or lien of any kind of any other person
and neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing except as would not reasonably be expected to have a Material
Adverse Effect. The use of the Intellectual Property in connection with the
business and
13
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.
(xix) None of the Company or any of its subsidiaries, or, or to
the best knowledge of the Company, any of their respective officers, directors,
partners, employees, agents or affiliates or any other person acting on behalf
of the Company or any of its subsidiaries has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, official or employee of
any governmental agency (domestic or foreign), instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is or may be in a position to help or
hinder the business of the Company or any of its subsidiaries (or assist the
Company or any of its subsidiaries in connection with any actual or proposed
transaction) which (i) would reasonably be expected to subject the Company, or
any other individual or entity to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (ii) if not
given in the past, would reasonably be expected to have had a Material Adverse
Effect or (iii) if not continued in the future, would reasonably be expected to
have a Material Adverse Effect.
(xx) All material tax returns required to be filed by the Company
and its subsidiaries in all jurisdictions have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities or that are due and payable
have been paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without penalty
or interest. To the knowledge of the Company, there are no material proposed
additional tax assessments against the Company or any of its subsidiaries or the
assets or property of the Company or any of its subsidiaries. The Company has
made adequate charges, accruals and reserves in the applicable financial
statements to be included in the Offering Memorandum in respect of all federal,
state and foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its consolidated subsidiaries has not been
finally determined.
(xxi) The Company is not an "investment company" or a company "
controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
(xxii) Except as will be disclosed in the Offering Memorandum,
there are no holders of securities of the Company or any of its subsidiaries
who, by reason of the execution by the Company of this Agreement or any other
Operative Document to which it is a party or the consummation by the Company or
any of its subsidiaries of the transactions contemplated hereby or thereby, have
the right to request or demand that the Company or any of its subsidiaries
register under the Securities Act or analogous foreign laws and regulations
securities held by them, other than such that have been duly waived.
(xxiii)The Company and its subsidiaries each maintain a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as
14
necessary to permit preparation of financial statements in conformity in all
material respects with generally accepted accounting principles and to maintain
accountability for assets; and (iii) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xxiv) Each of the Company and its subsidiaries are insured by
recognized, financially sound institutions with policies in such amounts and
with such deductibles and covering such risks as are customary for similarly
situated businesses including but not limited to, policies covering real and
personal property owned or leased by the Company and its subsidiaries against
theft, damage, destruction and acts of vandalism. The Company has no reason to
believe that it or any subsidiary will not be able (i) to renew its existing
insurance coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material
Adverse Change.
(xxv) The Company has not (i) taken, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Notes or (ii) (A) sold, bid for, purchased
or paid any person any compensation for soliciting purchases of, the Notes or
(B) paid or agreed to pay to any person any compensation for soliciting another
to purchase any other securities of the Company.
(xxvi) No registration under the Securities Act of the Notes is
required for the sale of the Notes to the Initial Purchasers as contemplated
hereby or for the Exempt Resales assuming (i) that the purchasers who buy the
Notes in the Exempt Resales are Eligible Purchasers and (ii) the accuracy of the
Initial Purchasers' representations contained herein. No form of general
solicitation or general advertising was used by the Company or any of its
representatives (other than the Initial Purchasers, their employees, agents or
any other persons acting on their behalf, as to which the Company makes no
representation or warranty) in connection with the offer and sale of any of the
Notes in connection with Exempt Resales, including, but not limited to,
articles, notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. No securities of the same respective classes as the Notes have been
issued and sold by the Company within the six-month period immediately prior to
the date hereof.
(xxvii) The Company and its subsidiaries and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or a subsidiary, any member of any group of organizations described in
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (the
"Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any
15
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates. No "'employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfunded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(xxviii) The Offering Memorandum, as of its date, and each
amendment or supplement thereto read in conjunction with the Offering
Memorandum, as of its date, will contain the information specified in, and will
meet the requirements of, Rule 144A(d)(4) under the Securities Act.
(xxix) Except as otherwise will be disclosed in the Offering
Memorandum, subsequent to the respective dates as of which information is given
in the Offering Memorandum: (i) there has been no Material Adverse Change; (ii)
the Company and its subsidiaries, considered as one entity, have not incurred
any material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company or,
except for dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or redemption by the
Company or any of its subsidiaries of any class of capital stock; (iv) there has
been no capital expenditure or commitment by the Company or any of its
subsidiaries exceeding $1,000,000, either individually or in the aggregate
except in the ordinary course of business as generally contemplated by the
Offering Memorandum; (v) there has been no material change in accounting methods
or practices (including any change in depreciation or amortization policies or
rates) by the Company or any of its subsidiaries; (vi) there has been no
revaluation by the Company or any of its subsidiaries of any of their assets;
(vii) there has been no increase in the salary or other compensation payable or
to become payable by the Company or any of its subsidiaries to any of their
officers, directors, employees or advisors, nor any declaration, payment or
commitment or obligation of any kind for the payment by the Company or any of
its subsidiaries of a bonus or other additional salary or compensation to any
such person; (viii) there has been no amendment or termination of any material
contract, agreement or license to which the Company or any subsidiary is a party
or by which it is bound; (ix) there has been no waiver or release of any
material right or claim of the Company or any subsidiary, including any
write-off or other compromise of any material account receivable of the Company
or any subsidiary; and (x) there has been no change in pricing or royalties set
or charged by the Company or any subsidiary to their respective customers or
licensees or in pricing or royalties set or charged by persons who have licensed
Intellectual Property Rights to the Company or any of its subsidiaries.
