Exhibit 1.1
FOCAL COMMUNICATIONS CORPORATION
$270,000,000
12.125% Senior Discount Notes due 2008
PURCHASE AGREEMENT
New York, New York
February 12, 1998
Salomon Brothers Inc
Xxxxxx Xxxxxxx & Co. Incorporated
NationsBanc Xxxxxxxxxx Securities LLC
In care of Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Focal Communications Corporation (the "Company"), a Delaware
corporation, proposes to issue and sell to you (the "Initial Purchasers"),
$270,000,000 aggregate stated principal amount at maturity of its 12.125% Senior
Discount Notes due 2008 (the "Notes"). The Notes are to be issued under an
indenture (the "Indenture") dated as of February 18, 1998 between the Company
and Xxxxxx Trust and Savings Bank, as trustee (the "Trustee").
The sale of the Notes to the Initial Purchasers will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereunder in
compliance with Rule 144A under the Securities Act. The Initial Purchasers have
advised the Company that the Initial Purchasers will offer and sell the Notes
purchased by them hereunder in accordance with Section 4 hereof on the terms set
forth in the Final Memorandum
(as defined below) as soon as the Initial Purchasers deem advisable after this
Purchase Agreement (the "Agreement") has been executed and delivered.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum, dated January 30, 1998 (the "Preliminary
Memorandum") and a final offering memorandum, dated February 12, 1998 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company and the Notes.
The Company hereby confirms that it has authorized the use of the Preliminary
Memorandum and the Final Memorandum, and any amendment or supplement thereto, in
connection with the offer and sale of the Notes by the Initial Purchasers.
Unless stated to the contrary, all references herein at the Execution Time (as
defined therein) and are not meant to include any amendment or supplement
subsequent to the Execution Time.
The holders of the Notes will be entitled to the benefits of the
Exchange and Registration Agreement dated the Closing Date (as defined herein)
among the Company and the Initial Purchasers (the "Registration Agreement") in
the form of Exhibit C attached hereto.
1. Representations and Warranties. The Company and the Executing
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Subsidiaries represent and warrant to, and agree with, the Initial Purchasers as
set forth below in this Section 1.
(a) The Preliminary Memorandum, at the date thereof did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Final
Memorandum at the date hereof and at all times subsequent hereto up to
and including the Closing Date, does not, and will not (and, together
with any amendment or supplement thereto, at the date thereof and at the
Closing Date, will not), contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
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representation or warranty as to the information contained in or omitted
from the Preliminary Memorandum, or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Initial Purchasers specifically for inclusion therein.
(b) Neither the Company, nor any of its Affiliates (as defined in
Rule 501(b) of Regulation D of the Securities Act ("Regulation D")), nor
any person acting on its or their behalf has, directly or indirectly, (i)
made offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the registration of the
Notes under the Securities Act or (ii) has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D)
or in any manner or action involving a public offering within the meaning
of Section 4(2) of the Act in connection with the offering of
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the Notes (provided that no representation is made as to the Initial
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Purchasers or any person acting on their behalf).
(c) Assuming (i) that the representations and warranties of the
Initial Purchasers in Section 4 hereof are true and (ii) compliance by
the Initial Purchasers with the covenants set forth in Section 4 hereof,
it is not necessary in connection with the offer, sale and delivery of
the Notes in the manner contemplated by this Agreement and the Final
Memorandum or in connection with the initial resale of the Notes by the
Initial Purchasers in accordance with this Agreement and the Final
Memorandum to register the Notes under the Securities Act or to qualify
the Indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").
(d) The Notes satisfy the eligibility requirements set forth in
Rule 144A(d)(3) under the Securities Act.
(e) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf has engaged in any directed selling
efforts (as defined in Regulation S under the Securities Act ("Regulation
S")) with respect to the Notes, and each of them has complied with the
offering restrictions requirement of Regulation S (provided that no
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representation is made as to the Initial Purchasers or any person acting
on their behalf).
(f) The Company reasonably believes that there is no substantial
U.S. market interest (as defined in Regulation S) in the Notes.
(g) The Company agrees to permit the Notes to be designated
PORTAL eligible securities and will pay the requisite fees related
thereto.
(h) The Company is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), without taking account of any exemption arising out of the
number of holders of the Company's securities.
(i) The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any Notes (except as
contemplated by this Agreement and as disclosed in the Final Memorandum).
(j) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with
any offering of the Notes.
(k) The information provided by the Company pursuant to Section
5(k) hereof will not, at the date thereof, contain any untrue statement
of a material fact
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or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(l) Each of the Company and its subsidiaries (all of which are
listed in Annex I hereto) (individually a "Subsidiary" and collectively
the "Subsidiaries") has been duly incorporated and is validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation, with the requisite corporate power and capacity to own its
material properties and conduct its business and proposed business as
described in, and contemplated by, the Final Memorandum; and each of the
Company and its subsidiaries is duly qualified or registered to carry on
business as a corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business
requires such qualification or registration, other than where the failure
to so qualify or register could not reasonably be expected to,
individually or in the aggregate, have a material adverse effect on the
financial condition or business, proposed business as described in the
Final Memorandum, properties, net worth or results of operations of the
Company and the Subsidiaries taken as a whole (a "Material Adverse
Effect"). Neither the Company nor any of its Subsidiaries is in
liquidation, administration or receivership nor has any petition been
presented for the winding up of the Company or any of its Subsidiaries.
(m) The Company is a holding company which derives all of its
revenues from the operations of its Subsidiaries. The Company does not
have any investment in any person other than its investments in its
Subsidiaries.
(n) Neither the Company nor any of its Subsidiaries is in
violation of its articles or by-laws or in default in the performance of
any indenture or other agreement or instrument to which it is a party or
by which it is bound or to which it or any of its properties is subject,
which default or defaults individually or in the aggregate would have a
Material Adverse Effect.
(o) Except as otherwise set forth in the Final Memorandum, the
(i) issuance and sale of the Notes to the Initial Purchasers by the
Company pursuant to this Agreement, (ii) execution, delivery and
performance of this Agreement, the Registration Agreement and the
Indenture by the Company, (iii) compliance by the Company and the
Executing Subsidiaries with all the provisions hereof and thereof and
(iv) consummation on the Closing Date of the transactions contemplated
hereby and thereby by the Company and the Executing Subsidiaries do not
require any consent, permission, authorization, approval or order of, or
filing or registration with or notice to, any court, regulatory body,
administrative agency or other governmental body (except as may be
required under blue sky laws of the various states of the United States
and those consents, permissions, authorizations, approvals, orders,
filings, registrations or notices which have been obtained or made, as
the case may be, or may be obtained or
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made, as the case may be, pursuant to the Registration Agreement) and do
not and will not conflict with, or constitute a breach or a violation of
any of the terms or provisions of, or a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any Subsidiary under, (i) the
articles, by-laws or other governing documents of the Company or any
Subsidiary, (ii) any material statute, rule or regulation applicable to
the Company or any Subsidiary or any order of any governmental agency or
body or any court having jurisdiction over the Company or any Subsidiary
or any of their respective properties, (iii) any agreement or instrument
relating to borrowed money to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary is bound or to which any
of their respective properties is subject, or (iv) any other material
agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary is bound or to which any of
their respective properties is subject.
