EXHIBIT 1.1
EXECUTION COPY
COVAD COMMUNICATIONS GROUP, INC.
$500,000,000 Principal Amount of 6% Convertible Senior Notes due 2005
Purchase Agreement
September 19, 2000
BEAR, XXXXXXX & CO. INC.
XXXXXX XXXXXXX & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
DEUTSCHE BANK SECURITIES, INC.
XXXXXXX, XXXXX & CO.
COVAD COMMUNICATIONS GROUP, INC.
$500,000,000 Principal Amount of 6% Convertible Senior Notes due 2005
PURCHASE AGREEMENT
September 19, 2000
New York, New York
Bear, Steams & Co. Inc.
Xxxxxx Xxxxxxx & Co. Incorporated
Credit Suisse First Boston Corporation
Deutsche Bank Securities, Inc.
Xxxxxxx, Xxxxx & Co.
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., Xxxxxx Xxxxxxx & Co.
Incorporated, Credit Suisse First Boston Corporation Deutsche Bank Securities,
Inc. and Xxxxxxx, Xxxxx & Co. (together, the "INITIAL PURCHASERS") $500,000,000
aggregate principal amount of 6% Convertible Senior Notes due 2005 (the "FIRM
NOTES"), subject to the terms and conditions set forth herein. In addition, the
Company proposes to grant to the Initial Purchasers an option to purchase up to
$75,000,000 of additional identical notes (the "OPTIONAL NOTES"), as provided in
Section 3 hereof. The Firm Notes and, to the extent such option is exercised,
the Optional Notes are hereinafter referred to as the "NOTES").
The 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 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
Notes. The Notes and the Common Stock (as defined below) issuable in exchange
therefore are hereinafter collectively referred to as the Securities.
Capitalized terms used but not otherwise defined herein shall have the meanings
given to such terms in the Indenture.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "SECURITIES ACT"), the Securities 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 persons
whom any of the Initial Purchasers reasonably believe to be "qualified
institutional buyers", as defined in Rule 144A under the Securities Act ("QIBs"
or "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 Securities 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 Securities 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, 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 Shelf Registration Statement to be declared
effective and, subject to the terms and conditions set forth in the Registration
Rights Agreement, remain effective for a period not less than two years from the
Closing Date. This Agreement, the Securities, 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 the Firm Notes set forth opposite such Initial
Purchaser's name on Schedule I hereto. The purchase price for the Firm Notes
shall be $970.00 per $1,000 principal amount of Notes.
(b) Delivery of, and payment of the purchase price for, the Firm Notes
shall be made at the offices of Covad Communications Group, Inc., 0000 Xxxxxx
Xxxxx, 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 September 25, 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, the Firm Notes sold by the Initial Purchasers
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
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amount corresponding to the aggregate principal amount of the Firm Notes
(collectively, the "GLOBAL FIRM NOTES"). The Global Firm 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.
(d) In addition, on the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the Initial Purchasers the option to purchase up to
$75,000,000 principal amount of Optional Notes at the same purchase price to be
paid by the Initial Purchasers to the Company for the Firm Notes as set forth in
this Section 3, for the sole purpose of covering over-allotments in the sale of
Firm Notes by the Initial Purchasers. This option may be exercised at any time,
in whole or in part, on or before the 30th day following the date of the
Offering Memorandum, by written notice by the Initial Purchasers to the Company.
Such notice shall set forth the aggregate principal amount of Optional Notes as
to which the option is being exercised and the date and time, as reasonably
determined by the Initial Purchasers, when the Optional Notes are to be
delivered (such date and time being herein sometimes referred to as the
"ADDITIONAL CLOSING DATE"); PROVIDED, however, that the Additional Closing Date
shall not be earlier than the Closing Date or earlier than the second full
business day after the date on which the option shall have been exercised nor
later than the eighth full business day after the date on which the option shall
have been exercised (unless such date and time are postponed in accordance with
the provisions of Section 9(b) hereof). Certificates evidencing the Optional
Notes shall be in such denominations and registered in such names as the Initial
Purchasers request at least three business days prior to the Additional Closing
Date.