(xxx) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Notes, the application of the proceeds
from the issuance and sale of the Notes and the consummation of the transactions
contemplated thereby as will be set forth in the Offering
16
Memorandum, will violate Regulations T, U or X promulgated by the Board of
Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(xxxi) Xxxxx & Young LLP, who will express their opinion with
respect to the financial statements (which term as used in this Agreement
includes the related notes thereto) and supporting schedules to be included in
the Offering Memorandum, are independent public or certified public accountants
within the meaning of Regulation S-X under the Securities Act and the Exchange
Act.
(xxxii) The financial statements, together with the related
notes, to be included in the Offering Memorandum present fairly in all material
respects the consolidated financial position of the Company and its subsidiaries
as of and at the dates indicated and the results of their operations and cash
flows for the periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. The financial data to be set forth in the Offering
Memorandum under the captions "Offering Memorandum Summary--Summary Consolidated
Financial Data", "Selected Consolidated Financial Data" and "Capitalization"
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements to be contained in the Offering Memorandum.
(xxxiii) The Company does not intend to, nor does it believe that
it will, incur debts beyond its ability to pay such debts as they mature. The
present fair salable value of the assets of the Company on a consolidated basis
exceeds the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of the
Company on a consolidated basis as they become absolute and matured. The assets
of the Company on a consolidated basis do not constitute an unreasonably small
capital to carry out the business of the Company as conducted or as proposed to
be conducted. Upon the issuance of the Notes, the present fair salable value of
the assets of the Company on a consolidated basis will exceed the amount that
will be required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Company on a consolidated
basis as they become absolute and matured. Upon the issuance of the Notes, the
assets of the Company on a consolidated basis will not constitute an
unreasonably small capital to carry out its businesses as now conducted,
including the capital needs of the Company on a consolidated basis.
(xxxiv) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between the Company and any other person
that would give rise to a valid claim against the Company or either of the
Initial Purchasers for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Notes.
(xxxv) There are no business relationships or related-party
transactions involving the Company or any subsidiary or any other person that
would be required to be described in the Offering Memorandum were it to be filed
as a part of a Registration Statement on Form S-1 under the Securities Act,
which will not have been described as would have been so required.
17
(xxxvi) The statements (including the assumptions described
therein) to be included in the Offering Memorandum under the heading "Business"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" (i) are within the coverage of Rule 175(b) under the
Securities Act to the extent such data constitute forward looking statements as
defined in Rule 175(c) and (ii) will be made by the Company with a reasonable
basis and reflect the Company's good faith estimate of the matters described
therein.
(xxxvii) The Company and its affiliates and all persons acting on
their behalf (other than the Initial Purchasers, as to whom the Company makes no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of the
Notes outside the United States and, in connection therewith, the Offering
Memorandum will contain the disclosure required by Rule 902(g)(2).
(xxxviii) The Notes sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
distribution compliance period referred to in Rule 903(c)(3) of the Securities
Act and only upon certification of beneficial ownership of such Notes by
non-U.S. persons or U.S. persons who purchased such Notes in transactions that
were exempt from the registration requirements of the Securities Act.
(xxxix) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
pursuant to this Agreement shall be deemed to be a representation and warranty
by the Company to the Initial Purchasers as to the matters covered thereby.
The Company acknowledges that each of the Initial Purchasers and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 8 hereof, counsel to the Company and counsel to the Initial
Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
(b) Each of the Initial Purchasers severally and not jointly
represents, warrants and covenants to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Notes.
(ii) Such Initial Purchaser is not acquiring the Notes with a
view to any distribution thereof that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction.