(p) (i) There are no restrictions (other than restrictions which
have been waived) on the corporate power and capacity of the Company to
enter into this Agreement, the Indenture and the Registration Agreement,
to execute and sell the Notes, or to carry out its obligations hereunder
and thereunder; (ii) the execution and delivery of this Agreement, the
Indenture and the Registration Agreement and the consummation on the
Closing Date of the transactions contemplated herein and therein have
been duly authorized by all necessary corporate action on the part the
Company; (iii) this Agreement has been duly executed and delivered by and
constitutes a valid and binding obligation of the Company and is
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws relating to or affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity); (iv)
when duly executed and delivered by the Company and the other parties
thereto, each of the Indenture and the Registration Agreement will
constitute valid and binding obligations of the Company and will be
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws relating to or affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(q) (i) There are no restrictions (other than restrictions which
have been waived) on the corporate power and capacity of either Focal
Communications Corporation of Illinois or Focal Communications
Corporation of New York (each an "Executing Subsidiary" and collectively,
the "Executing Subsidiaries") to enter into this Agreement; (ii) the
execution and delivery of this Agreement and the consummation on the
Closing Date of the transactions contemplated herein have been duly
authorized by all necessary corporate action on the part of each of the
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Executing Subsidiaries; (iii) this Agreement has been duly executed and
delivered by each of the Executing Subsidiaries and constitutes a valid
and binding obligation of each of the Executing Subsidiaries and is
enforceable against each of the Executing Subsidiaries in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other laws relating to or affecting
creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at
law or in equity).
(r) All of the issued and outstanding shares of capital stock of,
or other ownership interests in, each of the Subsidiaries have been duly
authorized and validly issued and, with the exception of the outstanding
shares of capital stock of Focal Communications Corporation of Virginia,
all of which are registered in the name of Focal Communications
Corporation of the Mid-Atlantic, a wholly owned subsidiary of the
Company, all of the shares of capital stock of, or other ownership
interests in, each of the Subsidiaries are owned beneficially and of
record directly by the Company. All such shares of capital stock are
fully paid and nonassessable, and are owned free and clear of any lien
(other than the lien granted in connection with the bank credit facility
of Focal Communications Corporation of Illinois, which lien will be
released upon application of the proceeds from the sale of the Notes).
There are no outstanding subscriptions, rights, warrants, options, calls,
convertible or exchangeable securities, commitments of sale or liens
related to, or entitling any person to purchase or otherwise to acquire
any shares of, the capital stock of, or other ownership interest in, any
of the Subsidiaries.
(s) The authorized capital stock of the Company as of February
12, 1998 is as set forth in the Final Memorandum under "Description of
Capital Stock"; all the issued and outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully
paid and nonassessable; the capital stock of the Company conforms in all
material respects to all statements relating thereto in the Final
Memorandum.
(t) The Notes have been duly authorized for issuance and sale by
the Company to the Initial Purchasers and will, upon execution and
delivery of the Indenture, and when issued, executed and delivered in
accordance with the Indenture, and paid for in accordance with the terms
of this Agreement, constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms
and be entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
and other laws relating to or affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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(u) The statements set forth in the Final Memorandum under the
captions "Risk Factors", "Business", "Management", "Security Ownership of
Certain Beneficial Owners and Management", "Certain Transactions",
"Description of the Notes", "Description of Capital Stock", "Exchange
Offer; Registration Rights", "Certain United Federal Income Tax
Considerations", "Plan of Distribution", and "Notice to Investors",
insofar as they describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair.
(v) Except as disclosed in the Final Memorandum, (i) there are no
legal or governmental actions, suits or proceedings pending or, to the
best knowledge of the Company or the Executing Subsidiaries, threatened
to which the Company or any of its Subsidiaries is or is threatened to be
made a party or of which property owned or leased by the Company or any
of its Subsidiaries is or is threatened to be made the subject, which
actions, suits or proceedings could, individually or in the aggregate,
have a Material Adverse Effect, or materially and adversely affect the
ability of the Company to perform its obligations under this Agreement,
the Indenture, the Registration Agreement or the Notes or to consummate
the transactions contemplated hereby and thereby, and (ii) no labor
disturbance by the employees of the Company or any of its Subsidiaries
exists or, to the best of the Company's knowledge, is imminent, in either
case which could have a Material Adverse Effect or which could materially
and adversely affect the ability of the Company to perform its
obligations under this Agreement, the Indenture, the Registration
Agreement or the Notes or to consummate the transactions contemplated
hereby and thereby. Except as disclosed in the Final Memorandum, neither
the Company nor any of its Subsidiaries is a party or subject to the
provisions of any material injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental body
(other than orders of regulatory bodies and administrative agency which
are generally applicable to similarly situated telecommunications
company).
(w) The Company has not received any notice of, nor does it have
any actual knowledge of, any failure by it or any of its Subsidiaries to
be in compliance with all existing statutes and regulations, ordinances,
administrative or governmental rules or regulations or court decrees
applicable to it or any of its Subsidiaries, which failure could have a
Material Adverse Effect.
(x) The Company and its Subsidiaries are conducting business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which they conduct business, including, without
limitation, all applicable environmental laws and regulations, except
where the failure to be so in compliance would not have a Material
Adverse Effect.
(y) Except as disclosed in the Final Memorandum, the Company and
its Subsidiaries have good and marketable title to all material real
properties and all
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other material properties and assets owned by them, in each case free
from liens, encumbrances and defects, other than those which do not,
individually or in the aggregate, have a Material Adverse Effect. Except
as disclosed in the Final Memorandum, the Company and its Subsidiaries
hold any leased real or personal property under valid and enforceable
leases with no exceptions, other than those which do not, individually or
in the aggregate, have a Material Adverse Effect.
(z) The Company and its Subsidiaries hold all Federal
Communications Commission ("FCC") licenses or authorizations and possess
adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by them, other than those the absence of which could not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect and have not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or its
Subsidiaries, could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(aa) The Company and its Subsidiaries own or possess adequate
trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other intellectual
property (collectively, the "Intellectual Property") necessary to conduct
the business now operated by them, other than those the absence of which
could not, individually or in the aggregate, have a Material Adverse
Effect. With respect to the Intellectual Property presently employed by
the Company or its Subsidiaries, 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 Intellectual Property that,
if determined adversely to the Company or any of its Subsidiaries, could
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.