(e) Payment for the Optional Notes shall be made by certified or
official bank check or checks, in New York Clearing House or similar next day
funds, payable to the order of the Company at the offices of Covad
Communications Group, Inc., 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 or such
other location as may be mutually acceptable, upon delivery of the Optional
Notes to the Initial Purchasers.
(f) On the Additional Closing Date, the Optional Notes sold by the
Initial Purchasers will be represented by one or more Notes in definitive global
form, registered in the name of Cede & Co., as nominee of DTC, having an
aggregate principal amount corresponding to the aggregate principal amount of
the Optional Notes (collectively, the "GLOBAL OPTIONAL NOTES" and, together with
the "GLOBAL FIRM NOTES", the "GLOBAL NOTES"). The Global Optional 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
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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 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
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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".
(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
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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) None of the Company, its affiliates (as defined in Rule 501(b) of
the Securities Act) under its Control (as defined below) or any person acting on
their behalf (other than the Initial Purchasers and their respective affiliates)
will solicit any offer to buy or offer or sell the Securities by means of any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act. "CONTROL"
means, with respect to a person, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
person, whether through the ability to exercise voting power, by contract or
otherwise.
(o) None of the Company, its affiliates (as defined in Rule 501(b) of
the Securities Act) under its Control or any person acting on their behalf will
offer, sell or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) of the Company in a manner that
would require the registration of the Securities under the Securities Act.
(p) During the period from the Closing Date to two years after the
Closing Date, the Company and its Subsidiaries will not, and will not permit any
of their "affiliates" (as defined in Rule 144 under the Securities Act) under
its Control to, resell any of the Notes that have been reacquired by them,
except for Notes purchased by the Company and its Subsidiaries or any of their
affiliates and resold in a transaction registered under the Securities Act.
(q) 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.
(r) 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 (and, with respect to any material
transaction, any person with whom the Company shall have entered any written
agreement providing for (i) the consolidation or merger of the parties thereto
or (ii) the acquisition by the Company of such person or all or substantially
all of the assets of
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such Person) for any period subsequent to the periods covered by the financial
statements appearing in the Offering Memorandum.
(s) 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.
(t) 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.
(u) To comply with the agreements in the Indenture, the Registration
Rights Agreement and any other Operative Document.
(v) To cause each certificate for a Security to bear the legend
contained in the Indenture for the time period and upon the other terms stated
in the Indenture.
(w) During the period of 90 days from the date hereof, the Company
will not, without prior written consent of the Initial Purchasers, issue, sell,
offer or contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any of the Company's common stock (the
"COMMON STOCK") (or any securities convertible into, exercisable for or
exchangeable for Common Stock or any rights to acquire Common Stock) in any such
case for cash, other than (1) upon conversion of any Note in accordance with the
terms of the Indenture, (2) the Company's sale of Notes hereunder and (3) the
Company's issuance of Common Stock upon the exercise of stock options, warrants,
stock options, stock purchase rights and options to purchase Common Stock
existing on the date hereof. The foregoing restrictions shall not apply to any
issuance of (i) shares of Common Stock, stock purchase rights and options to
purchase Common Stock under the Company's stock option and stock purchase plans
and upon the exercise of warrants, in each case after the Closing Date, so long
as each recipient of any such shares, rights or options agrees to be bound by a
lock-up agreement for the remainder of the 90-day period, (ii) shares of capital
stock in connection with strategic relationships or acquisitions of businesses,
technologies or products complementary to those of the Company so long as (A)
the recipients of at least 80% of such stock agree to be bound by lock-up
agreements for the remainder of the 90-day period or (B) the aggregate number of
shares issued in any such transaction does not exceed 5% of the Company's
outstanding capital stock on a fully-diluted basis, (iii) shares of Common Stock
to Bear Xxxxxxx Corporate Lending, Inc. ("BSCL") to acquire loans made by BSCL
to BlueStar prior to the BlueStar merger and (iv) shares of Common Stock to SBC
Communications, Inc., on the terms described in the Offering Memorandum. The
Company shall not waive its rights pursuant to any lock-up agreement entered
into with a third party without the prior written consent of Bear, Xxxxxxx & Co.
Inc.