(iii) No form of general solicitation or general advertising has
been or will be used by either of the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the Notes,
including but not limited to, articles, notices or other communications
published
18
in any newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(iv) Each of the Initial Purchasers agrees that, in connection
with the Exempt Resales, it will solicit offers to buy the Notes only from, and
will offer to sell the Notes only to, Eligible Purchasers. Such Initial
Purchaser further (A) agrees that it will offer to sell the Notes only to, and
will solicit offers to buy the Notes only from (1) Eligible Purchasers that the
Initial Purchaser reasonably believes are QIBs, (2) Accredited Investors who
make the representations contained in, and execute and return to the Initial
Purchaser, a certificate in the form of Annex A attached to the Offering
Memorandum and (3) Reg S Investors and (B) acknowledges and agrees that, in the
case of such QIBs, such Accredited Investors and such Reg S Investors, that such
Notes will not have been registered under the Securities Act and may be resold,
pledged or otherwise transferred only (x)(I) to a person whom the seller
reasonably believes is a QIB in a transaction meeting the requirements of Rule
144A, (II) in an offshore transaction (as defined in Rule 902 under the
Securities Act) meeting the requirements of Rule 904 under the Securities Act,
(III) in a transaction meeting the requirements of Rule 144 under the Securities
Act, (IV) to an Accredited Investor that, prior to such transfer, furnishes to
the Trustee a signed letter containing certain representations and agreements
relating to the Notes (the form of such letter can be obtained from the Trustee
or (V) in accordance with another exemption from the registration requirements
of the Securities Act (in the case of II, III, IV or V, based upon an opinion of
counsel if the Company or the Trustee, or the "Registrar" or "Transfer Agent"
(as such terms are defined in the Indenture) for the Notes so requests), (y) to
the Company or (z) pursuant to an effective registration statement under the
Securities Act and, in each case, in accordance with any applicable securities
laws of any state of the United States and (C) that the holder and each
subsequent holder will be required to notify any purchaser of the security
evidenced thereby of the resale restrictions set forth in (B) above.
(v) Such Initial Purchaser and its affiliates or any person
acting on its or their behalf have not engaged or will not engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Notes.
(vi) The Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(vii) The sale of Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Securities Act.
(viii) Each of the Initial Purchasers agrees that it has not
offered or sold and will not offer or sell the Notes in the United States or to,
or for the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Securities Act (i) as part of its
distribution at any time and (ii) otherwise until 40 days after the later of the
commencement of the offering of the Notes pursuant hereto and the Closing Date,
other than in accordance with Regulation S of the Securities Act or another
exemption from the registration requirements of the Securities Act. Such Initial
Purchaser agrees that, during such 40-day distribution compliance period, it
will not cause any advertisement with respect to the Notes (including any
"tombstone" advertisement) to be
19
published in any newspaper or periodical or posted in any public place and will
not issue any circular relating to the Notes, except such advertisements as
permitted by and include the statements required by Regulation S.
(ix) Each of the Initial Purchasers agrees that, at or prior to
confirmation of a sale of Notes by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the 40-day
distribution compliance period referred to in Rule 903(c)(3) under the
Securities Act, it will send to such distributor, dealer or person receiving a
selling concession, fee or other remuneration a confirmation or notice to
substantially the following effect:
"The Notes covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered and sold within
the United States or to, or for the account or benefit of,
U.S. persons (i) as part of your distribution at any time
or (ii) otherwise until 40 days after the later of the
commencement of the Offering and the Closing Date, except
in either case in accordance with Regulation S under the
Securities Act (or Rule 144A or to Accredited Institutions
in transactions that are exempt from the registration
requirements of the Securities Act), and in connection
with any subsequent sale by you of the Notes covered
hereby in reliance on Regulation S during the period
referred to above to any distributor, dealer or person
receiving a selling concession, fee or other remuneration,
you must deliver a notice to substantially the foregoing
effect. Terms used above have the meanings assigned to
them in Regulation S."
(x) Each of the Initial Purchasers agrees that the Notes offered
and sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities until the
expiration of the 40-day distribution compliance period referred to in Rule
903(c)(3) of the Securities Act and only upon certification of beneficial
ownership of such Notes by non-U.S. persons or U.S. persons who purchased such
Notes in transactions that were exempt from the registration requirements of the
Securities Act.
(xi) Each of the Initial Purchasers understands that the Company
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 8 hereof, counsel to the Company and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) each of
the Initial Purchasers, (ii) each person, if any, who controls either of the
Initial Purchasers within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and (iii) the respective officers, directors,
partners, employees, representatives and agents of any of the Initial Purchasers
or any controlling person to the fullest extent lawful, from and against any and
all losses, liabilities, claims, damages and expenses whatsoever (including but
not limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation
20
or litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Offering Memorandum, or in any supplement thereto or amendment thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company will not be liable in any such
case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Initial Purchasers expressly for use therein.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have, including under this Agreement.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against any losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum, or in any amendment thereof
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading in each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of either
Initial Purchaser expressly for use therein; provided, however, that in no case
shall either Initial Purchaser be liable or responsible for any amount in excess
of the discounts and commissions received by such Initial Purchaser, as set
forth on the cover page of the Offering Memorandum. This indemnity will be in
addition to any liability which either Initial Purchaser may otherwise have,
including under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which 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
21
be entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case (and where the Initial Purchasers are the
indemnified parties, Bear, Xxxxxxx & Co. Inc. shall have the right to select
such counsel for the Initial Purchasers), but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless (i)
the employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to take charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying party or parties shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of counsel shall be
borne by the indemnifying parties; provided, however, that the indemnifying
party under subsection (a) or (b) above, shall only be liable for the legal
expenses of one counsel (in addition to any local counsel) for all indemnified
parties in each jurisdiction in which any claim or action is brought. Anything
in this subsection to the contrary notwithstanding, an indemnifying party shall
not be liable for any settlement of any claim or action effected without its
prior written consent; provided, however, that such consent was not unreasonably
withheld.