(bb) The Company and its Subsidiaries comply with all
Environmental Laws (as defined below), except to the extent that failure
to comply with such Environmental Laws could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
neither the Company nor any of its Subsidiaries is the subject of any
pending or, to the best knowledge of the Company, threatened federal,
state or local investigation evaluating whether any remedial action by
the Company or any of its Subsidiaries is needed to respond to a release
of any Hazardous Materials (as defined below) into the environment,
resulting from the Company's or of the Company or any of its Subsidiaries
business properties or assets of the Company or any of its Subsidiaries,
or whether the Company or any of its Subsidiaries is in contravention of
any Environmental Law; neither the Company nor any of its Subsidiaries
has received any notice or claim, nor are there pending or, to the best
knowledge of the Company, threatened
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lawsuits against them, with respect to violations of any Environmental
Law or in connection with any release of any Hazardous Materials into the
environment; as used herein, "Environmental Laws" means any federal,
state or local law, regulation, permit, rule or order of any governmental
authority, administrative body or court applicable to the Company's or of
the Company or any of its Subsidiaries business operations or the
ownership or possession of any of their properties or assets relating to
environmental matters, and "Hazardous Materials" means those substances
that are regulated by, or form the basis of liability under, any
Environmental Laws.
(cc) The consolidated financial statements (including all notes
thereto) included in the Final Memorandum present fairly the financial
position of the Company and its consolidated subsidiaries as of the dates
shown and their results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity
with generally accepted accounting principles in the United States
applied on a consistent basis. The selected financial data and all
operating data included in the Final Memorandum present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited consolidated financial statements included in
the Final Memorandum.
(dd) Except as disclosed in the Final Memorandum, since the date
of the latest audited consolidated financial statements included in the
Final Memorandum there has been no change, development or event which
could reasonably be expected to have a Material Adverse Effect and there
has been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock. The Company shall have,
prior to the Closing Date, received $13.8 million of additional capital
from the Equity Investors (as defined in the Final Memorandum) as
described in the Final Memorandum and, as a result of the amendment of
the Stock Purchase Agreement, the Company's Redeemable Class A Common
Stock will be classified as permanent equity on the face of the Company's
financial statements for all periods subsequent to December 31, 1997.
(ee) The Final Memorandum or the Company's consolidated financial
statements contained therein disclose each agreement or other instrument
to which the Company or any Subsidiary is a party under which the Company
or any Subsidiary has indebtedness outstanding of $500,000 or more or is
entitled, subject to the satisfaction of conditions specified in such
agreement or instrument, to incur indebtedness in such amount. The
Company has disclosed to the Initial Purchasers and counsel to the
Initial Purchasers that it has no swap or other hedging or derivative
agreement or transaction to which the Company or any Subsidiary is a
party or may in any way be contingently liable.
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(ff) Xxxxxx Xxxxxxxx LLP, who are reporting on the audited
consolidated financial statements of the Company included in the Final
Memorandum, are independent public accountants in accordance with the
provisions of the Securities Act.
2. Purchase and Sale. Subject to the terms and conditions and in
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reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
55.56578% of the stated principal amount at maturity thereof, plus accrued
original issue discount thereon, if any, from February 18, 1998 to the Closing
Date, the respective stated principal amount at maturity of Notes set forth
opposite such Initial Purchaser's name in Schedule I hereto. Concurrently with
the payment by the Initial Purchasers of the purchase price for the Notes, the
Company agrees to pay to the Initial Purchasers an underwriting commission equal
to 1.94480% of the total stated principal amount at maturity of Notes set forth
in Schedule I.
3. Delivery and Payment. Delivery of and payment for the Notes
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shall be made at 10:00 AM, New York City time, on February 18, 1998, or such
later date as the Initial Purchasers shall designate, which date and time may be
postponed by agreement between the Initial Purchasers and the Company or as
provided in Section 9 hereof (such date and time of delivery and payment for the
Notes being herein called the "Closing Date"). Delivery of the Notes shall be
made to the Initial Purchasers for the respective accounts of the several
Initial Purchasers against payment by the several Initial Purchasers through
Salomon Brothers Inc of the purchase price thereof to or upon the order of the
Company by wire transfer in immediately available U.S. funds or such other
manner of payment as may be agreed by the Company and the Initial Purchasers not
less than two business days prior to the Closing Date. Delivery of the Notes
shall be made at such location as the Initial Purchasers shall reasonably
designate at least one business day in advance of the Closing Date and payment
for the Notes shall be made at the office of Xxxx & Xxxxxxx, 000 Xxxxx Xxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx. Certificates for the Notes shall be
registered in such names and in such denominations as the Initial Purchasers may
request not less than two full business days in advance of the Closing Date.
The Company agrees to have the certificates for the Notes
available for inspection by the Initial Purchasers in Chicago, Illinois, at the
offices of Xxxx & Xxxxxxx, not later than 1:00 PM on the business day prior to
the Closing Date .
4. Offering of Notes. (a) Each Initial Purchaser (i) represents
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and warrants to and agrees with the Company that it, its Affiliates and any
person acting on its or its Affiliates' behalf, have not solicited and will not
solicit any offer to buy or offer to sell the Notes by means of any form of
general solicitation or general advertising (within the meaning of Regulation D)
or in any manner involving a public offering within
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the meaning of Section 4(2) of the Securities Act, except pursuant to a
registered public offering as provided in the Registration Agreement or, with
respect to Notes sold in reliance on Regulation S, by means of any directed
selling efforts, (ii) acknowledges that it is purchasing the Notes pursuant to a
private sale exemption from registration under the Securities Act and that the
Notes have not been registered under the Securities Act and may not be offered
or sold except pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act or pursuant to an
effective registration statement under the Securities Act, and (iii) severally
and not jointly, represents and warrants to and agrees with the Company that:
(1) It has not offered or sold, and will not offer or sell, any
Notes except (A) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act)
and that, in connection with each such sale, it has taken or will take
reasonable steps to ensure that the purchaser of such Notes is aware that
such sale is being made in reliance on Rule 144A, or (B) in accordance
with the restrictions set forth in Exhibit A hereto.
(2) It is a qualified institutional buyer (as defined in Rule
144A) and will offer the Notes for resale only upon the terms and
conditions set forth in this Agreement and in the Final Memorandum.
5. Agreements. The Company agrees with each Initial Purchaser
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that:
(a) The Company will furnish to each Initial Purchaser and its
counsel, without charge, during the period referred to in paragraph (c)
below, as many copies of the Final Memorandum and any amendments and
supplements thereto as it may reasonably request. The Company will pay
the expenses of printing or other production of all documents relating to
the offering of the Notes.