(x) The Company will obtain the undertaking of each of its executive
officers not to engage in any of the transactions described in paragraph (w)
above, on their own behalf, in excess of 5% of such executive officer's holdings
in the Common Stock or any securities convertible into or exchangeable or
exercisable (currently or in the future) for Common Stock or any rights to
acquire Common Stock as of the date hereof for a period of 90 days after the
date hereof without the prior written consent of the Initial Purchasers, except
shares sold on behalf of
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Xxxxx Xxxxxx by a trustee acting for his benefit pursuant to a trust
arrangement whereby he has no control over the ongoing investment decisions of
the trustee. The Company shall not waive its rights pursuant to any lock-up
agreement entered into with a third party without the prior written consent of
Bear, Xxxxxxx & Co. Inc.
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 its subsidiaries 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 Effect (as
defined below). 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, Covad Communications Investment Corp., a Delaware corporation,
Covad Acquisition Corporation, a Delaware corporation, Lightsaber Acquisition
Co. , a Delaware corporation, Covad Canada Communications, Inc. , a Delaware
corporation, Covad Europe Sarl, a Luxembourg societe a responsabilit e limitee
and Covad Communications International B.V.,
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a Netherlands besloten vennootschap met eperkte aansprakelijkheid. As of the
date hereof, (a) the Company has obtained CLEC regulatory approval in each of
the following States: Alabama, Arizona, California, Colorado, Connecticut,
Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New
Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, 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 two 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 June
30, 2000, after giving effect to the issuance and sale of the Firm 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) The shares of Common Stock of the Company issuable upon conversion
of the Notes have been duly authorized and, when issued in accordance with the
terms of the Notes, will be validly issued, fully paid and nonassessable and
will conform in all material respects to the description thereof contained in
the Offering Memorandum. No preemptive rights or other rights to subscribe for
or purchase securities exist with respect to the issuance and sale of the Notes
by the Company pursuant to this Agreement or the issuance of Common Stock on
conversion of the Notes. Other than as disclosed in or contemplated by the
Offering Memorandum, no security holder of the Company has any right which has
not been satisfied or waived to require the Company to register the sale of any
securities owned by such security holder under the Act in the Shelf Registration
Statement, except as contemplated by the Registration Rights Agreement (as
defined in the Offering Memorandum). The shares of Common Stock issuable on
conversion of the Notes at the initial conversion price have been reserved for
issuance and no further approval or authority of the stockholders or the Board
of Directors of the Company will be required for such issuance of such Common
Stock. The Offering Memorandum will contain a fair summary of the capital
structure of the Company.
(vi) 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.
(vii) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the other
Operative Documents and
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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.
(viii) 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.
(ix) 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 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.
(x) The 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 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
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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 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 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 material 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
11
(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 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 Effect 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 Effect, (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 investigation 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
12
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 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 Effect. 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
13
operated by them are owned, to the Company's knowledge, free and clear of and
without violating any right, claimed right, charge, encumbrance, pledge,
security interest, restriction or lien of any kind of any other person and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing except as would not reasonably be expected to have a Material
Adverse Effect. The use of the Intellectual Property in connection with the
business and operations of the Company and its subsidiaries does not infringe on
the rights of any person, except as could not reasonably be expected to have a
Material Adverse Effect.
(xix) None of the Company or any of its subsidiaries, and, 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
14
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 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 Effect.
(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
15
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 "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 Effect; (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
16
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 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) (A) Xxxxx & Young LLP, who will express their opinion with
respect to the Company financial statements (which term as
used in this Agreement includes the related notes thereto)
and supporting schedules to be included in the Offering
Memorandum with respect to the Company, are independent
public or certified public accountants within the meaning
of Regulation S-X under the Securities Act and the
Exchange Act.
(B) The Company 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.
(C) 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.
(xxxii) (A) Xxxxxx Xxxxxxxx LLP, who will express their opinion
with respect to the BlueStar financial statements
(which term as used in this Agreement includes the
related notes thereto) and supporting schedules to be
included in the Offering Memorandum with respect to
BlueStar Communications Group, Inc. ("BLUESTAR"), are
independent public or certified public accountants
within the meaning of Regulation S-X under the
Securities Act and the Exchange Act.
(B) The BlueStar financial statements, together with the
related notes, to be included in the Offering Memorandum
present fairly in all
17
material respects the consolidated financial position of
BlueStar 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.