7. Contribution. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 6 is for any reason held to
be unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and the Initial Purchasers shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Initial Purchasers, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act) to which the Company
and one or both of the Initial Purchasers may be subject, in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Initial Purchasers from the offering of the Notes or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 6, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Initial
Purchasers in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Initial Purchasers shall be deemed to be in the same proportion as (x) the total
proceeds from the offering of Notes (net of discounts but before deducting
expenses) received by the Company and (y) the discounts received by the Initial
Purchasers, respectively, in each case as set forth in the table on the cover
page of the Offering Memorandum. The relative fault of the Company and of the
Initial Purchasers shall be determined by reference to, among other things,
whether the
22
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7, (i) in no case shall either of the Initial Purchasers be
required to contribute any amount in excess of the amount by which the discount
applicable to the Notes purchased by such Initial Purchaser pursuant to this
Agreement exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7, (A)
each person, if any, who controls either of the Initial Purchasers within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and (B) the respective officers, directors, partners, employees, representatives
and agents of any of the Initial Purchasers or any controlling person shall have
the same rights to contribution as such Initial Purchaser, and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 7. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its prior written consent; provided, however, that such written consent
was not unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase and pay for the Notes, if any,
as provided herein, shall be subject to the satisfaction of the following
conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed or
complied with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York City
time, on the fourth business day following the date of this Agreement or at such
later date and time as to which the Initial Purchasers may agree, and no stop
order suspending the qualification or exemption from qualification of the Notes
in any jurisdiction referred to in Section 4(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending or
threatened.
23
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the issuance of
the Notes; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the Company's knowledge, threatened against,
the Company before any court or arbitrator or any governmental body, agency or
official that (1) could reasonably be expected to result in a Material Adverse
Effect and (2) has not been disclosed in the Offering Memorandum; and no stop
order shall have been issued preventing the use of the Offering Memorandum, or
any amendment or supplement thereto, or which could reasonably be expected to
have a Material Adverse Effect.
(d) Since the dates as of which information is given in the
Offering Memorandum, (i) there shall not have been any Material Adverse Change,
or any development that is reasonably likely to result in a Material Adverse
Change, in the capital stock or the long-term debt, or material increase in the
short-term debt, of the Company or any of its subsidiaries from that set forth
in the Offering Memorandum, (h) no dividend or distribution of any kind shall
have been declared, paid or made by the Company or any of its subsidiaries on
any class of its capital stock, (iii) neither the Company nor any of its
subsidiaries shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and its subsidiaries, taken as a whole, and, that are required to, be disclosed
in accordance with generally accepted accounting principles on the latest
balance sheet or notes thereto included in the Offering Memorandum and are not
so disclosed. Since the date hereof and since the dates as of which information
is given in the Offering Memorandum, there shall not have occurred any Material
Adverse Effect.
(e) The Initial Purchasers shall have received a certificate,
dated the Closing Date, signed on behalf of the Company by each of the Company's
Chief Executive Officer and Chief Financial Officer in form and substance
reasonably satisfactory to the Initial Purchasers, confirming, as of the Closing
Date, the matters set forth in paragraphs (a), (b), (c) and (d) of this Section
8 and that, as of the Closing Date, the obligations of the Company to be
performed hereunder on or prior thereto have been duly performed in all material
respects.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers, of Irell & Xxxxxxx
LLP, counsel for the Company, to the effect set forth in Exhibit A hereto.
(g) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and counsel to the Initial Purchasers, of Xxxxx Xxxxxx,
General Counsel of the Company, to the effect set forth in Exhibit B hereto.
(h) The Initial Purchasers shall have received an opinion, dated
the Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, of Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to the Initial Purchasers,
covering such matters as are customarily covered in such opinions.
24
(i) Prior to the printing of the Offering Memorandum and at the
Closing Date, the Initial Purchasers shall have received from Ernst & Young LLP,
independent public accountants for the Company, dated as of the date of this
Agreement and as of the Closing Date, customary comfort letters addressed to the
Initial Purchasers and in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers with respect to the financial
statements and certain financial information of the Company contained in the
Offering Memorandum.