(b) Except as set forth in paragraph (c) of this Section 5, the
Company will not amend or supplement the Final Memorandum prior to the
completion of the sale of the Notes by the Initial Purchasers without
prior consent of the Initial Purchasers, which consent will not be
unreasonably withheld.
(c) If at any time prior to the completion of the sale of the
Notes by the Initial Purchasers (as determined by the Initial
Purchasers), any event occurs as a result of which the Final Memorandum,
as then amended or supplemented, would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it should be necessary to amend or
supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchasers of the same and,
subject to the requirements of paragraph (b) of this Section 5, will
prepare and provide, at its own expense, to the Initial Purchasers
pursuant to paragraph (a) of this Section 5
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an amendment or supplement which will correct such statement or omission
or effect such compliance.
(d) The Company will promptly take such action as the Initial
Purchasers may reasonably request to qualify the Notes for sale by the
Initial Purchasers in the manner contemplated by this Agreement and under
the securities or blue sky laws of the United States as the Initial
Purchasers may designate and will maintain such qualifications in effect
so long as required for the sale of the Notes by the Initial Purchasers;
provided, however, that the Company shall not be required to amend its
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articles or by-laws or to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction. The Company
will promptly advise the Initial Purchasers of the receipt by the Company
of any notification with respect to the suspension of the qualification
of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(e) The Company will not, and will not permit any of its
Affiliates to, resell any Notes that have been acquired by any of them
except for any such Notes resold in a transaction registered under the
Securities Act or pursuant to an exemption therefrom.
(f) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf will, directly or indirectly, make
offers or sales of any security, or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act),
under circumstances that would require the registration of the Notes
under the Securities Act, except as contemplated in the Registration
Agreement.
(g) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf will engage in any form of general
solicitation or general advertising (within the meaning of Regulation D)
in connection with any offer or sale of the Notes in the United States,
except pursuant to a registered public offering as provided in the
Registration Agreement.
(h) Neither the Company, nor any of its Affiliates, nor any
person acting on its or their behalf will engage in any directed selling
efforts (as defined in Regulation S) with respect to the Notes, except
pursuant to a registered public offering as provided in the Registration
Agreement, and the Company, its Affiliates and each person acting on its
or their behalf will comply with the offering restrictions requirement of
Regulation S. Terms used in this paragraph have the meanings given to
them by Regulation S.
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(i) The Company will cooperate with the Initial Purchasers and
use its reasonable best efforts to permit the Notes to be eligible for
clearance and settlement through The Depository Trust Company.
(j) The Company and the Subsidiaries will not, until 90 days
following the date of the Final Memorandum, without the prior written
consent of Salomon Brothers Inc, offer, sell or contract to sell, grant
any option to purchase or otherwise dispose of, directly or indirectly,
or announce the offering of, any debt securities or any securities
exchangeable for debt securities or any securities exchangeable for debt
securities issued or guaranteed by the Company or any Subsidiary (other
than the Notes or pursuant to a registered public offering as provided in
the Registration Agreement), or enter into any agreement to do any of the
foregoing. The Company and the Subsidiaries will not at any time offer,
sell or contract to sell, grant any option to purchase or otherwise
dispose of, directly or indirectly, any securities under circumstances
where such offer, sale, contract or disposition would cause the exemption
afforded by Section 4(2) of the Securities Act or the safe harbor of
Regulation S thereunder to cease to be applicable to the offer and sale
of the Notes as contemplated by this Agreement and the Final Memorandum.
(k) So long as any of the Notes remain outstanding, the Company
will furnish to the holders of the Notes and to prospective investors (as
designated by holders of the Notes ), upon the request of such holders or
prospective investors, any information required to be delivered by Rule
144A(d)(4) under the Securities Act. In the event the Company is
required to file information, documents or other reports with the
Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act, the Company will furnish copies thereof to the holders
of the Notes at the time the Company is required to file the same with
the Trustee under the Indenture and will make such information, documents
or other reports available to prospective investors who request it in
writing. This covenant is intended to be for the benefit of the holders
of the Notes, and prospective investors in the Notes.
(l) The Company will not be or become an open-end investment
company, unit investment trust, closed-end investment company or face-
amount certificate company that is or is required to be registered under
the Investment Company Act.
(m) The Company shall include information substantially in the
form set forth in Exhibit B in each Final Memorandum.
(n) The Company will apply the net proceeds from the sale of the
Notes sold by it substantially in accordance with its statements under
the caption "Use of Proceeds" in the Final Memorandum.
13
(o) Neither the Company nor any of its Subsidiaries will take,
directly or indirectly, any action which is designed to or which
constitutes or which might reasonably be expected to cause or result in
any act prohibited by Regulation M.
(p) The Notes will bear the legend set forth in Exhibit A until
such legend shall no longer be necessary or advisable because the Notes
are no longer subject to the restrictions of transfer described therein.
(q) The Company and the Executing Subsidiaries will do and
perform all things required by it prior to or after the Closing Date and
to satisfy all conditions precedent on its part prior to delivery of the
Notes.
6. Conditions to the Obligations of the Initial Purchasers. The
-------------------------------------------------------
obligations of the Initial Purchasers to purchase the Notes shall be subject to
the continued accuracy of the representations and warranties on the part of the
Company and the Executing Subsidiaries contained herein at the date and time
that this Agreement is executed and delivered by the parties hereto (the
"Execution Time"), and at the Closing Date to the accuracy of the statements of
the Company and the Executing Subsidiaries made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Executing
Subsidiaries of their respective obligations hereunder and to the following
additional conditions:
(a) The Company shall have furnished to the Initial Purchasers
the opinion of Xxxx & Xxxxxxx, special counsel for the Company, dated the
Closing Date, substantially to the effect that:
(i) the statements in the Final Memorandum under the caption
"Risk Factors--Original Issue Discount; Possible Unfavorable Tax
and Other Legal Consequences for Holders of Notes", Certain United
States Federal Income Tax Considerations" and "Exchange Offer;
Registration Rights", to the extent such statements constitute
matters of law, summaries of legal matters or legal conclusions,
have been reviewed by such counsel and are correct in all material
respects;
(ii) no consent, approval, authorization or order of any
state or Federal governmental authority is required under
applicable law to be obtained by the Company or the Executing
Subsidiaries as of the Closing Date for the consummation by the
Company and the Executing Subsidiaries of the transactions
contemplated herein, except any such consent, approval,
authorization or order as may be required under the blue sky or
securities laws of any state in the United States in connection
with the purchase and sale of the Notes by the Initial Purchasers,
as to which such counsel shall not be required to render any
opinion;
14
(iii) neither the issuance and sale of the Notes by the
Company to the Initial Purchasers, the execution and delivery by
the Company of this Agreement, the Indenture and the Registration
Agreement, the execution and delivery by the Executing
Subsidiaries of this Agreement, nor the consummation by the
Company, as of the Closing Date of the transactions herein or
therein contemplated will conflict with, result in a breach or
violation of, or constitute a default under the terms of (a) any
other indenture, material agreement or instrument known to such
counsel and to which the Company or its Subsidiaries is a party or
bound, (b) any judgment, order or decree known to such counsel and
binding on the Company or its Subsidiaries of any state or Federal
court or any state or Federal governmental agency having
jurisdiction over the Company or its Subsidiaries or (c) the
articles of incorporation or by-laws of the Company or its
Subsidiaries;
(iv) assuming (A) the accuracy of the representations and
warranties of the Company set forth in Section 1 of this
Agreement, (B) the due performance by the Company of the
agreements set forth in Section 5 of this Agreement, (C) the
accuracy of the representations and warranties made by the Initial
Purchasers in Section 4 of this Agreement and the due performance
by the Initial Purchasers of the agreements set forth in Section 4
of this Agreement (including all exhibits hereto), (D) compliance
by the Initial Purchasers with the offering and transfer
procedures and restrictions described elsewhere in this Agreement
and the Final Memorandum and (E) the accuracy of the
representations and warranties made in accordance with this
Agreement and the Final Memorandum by purchasers to whom the
Initial Purchasers initially resell Notes, no registration of the
Notes under the Securities Act is required, and no qualification
of the Indenture under the Trust Indenture Act is necessary, for
the offer and sale by the Initial Purchasers of the Notes in the
manner contemplated by this Agreement;
(v) the Company is not an "investment company" within the
meaning of the Investment Company Act without taking account of
any exemption arising out of the number of holders of the
Company's securities;
(vi) the summaries in the Final Memorandum of (x) the
provisions of the certain investors liquidation rights described
under the heading "Description of Capital Stock -- Investors'
Liquidation Rights" and (y) the Stock Purchase Agreement (as
defined in the Final Memorandum) provide a fair summary of such
provisions;
15
(vii) the Notes are in the form contemplated by the
Indenture and, when executed by the Company and authenticated or
countersigned by the Trustee, in accordance with the provisions of
the Indenture and delivered to and paid for by the Initial
Purchasers pursuant to this Agreement, will constitute legal,
valid and binding obligations of the Company entitled to the
benefits of the Indenture;
(viii) the statements set forth under the headings
"Description of the Notes" insofar as such statements purport to
summarize certain provisions of the Notes and the Indenture
provide a fair summary of such provisions;
(ix) each of this Agreement, the Indenture and the
Registration Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company, in
accordance with their respective terms; and the Agreement
constitutes a legal, valid and binding obligation of the Executing
Subsidiaries, enforceable against the Executing Subsidiaries, in
accordance with its terms;
(x) each of the Company and its Subsidiaries is a
corporation in good standing under the laws of the jurisdiction of
its incorporation; there are no restrictions on the corporate
power and capacity of the Company or any of its Subsidiaries to
own and lease property and assets and to carry on business;
(xi) each of the Company and its Subsidiaries is qualified
or registered to carry on business as a foreign corporation in
each jurisdiction in which failure to do so would have a material
adverse effect on it or its operations;
(xii) the authorized capital of the Company consists of
85,567.693 Class A Common Shares, 35,000 Class B Common Shares and
15,000 Class C Common Shares and conforms in all material respects
to the information contained in the Final Memorandum under the
heading "Description of Capital Stock";
(xiii) the outstanding shares of capital stock of the Company
and its Subsidiaries have been duly authorized and validly issued
and, assuming receipt of the consideration thereof, are
outstanding as fully paid and non-assessable; all of the
outstanding shares of capital stock of the Subsidiaries are
registered in the name of the Company or its Subsidiaries;
(xiv) there are no restrictions (other than restrictions
which have been waived) on the corporate power and capacity of the
Company to enter into this Agreement, the Indenture and the
Registration Agreement, to
16
execute, issue and sell the Notes or to carry out its obligations
hereunder and thereunder;
(xv) the execution and delivery of this Agreement, the
Indenture, the Registration Agreement and the consummation of the
transactions contemplated herein and therein have been duly
authorized by all necessary corporate action on the part of the
Company;
(xvi) the execution, issuance and sale of the Notes has
been duly authorized by all necessary corporate action on the part
of the Company;
(xvii) each of the Notes, this Agreement, the Indenture and
the Registration Agreement has been duly executed and delivered by
the Company;
(xviii) to the knowledge of such counsel, there is no pending
or threatened action or suit or judicial, arbitral or other
administrative proceeding to which the Company or its Subsidiaries
is the subject that, singly or in the aggregate, (A) questions the
validity of this Agreement, the Registration Agreement or the
Indenture or any action taken or to be taken pursuant hereto or
thereto, or (B) if determined adversely to the Company or its
Subsidiaries is reasonably likely to have a Material Adverse
Effect;
(xix) the Indenture conforms to all material requirements
of the Trust Indenture Act and the rules and regulations
applicable thereto;
Such counsel shall also state that they have no reason to
believe that at the Execution Time the Final Memorandum contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that at the
Closing Date, the Final Memorandum includes an untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than
the States of Illinois, Delaware and New York or the United States, to
the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to Xxxx, Xxxxxxxx, Xxxxxxxx & Xxxxxx
LLP and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials
and upon the representations and warranties set forth in this Agreement,
the Indenture and the Registration Agreement.
17
In addition, such opinion may be qualified to the extent that
the enforceability of any right or remedy, including without limitation
any right to liquidated damages, may be subject to general principles of
equity, including without limitation concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether
enforceability is considered in a proceeding in equity or in law) and to
the discretion of the court before which proceedings hereof may be
brought.
Such opinion may also be subject to standard limitations,
assumptions, qualifications and exceptions.
All references in this Section 6(a) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
Closing Date.
(b) The Company shall have furnished to the Initial Purchasers
the opinion of Xxxxxxx & Berlin, special regulatory counsel for the
Company, dated the Closing Date, in form and substance satisfactory to
the Initial Purchasers and their counsel.
(c) The Initial Purchasers shall have received from Xxxx,
Xxxxxxxx, Xxxxxxxx & Xxxxxx LLP such opinion dated the Closing Date, with
respect to the issuance and sale of the Notes, the Final Memorandum and
other related matters as the Initial Purchasers may reasonably require,
and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters.