(j) Xxxxxxx Xxxxxxx & 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 Initial Purchasers such further information, certificates and documents
as the Initial Purchasers may reasonably request.
(l) The Company and the Trustee shall have entered into the
Indenture and the Initial Purchasers shall have received counterparts, conformed
as executed, thereof.
All opinions, certificates, letters and other documents required
by this Section 8 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchasers. The Company will furnish the Initial Purchasers with
such conformed copies of such opinions, certificates, letters and other
documents as it shall reasonably request.
9. Initial Purchasers' Information. The Company and the Initial
Purchasers severally acknowledge that the statements to be set forth (i) with
respect to the offering of the Notes in the last paragraph of the outside of the
front cover page; (ii) with respect to the stabilization language on page i; and
(iii) in the third paragraph, the fifth sentence of the fourth paragraph and the
fifth paragraph under the caption "Plan of Distribution" in such Offering
Memorandum will constitute the only information furnished in writing by the
Initial Purchasers expressly for use in the Offering Memorandum.
10. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including the agreements contained in Sections 4(f)
and 11(d), the indemnity agreements contained in Section 6 and the contribution
agreements contained in Section 7, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Initial
Purchasers or any controlling person thereof or by or on behalf of the Company
or any controlling person thereof, and shall survive delivery of and payment for
the Notes to and by the Initial Purchasers. The representations contained in
Section 5 and the agreements contained in Sections 4(f), 6, 7 and 11(d) shall
survive the termination of this Agreement, including any termination pursuant to
Section 11.
25
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company from
the Initial Purchasers, without liability (other than with respect to Sections 6
and 7) on the Initial Purchasers' part to the Company if, on or prior to such
date, (i) the Company shall have failed, refused or been unable to perform in
any material respect any agreement on its part to be performed hereunder, (ii)
any other condition to the obligations of the Initial Purchasers hereunder as
provided in Section 8 is not fulfilled when and as required in any material
respect, (iii) in the reasonable judgment of the Initial Purchasers any Material
Adverse Change shall have occurred since the respective dates as of which
information is given in the Offering Memorandum, other than as set forth in the
Offering Memorandum, (iv) any downgrading shall have occurred in the rating
accorded the Company's debt securities by any "nationally recognized statistical
rating organization", as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Securities Act, or any such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities, or
(v)(A) any domestic or international event or act or occurrence has materially
disrupted, or in the opinion of the 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
Stock Exchange or quotations on the Nasdaq National Market shall have been
suspended or materially limited, or minimum or maximum prices for trading shall
have been established, or maximum ranges for prices for securities shall have
been required, on such exchange, or by such exchange or other regulatory body or
governmental authority having jurisdiction; or (C) a banking moratorium shall
have been declared by federal or state authorities, or a moratorium in foreign
exchange trading by major international banks or persons shall have been
declared; or (D) there is an outbreak or escalation of armed hostilities
involving the United States on or after the date hereof, or if there has been a
declaration by the United States of a national emergency or war, the effect of
which shall be, in the Initial Purchasers' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the Notes on the terms
and in the manner contemplated in the Offering Memorandum; or (E) there shall
have been such a material adverse change in general economic, political or
financial conditions or if the effect of international conditions on the
financial markets in the United States shall be such as, in the Initial
Purchasers' judgment, makes it inadvisable or impracticable to proceed with the
delivery of the Notes as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11 shall
be by telephone, telex, telephonic facsimile, or telegraph, confirmed in writing
by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof, or if the sale of the Notes provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth herein is not satisfied or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof, the Company will, subject to demand by the Initial
Purchasers, reimburse the Initial
26
Purchasers for all out-of-pocket expenses (including the reasonable fees and
expenses of Initial Purchasers' counsel), incurred by the Initial Purchasers in
connection herewith.
12. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to Bear, Xxxxxxx & Co. Inc. and Xxxxxx Xxxxxxx & Co.
Incorporated, c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Corporate Finance Department, telecopy number: (000) 000-0000,
with a copy, which shall not constitute notice, to Xxxxxxx Xxxxxxx & Xxxxxxxx,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxx X. Xxxxxxx, telecopy
number: (000) 000-0000; and if sent to the Company, shall be mailed, delivered
or telexed, telegraphed or telecopied and confirmed in writing to Covad
Communications Group, Inc., 0000 Xxxxxxx Xxxxxxxxxx, Xxxxx Xxxxx, XX 00000,
Attention: Chief Financial Officer, telecopy number: (000) 000-0000, with a
copy, which shall not constitute notice, to Irell & Xxxxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000, Attn: Xxxxxxxx X. Xxxxxxx, telecopy
number: (000) 000-0000.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers and the Company and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Notes from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance with
the internal laws of the State of New York without giving any effect to any
provisions thereof relating to conflicts of law. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
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 pages to follow]
27
If the foregoing correctly sets forth the understanding among the
Initial Purchasers and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among us.