(d) Each of the following conditions shall have been satisfied
and the Company shall have furnished to the Initial Purchasers a
certificate of the Company, signed by each of the Chief Executive Officer
and the Chief Financial Officer of the Company, dated the Closing Date,
to the effect that the signatories thereto have carefully examined the
Final Memorandum, any amendment or supplement to the Final Memorandum and
this Agreement and that:
(i) the representations and warranties of the Company in
this Agreement are true and correct in all material respects on
and as of the Closing Date with the same effect as if made on the
Closing Date, and the Company has complied in all material
respects with all the agreements and satisfied in all material
respects all the conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no Material
Adverse Change, whether or not arising from transactions in the
ordinary course of business,
18
except as set forth in or contemplated by the Final Memorandum
(exclusive of any amendment or supplement thereto); and
(iii) the sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(e) At the Execution Time and at the Closing Date, Xxxxxx
Xxxxxxxx LLP shall have furnished to the Initial Purchasers a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Initial
Purchasers, addressed to the Initial Purchasers confirming that they are
independent accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder and stating in
effect that:
(i) in their opinion the audited financial statements and
financial statement schedules and pro forma information included
in the Final Memorandum and reported on by them comply as to form
in all material respects with generally accepted accounting
principles;
(ii) based upon a reading of the latest unaudited
consolidated financial statements made available by the Company;
their limited review in accordance with the standards established
by the American Institute of Certified Public Accountants
("AICPA") of the unaudited interim financial information for the
date covered by such financial statements for the period; carrying
out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would
not necessarily reveal matters of significance with respect to the
comments set forth in such letter; such specified procedures would
include, but are not limited to, a reading of minutes of the
shareholders' and directors' meetings (and any meetings of
committees of the Board of Directors) of the Company, and its
Subsidiaries; and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters of
the Company and Subsidiaries as to transactions and events
subsequent to December 31, 1997, nothing has come to their
attention that causes them to believe that:
(1) any unaudited financial statements included in the Final
Memorandum do not comply as to form in all material respects with
accounting requirements of the Securities Act and with the
published rules and regulations of the Commission; and any
unaudited financial statements are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Final Memorandum; or
19
(2) with respect to the period subsequent to December 31,
1997, there were any changes, at February 10, 1998, in the long-
term obligations of the Company and the Subsidiaries or capital
stock of the Company or decreases in the consolidated assets or
shareholders' equity of the Company as compared with the amounts
shown on the December 31, 1997 consolidated balance sheet included
in the Final Memorandum, or for the period from December 31, 1997
to February 10, 1998 there were any decreases, as compared with
the corresponding period in the preceding year, in net sales,
operating expenses, operating income or income (loss) before
income taxes and extraordinary items or in total, of the Company
and the Subsidiaries, except in all instances for changes or
decreases set forth in such letter, in which case the letter shall
be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Initial Purchasers; and
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of
an accounting, financial or statistical nature (which is limited
to accounting, financial or statistical information derived from
the general accounting records of the Company) set forth in the
Final Memorandum is mathematically accurate and agrees with the
accounting records of the Company and its Subsidiaries, in each
case, excluding any questions of legal interpretation.
All references in this Section 6(e) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at
the date of the letter.
(f) Subsequent to the Execution Time or, if earlier, the
dates as of which information is given in the Final Memorandum,
there shall not have been (i)any change, decrease or increase
specified in the letter or letters referred to in paragraph (e) of
this Section6 or (ii)any change, or any development involving a
prospective change, in or affecting the business, proposed
business or properties of the Company and the Subsidiaries the
effect of which, in any case referred to in clause(i) or (ii)
above, is, in the judgment of the Initial Purchasers, so material
and adverse as to make it impractical or inadvisable to market the
Notes as contemplated by the Final Memorandum.
(g) On or prior to the Closing Date, the Registration
Agreement, in form and substance satisfactory to the Company and
its counsel and the Initial Purchasers and their counsel, shall
have been executed and shall have been delivered to you and the
Trustee.
(h) On or prior to the Closing Date, the Company and the
Trustee shall have entered into and delivered the Indenture and
the Initial
20
Purchasers shall have received a counterpart, conformed as
executed, thereof. The Indenture shall be in full force and
effect.
(i) 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.
If any of the conditions specified in this Section 6
shall not have been fulfilled in all material respects when and as
provided in this Agreement, or if any of the opinions and
certificates mentioned above or elsewhere in this Agreement shall
not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchasers and Paul, Hastings,
Xxxxxxxx & Xxxxxx LLP, this Agreement and all obligations of the
Initial Purchasers hereunder may be canceled at, or at any time
prior to, the Closing Date by the Initial Purchasers. Notice of
such cancellation shall be given to the Company in writing or by
telephone or telegraph confirmed in writing.
The documents required to be delivered by this
Section 6 will be delivered at the office of Xxxx & Xxxxxxx, 000
Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx, on the
Closing Date.
7. Reimbursement of Expenses. If the sale of the
Notes provided for herein is not consummated because any condition
to the obligations of the Initial Purchasers set forth in Section
6 hereof is not satisfied, because of any termination pursuant to
Section10 hereof or because of any refusal, inability or failure
on the part of the Company or any Executing Subsidiary to perform
any agreement herein or comply with any provision hereof other
than by reason of a default by any of the Initial Purchasers in
payment for the Notes on the Closing Date, the Company and the
Executing Subsidiaries, jointly and severally, will reimburse the
Initial Purchasers severally upon demand for all out-of-pocket
expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the
proposed purchase and sale of the Notes.
8. Indemnification and Contribution. (a)The Company
and the Executing Subsidiaries, jointly and severally, agree to
indemnify and hold harmless each Initial Purchaser, the directors,
officers, employees and agents of each Initial Purchaser and each
person, if any, who controls any Initial Purchaser within the
meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may
become subject under the Securities Act, the Exchange Act or other
21
Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Memorandum or the Final Memorandum or
any information provided by the Company to any holder or
prospective investor in Notes pursuant to Section 5(k), 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, and agree to reimburse each
such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability
or action; provided, however, that the Company and the Executing
Subsidiaries will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made in the Preliminary Memorandum
or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any
Initial Purchaser specifically for inclusion therein, it being
understood that the only such information is that described in
Section 8(b). This indemnity agreement will be in addition to any
liability which the Company or the Executing Subsidiaries may
otherwise have.
(b) Each Initial Purchaser, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors,
its officers, employees and agents, and each person who controls
the Company within the meaning of either the Securities Act or the
Exchange Act, to the same extent as the foregoing indemnity from
the Company to each Initial Purchaser, but only with reference to
written information relating to such Initial Purchaser furnished
to the Company by or on behalf of such Initial Purchaser
specifically for inclusion in the Preliminary Memorandum or the
Final Memorandum (or in any amendment or supplement thereto). This
indemnity agreement will be in addition to any liability which the
Initial Purchasers may otherwise have. The Company acknowledges
that the statements set forth in the last paragraph of the cover
page and under the heading "Plan of Distribution" in the
Preliminary Memorandum and the Final Memorandum constitute the
only information furnished in writing by or on behalf of the
Initial Purchasers for inclusion in the Preliminary Memorandum or
the Final Memorandum (or in any amendment or supplement thereto).
22
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section8, notify
the indemnifying party in writing of the commencement thereof; but
the failure so to notify the indemnifying party (i)will not
relieve it from liability under paragraph(a) or(b) above unless
and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses and (ii)will not, in any event,
relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation
provided in paragraph(a) or (b) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's
choice at the indemnifying party's expense, which counsel,
together with one local counsel in each jurisdiction, shall act on
behalf of all the indemnified parties in any action for which
indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of
any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel
shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear
the reasonable fees, costs and expenses of such separate counsel
if (i)the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a
conflict of interest, (ii)the actual or potential defendants in,
or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to
it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii)the
indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of
such action or (iv)the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding.
23
(d) In the event that the indemnity provided in
paragraph(a) or (b) of this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party for any reason,
the Company and the Executing Subsidiaries, on the one hand, and
the Initial Purchasers, on the other hand, agree to contribute to
the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which
the Company and one or more of the Initial Purchasers may be
subject in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and by
the Initial Purchasers, on the other hand, from the offering of
the Notes; provided, however, that in no case shall any Initial
Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Notes purchased by such
Initial Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
Company and the Executing Subsidiaries, on the one hand, and the
Initial Purchasers, on the other hand, shall contribute in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and of the
Initial Purchasers in connection with the statements or omissions
which resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Company shall
be deemed to be equal to the total net proceeds from the offering
(before deducting expenses), and benefits received by the Initial
Purchasers shall be deemed to be equal to the total purchase
commissions (before deducting expenses), in each case as set forth
on the cover page of the Final Memorandum. Relative fault shall be
determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company or the
Initial Purchasers. The Company, the Executing Subsidiaries and
the Initial Purchasers agree that it would not be just and
equitable if contribution were determined by pro rata allocation
or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding
the provisions of this paragraph(d), 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 8, each person who controls an
Initial Purchaser within the meaning of either the Securities Act
or the Exchange Act and each director, officer, employee and agent
of an Initial Purchaser shall have the same rights to contribution
as such Initial Purchaser, and each person who controls the
Company within the meaning of either the Securities Act or the
Exchange Act and each officer, director, employee and agent of the
Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of
this paragraph(d).
24
9. Default by an Initial Purchaser. If any one or
more Initial Purchasers shall fail to purchase and pay for any of
the Notes agreed to be purchased by such Initial Purchaser
hereunder and such failure to purchase shall constitute a default
in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated
severally to take up and pay for (in the respective proportions
which the stated principal amount at maturity of Notes set forth
opposite their names in Schedule I hereto bears to the aggregate
stated principal amount at maturity of Notes set forth opposite
the names of all the remaining Initial Purchasers) the Notes which
the defaulting Initial Purchaser or Initial Purchasers agreed but
failed to purchase; provided, however, that in the event that the
aggregate stated principal amount at maturity of Notes which the
defaulting Initial Purchaser or Initial Purchasers agreed but
failed to purchase shall exceed 10% of the aggregate stated
principal amount at maturity of Notes set forth in Schedule I
hereto, the remaining Initial Purchasers shall have the right to
purchase all, but shall not be under any obligation to purchase
any, of the Notes, and if such non-defaulting Initial Purchasers
do not purchase all the Notes, this Agreement will terminate
without liability to any non-defaulting Initial Purchaser, the
Company or the Executing Subsidiaries. In the event of a default
by any Initial Purchaser as set forth in this Section 9, the
Closing Date shall be postponed for such period, not exceeding
seven days, as the non-defaulting Initial Purchasers shall
determine in order that the required changes in the Final
Memorandum or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any
defaulting Initial Purchaser of its liability, if any, to the
Company or any non-defaulting Initial Purchaser for damages
occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers,
by notice given to the Company prior to delivery of and payment
for the Notes, if prior to such time (i)trading in securities
generally on the New York Stock Exchange, the American Stock
Exchange or the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") shall have been suspended or
limited or minimum prices shall have been established on either of
such Exchanges or Nasdaq, (ii)a general moratorium on commercial
banking activities in NewYork or the United States shall have been
declared by the relevant authorities or (iii)there shall have
occurred any outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war or other calamity
or crisis the effect of which on financial markets is such as to
make it, in the judgment of the Initial Purchasers, impracticable
or inadvisable to proceed with the offering or delivery of the
Notes as contemplated by the Final Memorandum.
25
11. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities
and other statements of the Company or its officers and of the
Initial Purchasers set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any
investigation made by or on behalf of the Initial Purchasers, the
Company or any of the officers, directors or controlling persons
referred to in Section 8 hereof, and will survive delivery of and
payment for the Notes. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to the Initial
Purchasers, will be mailed, delivered or telegraphed and confirmed
to them, care of Salomon Brothers Inc, at Seven World Trade
Center, New York, New York 10048 (telephone: (000)000-0000,
facsimile: (000) 000-0000), attention: Xxxxxxx X. Xxxxxxxxxx, with
a copy to Xxxx, Xxxxxxxx, Xxxxxxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (telephone: (000) 000-0000, facsimile
(000) 000-0000), attention: Xxxxxxx X. Xxxxxxxxx; or, if sent to
the Company, will be mailed, delivered or telegraphed and
confirmed to it at 000 X. XxXxxxx, Xxxxxxx, Xxxxxxxx 00000
(telephone: (000)000-0000; facsimile: (000)000-0000), attention:
Xxxxxx X. Xxxxxx, Executive Vice President and Chief Financial
Officer, with a copy to Xxxx & Xxxxxxx, 000 Xxxxx Xxxxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000 (telephone: (312) 750-
3501, facsimile (000) 000-0000), attention: Xxxxx Xxxx.
13. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers, directors, employees and
agents and controlling persons referred to in Section 8 hereof,
and, except as expressly set forth in Section 5(k) hereof, no
other person will have any right or obligation hereunder.
14. Governing Law. This Agreement will be governed by
and construed in accordance with the internal laws of the State of
NewYork without regard to principles of conflict of laws.
15. Business Day. For purposes of this Agreement,
"business day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in the City
of NewYork, New York are authorized or obligated by law, executive
order or regulation to close.
26
16. Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed to be an
original, but all such counterparts will together constitute one
and the same instrument.
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to us the
enclosed duplicate hereof, whereupon this Agreement and your
acceptance shall represent a binding agreement between the
Company, the Executing Subsidiaries and the Initial Purchasers.
Very truly yours,
Focal Communications Corporation
By: /s/ Xxxxxx X. Xxxxxx, Xx.
---------------------------------------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
Focal Communications Corporation of Illinois
By: /s/ Xxxxxx X. Xxxxxx, Xx.
---------------------------------------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
Focal Communications Corporation of New York
By: /s/ Xxxxxx X. Xxxxxx, Xx.