Very truly yours,
COVAD COMMUNICATIONS GROUP, INC.
By:
-------------------------------------
Name:
Title:
[Signatures continue on next page]
28
Accepted and agreed to as of
the date first above written:
BEAR, XXXXXXX & CO. INC.
XXXXXX XXXXXXX & CO. INCORPORATED
By: BEAR, XXXXXXX & CO. INC.
By:
------------------------------------
Name:
Title:
29
Schedule I
Aggregate Principal
Amount of Notes to
Initial Purchasers be Purchased
------------------ -------------------
Xxxx, Xxxxxxx & Co. Inc.................................... $362,500,000
Xxxxxx Xxxxxxx & Co. Incorporated.......................... $ 62,500,000
Total: $425,000,000
30
Exhibit A
Form of Opinion of Irell & Xxxxxxx LLP
1. The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
requisite corporate power and authority to carry on its business as it is
currently being conducted and as described in the Offering Memorandum and to
own, lease and operate its properties, and is duly qualified and in good
standing as a foreign corporation authorized to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on the
Company on a consolidated basis.
2. Each of the Company's subsidiaries is a corporation duly incorporated
and validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority
to carry on its business as it is currently being conducted and as described in
the Offering Memorandum and to own, lease and operate its properties, and is
duly qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect on the Company on a consolidated basis.
3. All of the outstanding shares of capital stock of the Company issued
since November 3, 1999 have been, to such counsel's knowledge, duly authorized
and validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights. The authorized, issued and
outstanding capital stock of the Company conforms in all respects to the
description thereof set forth in the Offering Memorandum.
4. When the Notes are issued and delivered pursuant to this Agreement,
no Note will be of the same class (within the meaning of Rule 144A under the
Securities Act) as securities of the Company that are listed on a national
securities exchange registered under Section 6 of the Exchange Act or that are
quoted in a United States automated inter-dealer quotation system.
5. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the other
Operative Documents and to consummate the transactions contemplated thereby,
including, without limitation, the corporate power and authority to issue, sell
and deliver the Notes.
6. This Agreement has been duly and validly authorized, executed and
delivered by the Company and is the legally valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that such counsel need express no opinion as to the validity or enforceability
of rights of indemnity or contribution, or both and except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.
31
7. Each of the Indenture and the Registration Rights Agreement has been
duly and validly authorized, executed and delivered by the Company and assuming
due execution by the other parties thereto, is the legally valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that such counsel need express no opinion as to the validity
or enforceability of rights of indemnity or contribution, or both and except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
8. The Notes are in the form contemplated by the Indenture, have been
duly and validly authorized for issuance and sale to the Initial Purchasers by
the Company pursuant to this Agreement and, when issued and authenticated in
accordance with the terms of the Indenture and delivered against payment
therefor in accordance with the terms of this Agreement and the Indenture, will
be the legally valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and entitled to the benefits of the
Indenture, except that such counsel need express no opinion as to the validity
or enforceability of rights of indemnity or contribution, or both, and except as
such enforceability may be limited by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of creditors
generally, (ii) to general principles of equity (whether considered in a
proceeding in equity or at law) or (iii) applicable public policy
considerations.
9. The Exchange Notes have been duly and validly authorized for issuance
by the Company and, when issued and authenticated in accordance with the terms
of the Indenture and delivered against payment therefor in accordance with the
terms of this Agreement and the Indenture, will be the legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms and entitled to the benefits of the Indenture, except that such
counsel need express no opinion as to the validity or enforceability of rights
of indemnity or contribution, or both, and except as such enforceability may be
limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally, (ii) general
principles of equity (whether considered in a proceeding in equity or at law) or
(iii) applicable public policy considerations.
10. The Offering Memorandum contains a fair summary of the principal
terms of each of the Notes, this Agreement, the Indenture and the Registration
Rights Agreement.
11. No registration under the Securities Act of the Notes is required
for the sale of the Notes to the Initial Purchasers as contemplated by this
Agreement or for the Exempt Resales, it being understood that no opinion is
expressed as to any subsequent resale of any Notes, assuming (A) that the
purchasers who buy such Notes in the initial resale thereof are Eligible
Purchasers, and (B) the accuracy of the Initial Purchasers' and the Company's
representations contained in this Agreement regarding the absence of general
solicitation in connection with the sale of Notes to the Initial Purchasers and
the Exempt Resales.
12. The Offering Memorandum, as of its date (except for the financial
statements and schedules and other financial or statistical data included
therein, as to which no opinion need be
32
expressed), contains all the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Securities Act.