---------------------------------------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
27
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
Xxxxxx Xxxxxxx & Co. Incorporated
NationsBanc Xxxxxxxxxx Securities LLC
By: Salomon Brothers Inc
By: /s/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Managing Director
28
SCHEDULE I
Initial Purchasers Stated Amount
------------------ at Maturity
of Notes
to be Purchased
---------------
Salomon Brothers Inc $ 135,000,000
Xxxxxx Xxxxxxx & Co. Incorporated $ 81,000,000
NationsBanc Xxxxxxxxxx Securities LLC $ 54,000,000
-----------
Total $ 270,000,000
===========
29
EXHIBIT A
SELLING RESTRICTIONS FOR OFFERS AND
SALES OUTSIDE THE UNITED STATES
(1)(a) The Notes have not been and will not be registered under the
Securities Act and may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons except in accordance with Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. Each Initial Purchaser represents and agrees
that, it has offered and sold the Notes, and will offer and sell the Notes, (i)
as part of its distribution at any time and (ii) otherwise until 40 days after
the later of the commencement of the offering and the Closing Date, only in
accordance with Rule 903 of Regulation S. Accordingly, each Initial Purchaser
represents and agrees that neither it, nor any of its affiliates nor any person
acting on its or their behalf has engaged or will engage in any directed selling
efforts with respect to the Notes, and that it and they have complied and will
comply with the offering restrictions requirement of Regulation S. Each Initial
Purchaser agrees that, at or prior to the confirmation of sale of Notes (other
than a sale of Notes pursuant to Section 4(a)(1)(A) of the Agreement to which
this is an exhibit), it shall have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases Notes
from it during the restricted period 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 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering and
February 18, 1998, except in either case in accordance with Regulation S,
Rule 144A or other exemption from registration under the Securities Act.
Terms used above have the meanings given to them by Regulation S."
(b) Each Initial Purchaser also represents and agrees that it has not entered
and will not enter into any contractual arrangement with any distributor with
respect to the distribution of the Notes, except with its affiliates or with the
prior written consent of the Company.
(c) Terms used in this Section have the meanings given to them by Regulation S.
30
EXHIBIT B
NOTICE TO INVESTORS
Offers and Sales by the Initial Purchasers
------------------------------------------
The Notes have not been registered under the Securities Act and may not be
offered or sold in the United States or to, or for the account or benefit of,
U.S. persons except in accordance with an applicable exemption from the
registration requirements thereof. Accordingly, the Notes are being offered and
sold only (1) in the United States to qualified institutional buyers ("Qualified
Institutional Buyers") under Rule 144A under the Securities Act, and (2) outside
the United States to non-U.S. persons ("foreign purchasers") in reliance upon
Regulation S under the Securities Act.
Investor Representations and Restrictions on Resale
---------------------------------------------------
Each purchaser of the Notes will be deemed to have represented and agreed
as follows:
(1) it is acquiring the Notes for its own account or for an account
with respect to which it exercises sole investment discretion, and that it
or such account is a Qualified Institutional Buyer, an Institutional
Accredited Investor acquiring the Notes for investment purposes and not for
distribution or a foreign purchaser outside the United States;
(2) it acknowledges that the Notes have not been registered under the
Securities Act or any other applicable securities laws and may not be sold
or otherwise transferred except as permitted below;
(3) it understands and agrees (x) that such Notes are being offered
only in a transaction not involving any public offering within the meaning
of the Securities Act, and (y) that (A) if within two years after the date
of original issuance of the Notes or, if within three months after it
ceases to be an affiliate (within the meaning of Rule 144 under the
Securities Act) of the Company, it decides to resell, pledge or otherwise
transfer Notes on which the legend set forth below appears, such Notes may
be resold, pledged or transferred only (i) to the Company, (ii) so long as
such Note is eligible for resale pursuant to Rule 144A, to a person whom
the seller reasonably believes is a Qualified Institutional Buyer that
purchases for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A (as indicated by the box
checked by the transferor on the
31
Certificate of Transfer on the reverse of the Note if such Note is not in
book-entry form), (iii) in an offshore transaction in accordance with
Regulation S (as indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the Note if such Note is in book-
entry form), (iv) to an Institutional Accredited Investor (as indicated by
the box checked by the transferor on the Certificate of Transfer on the
reverse of the Note if such Note is not in book-entry form), who has
certified to the Company and the Trustee for the Notes that such transferee
is an Institutional Accredited Investor and is acquiring the Notes, for
investment purposes and not for distribution, (v) pursuant to an exemption
from the registration requirements of the Securities Act provided by Rule
144 (if applicable) under the Securities Act or (vi) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States, (B) the purchaser will, and each subsequent holder is required to,
notify any purchaser of Notes from it of the resale restrictions referred
to in (A) above, if then applicable, and (C) with respect to any transfer
of Notes by an Institutional Accredited Investor, such holder will deliver
to the Company and the Trustee such certificates and other information as
they may reasonably require to confirm that the transfer by it complies
with the foregoing restrictions; and
(4) it understands that the notification requirement referred to in
(3) above will be satisfied, in the case only of transfer by physical
delivery of certificated Notes other than a global certificate, by virtue
of the fact that the following legend will be placed on the Notes unless
otherwise agreed by the Company:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY THAT
THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X)
PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR A
PREDECESSOR NOTE HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN
(1) TO THE COMPANY, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A
(AS INDICATED BY THE BOX CHECKED BY THE
32
TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
NOTE), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATIONS UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS NOTE), (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
THIS NOTE) THAT IS ACQUIRING THIS NOTE FOR INVESTMENT PURPOSES
AND NOT FOR DISTRIBUTION AND A CERTIFICATE IN THE FORM ATTACHED
TO THIS NOTE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND
THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE
SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS NOTE
AGREES THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
CERTIFICATES AND OTHER INFORMATION AS THE COMPANY MAY REASONABLY
REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS NOTE COMPLIES
WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING
THIS NOTE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY
THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IS HOLDING THIS NOTE FOR INVESTMENT
PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902
UNDER) REGULATION S UNDER THE SECURITIES ACT."
(5) it (i) is able to fend for itself in the transactions
contemplated by this Offering Memorandum; (ii) has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its prospective investment in the Notes; and (iii)
has the ability to bear the economic risks of its prospective investment
and can afford the complete loss of such investment; and
33
(6) it has received a copy of this Offering Memorandum relating to
the Offering and acknowledges that it has had access to such financial and
other information, and has been afforded the opportunity to ask questions
of the Company and receive answers thereto, as is deemed necessary in
connection with its decision to purchase the Notes; and
(7) it understands that the Company, the Initial Purchasers and
others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that if any of
the acknowledgments, representations and warranties deemed to have been
made by it by its purchase of Notes are no longer accurate, it shall
promptly notify the Company and the Initial Purchasers. If it is acquiring
the Notes as a fiduciary or agent for one or more investor accounts, it
represents that it has sole investment discretion with respect to each such
account and it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of such account.
34