13. Prior to the effectiveness of the Exchange Registration Statement or
the Shelf Registration Statement, the Indenture is not required to be qualified
under the Trust Indenture Act.
14. None of (A) the execution, delivery or performance by the Company of
this Agreement and the other Operative Documents or (B) the issuance and sale of
the Notes violates, conflicts with or constitutes a breach of any of the terms
or provisions of, or a default under (or an event that with notice or the lapse
of time, or both, would constitute a default), or require consent or waiver
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 agreement or instrument
filed with the SEC as an exhibit, or incorporated by reference as an exhibit,
pursuant to subparagraphs (b)(4) or (b)(10) of Item 601 of Regulation S-K, as
part of the Company's annual, quarterly or current reports on Forms 10K, 10Q or
8K, (iii) the Delaware General Corporation Law or any federal statute, rule or
regulation known to such counsel to be applicable to the Company (other than
federal or state securities laws, which are specifically addressed elsewhere
herein, and other than as are specifically addressed in the opinion of Xxxxx
Xxxxxx, General Counsel of the Company, separately delivered to you pursuant to
Section 8(g) of this Agreement, or (iv) any judgment, order or decree of any
court or governmental agency or authority having jurisdiction over the Company
or any of its subsidiaries or any of their assets or properties known to such
counsel, except in the case of clauses (ii), (iii) and (iv) for such violations,
conflicts, breaches, defaults, consents, impositions of liens or accelerations
that (x) would not, singly or in the aggregate, have a Material Adverse Effect
or (y) are disclosed in the Offering Memorandum. Assuming compliance with
applicable state securities and Blue Sky laws, as to which such counsel need
express no opinion, and except for the filing of a registration statement under
the Securities Act and qualification of the Indenture under the Trust Indenture
Act in connection with the Registration Rights Agreement, no consent, approval,
authorization or order of, or filing registration, qualification, license or
permit of or with, any court or governmental agency, body or administrative
agency is required for the execution, delivery and performance by the Company of
this Agreement, the Operative Documents or the issuance and sale of the Notes,
except such as have been obtained and made or have been disclosed in the
Offering Memorandum.
15. The Company is not and after giving effect to the offering and sale
of the Notes and the application of the proceeds thereof as described in the
Offering Memorandum, will not be an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
16. Except as set forth in this Agreement or the Registration Rights
Agreement, to such counsel's knowledge, there are no holders of securities of
the Company who, by reason of the execution by the Company of this Agreement or
any other Operative Document to which it is a party or the consummation by the
Company of the transactions contemplated thereby, have the right to request or
demand that the Company register under the Securities Act securities held by
them.
33
17. None of the execution, delivery and performance of this Agreement,
the issuance and sale of the Notes, the application of the proceeds from the
issuance and sale of the Notes and the consummation of the transactions
contemplated thereby as set forth in the Offering Memorandum, will violate
Regulations T, U or X promulgated by the Board of Governors of the Federal
Reserve System.
18. To such counsel's knowledge, after reasonable inquiry, and except as
described in the Offering Memorandum, there is (i) no action, suit,
investigation or proceeding (other than proceedings with respect to pending
license applications) before or by any court, arbitrator or governmental agency,
body or official, domestic or foreign, now pending, or threatened or
contemplated to which the Company and any of its subsidiaries is or may be a
party or to which the business or property of the Company and any of its
subsidiaries is or may be subject and (ii) no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction to
which the Company or any of its subsidiaries is or may be subject, or to which
the business, assets or property of the Company are or may be subject, has been
issued, except in the case of clauses (i) and (ii), those which (a) would not
singly or in the aggregate have a Material Adverse Effect upon the Company and
its subsidiaries taken as a whole or (b) which are disclosed in the Offering
Memorandum.
19. To such counsel's knowledge, there is no statute, rule, regulation
or order that has been enacted, adopted or issued by any governmental agency or
that has been proposed by any governmental body to which the Company or any of
its subsidiaries is or may be subject or to which the business, assets or
property of the Company or any of its subsidiaries are or may be subject, except
those which (a) would not singly or in the aggregate have a Material Adverse
Effect upon the Company and its subsidiaries taken as a whole or (b) which are
disclosed in the Offering Memorandum.
20. The statements contained in the Offering Memorandum under the
captions "Description of Notes", "Description of Certain Indebtedness", "Notice
to Investors"and "Plan of Distribution", in each case, insofar as such
statements constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information required with respect to
such legal matters, documents and proceedings and fairly summarize the matters
referred to therein in all material respects.
Such counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent certified
public accountants of the Company and the Initial Purchasers and its
representatives at which the contents of the Offering Memorandum and related
matters were discussed and, although such counsel is not passing upon and
assumes no responsibility for, the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum (except as indicated above), on
the basis of the foregoing, no facts have come to such counsel's attention which
led such counsel to believe that the Offering Memorandum, as of its date or the
Closing Date, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except as to financial statements and schedules and other financial
data, included therein, as to which such counsel need express no opinion).
34
Exhibit B
Form of Opinion of Xxxxx Xxxxxx, General Counsel of the Company
1. Neither the execution and delivery of the Operative Documents nor the
sale of the Notes contemplated thereby violate (A) the Communications Act of
1934 (the "Communications Act") as interpreted as of this date, (B) the
Telecommunications Act of 1996 (the "Telecom Act of 1996") as interpreted as of
this date, (C) any rules of regulations of the Federal Communications Commission
(the "FCC") applicable to the Company and its subsidiaries as interpreted as of
this date, or (D) any rules or regulations of the California Public Utilities
Commission, New York Public Service Commission, Massachusetts Department of
Public Utilities, Washington Utilities and Transportation Commission, Illinois
Commerce Commission, the Oregon Public Utilities Commission or any other
jurisdiction where the Company has obtained CLEC regulatory approval
(collectively, the "State Telecommunications Agencies") as interpreted as of
this date.
2. The Company and its subsidiaries (A) have made all reports and
filings, and paid all fees, required by the FCC and any of the State
Telecommunications Agencies, and (B) have all certificates, orders, permits,
licenses, authorizations, consents and approvals of and from, and have made all
filings and registrations with, the FCC and any of the State Telecommunications
Agencies necessary to own, lease, license and use their respective properties
and assets and to conduct their respective businesses as described in the
Offering Memorandum; and, except as described in the Offering Memorandum, there
are no pending or, to my knowledge, threatened proceedings before the FCC or any
State Telecommunications Agencies relating to the revocation or modification of
any such certificates, orders, permits, licenses, authorizations, consents or
approvals which, if determined adversely, would have a Material Adverse Effect.
3. Except as described in the Offering Memorandum, (A) no decree or
order of the FCC or any of the State Telecommunications Agencies is outstanding,
(B) no litigation or proceeding has been commenced or, to my knowledge,
threatened, (C) to my knowledge, no inquiry or investigation has been commenced
or threatened and (D) no formal notice of violation or order to show cause has
been issued, against the Company or its subsidiaries before the FCC or any of
the State Telecommunications Agencies.
4. The statements in the Offering Memorandum under the headings of "Risk
Factors--Charges for unbundled network elements are outside of our control
because they are proposed by traditional telephone companies and are subject to
costly regulatory approval processes", "Risk Factors--The failure of traditional
telephone companies to adequately provide transmission facilities and provision
telephone wires is likely to impair our ability to install lines and adversely
affect our growth rate", "Risk Factors--We depend on the traditional telephone
companies for the quality and availability of the telephone wires that we use",
"Risk Factors--Our business will suffer if our interconnection agreements are
not renewed or if they are renewed or modified on unfavorable terms", "Risk
Factors--Our services are subject to government regulation, and changes in
current of future laws or regulations could adversely affect our business",
"Business--Industry Background--Impact of Regulatory Developments" and
"Business--Government Regulation", to the extent such statements constitute
summaries of the Telecommunications Act of 1996 or rules and
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regulations of the FCC or any of the State Telecommunications Agencies, fairly
and accurately summarize the matters therein described.
5. The Company and its subsidiaries have the consents, approvals,
authorizations, licenses, certificates, permits, or orders of the FCC or the
State Telecommunications Agencies, if any is required, for the consummation of
the transactions contemplated in the Offering Memorandum, except where the
failure to obtain the consents, approvals, authorizations, licenses,
certificates, permits or orders would not have a Material Adverse Effect.
6. Neither the execution and delivery of the Operative Documents nor the
sale of the Notes contemplated thereby will conflict with or result in a
violation of any bond, debenture, note, indenture (other than the indenture
relating to the Company's 13 1/2% Senior Discount Notes due 2008 and the
indenture relating to the Company's 12 1/2% Senior Notes due 2009), mortgage,
deed of trust or other material agreement or instrument to which the Company or
any of its subsidiaries is a party or by which any of them or their property is
or may be bound, except for such conflicts or violations which would not have a
Material Adverse Effect.
7. As of the date hereof, (A) the Company has obtained CLEC regulatory
approval in each of the following States: Arizona, California, Colorado,
Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois,
Indiana, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Missouri,
Montana, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon,
Pennsylvania, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin and
no such regulatory approval has been withdrawn, and no such regulatory approval
is the subject of any legal challenge (except as disclosed in the Offering
Memorandum) and (B) the Company has not received any notice of rejection or
denial, nor has it withdrawn, any of its applications for CLEC approval in any
of the 5 additional States where such applications, as of the date hereof, are
pending approval.