(xxxiii)(A) PricewaterhouseCoopers LLP, who will express their opinion
with respect to the Laser Link financial statements (which
term as used in this Agreement includes the related notes
thereto) and supporting schedules to be included in the
Offering Memorandum with respect to Laser Xxxx.Xxx, Inc.
("XXXXX.XXXX"), are independent public or certified public
accountants within the meaning of Regulation S-X under the
Securities Act and the Exchange Act.
(B) The Xxxxx.Xxxx 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 Xxxxx.Xxxx 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.
(xxxiv) 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.
(xxxv) 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.
18
(xxxvi) 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.
(xxxvii) The statements (including the assumptions described therein)
to be included in the Offering Memorandum under the headings (a) "Business" and
"Covad Management's Discussion and Analysis of Financial Condition and Results
of Operations--Overview" and (b) "BlueStar Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview" each (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 and, to the Company's knowledge, BlueStar, respectively,
with a reasonable basis and reflect such person's good faith estimate of the
matters described therein.
(xxxviii) 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 any Initial Purchaser or any of its representatives in
connection with the offer and sale of any of the Notes, including but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(iv) Each Initial Purchaser 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,
19
and will solicit offers to buy the Notes only from Eligible Purchasers that the
Initial Purchaser reasonably believes are QIBs and (B) acknowledges and agrees
that that such Notes will not have been registered under the Securities Act and
may be resold, pledged or otherwise transferred only (x) to a person whom the
seller reasonably believes is a QIB in a transaction meeting the requirements of
Rule 144A, (II) in a transaction meeting the requirements of Rule 144 under the
Securities Act, (III) 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 (IV) in accordance with another exemption from the registration
requirements of the Securities Act (in the case of II, III or IV, 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) 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 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.
20
(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 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
21
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 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
22
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.
(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.
23
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any Material Adverse Effect, or any
development that is reasonably likely to result in a Material Adverse Effect, 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, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company or any of its subsidiaries on any
class of its capital stock, (iii) neither the Company nor any of its
subsidiaries shall have incurred any liabilities or obligations, direct or
contingent, 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.
(i) Prior to the printing of the Offering Memorandum and at the
Closing Date, the Initial Purchasers shall have received from each of (a) Ernst
& Young LLP, independent public accountants for the Company, (b) Xxxxxx Xxxxxxxx
LLP, independent public accountants for BlueStar, and (c) PricewaterhouseCoopers
LLP, independent public accountants for Xxxxx.Xxxx, and the Company, each 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
(a) the Company, (b) BlueStar and (c) Xxxxx.Xxxx, respectively, contained in the
Offering Memorandum.
24
(j) Xxxxxxx Xxxxxxx & Xxxxxxxx, in its capacity as counsel to the
Initial Purchasers, 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.
(m) The Company shall have received from each person who is a an
executive officer of the Company an agreement to the effect that such person
will not, directly or indirectly, offer, sell, offer or contract to sell, grant
any option for the sale of, or otherwise dispose of any shares of Common Stock
(or any securities convertible into, exercisable for or exchangeable for shares
of Common Stock or any rights to acquire Common Stock) in excess of 5% of such
executive officer's holdings in the Common Stock or any securities convertible
into or exchangeable or exercisable (currently or in the future) for Common
Stock or any rights to acquire Common Stock as of the date hereof for a period
of 90 days after the date hereof without the prior written consent of the
Initial Purchasers, except as provided in Section 4(x).
(n) At the Closing Date, the Notes shall have been approved for
quotation in the PORTAL market.
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; DEFAULT BY AN INITIAL PURCHASER.
(a) 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 next-to-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.
(b) If one or more of the Initial Purchasers shall fail at Closing
Date or the Additional Closing Date to purchase the Firm Notes or Optional Notes
that it is obligated to purchase under this Agreement (the "DEFAULTED NOTES"),
the non-defaulting Initial Purchasers
25
may in their discretion, within five calendar days thereafter, make arrangements
to purchase all, but not less than all, of the Defaulted Notes upon the terms
herein set forth on a pro rata basis, based on the allotments set forth in
Schedule A and after deducting the amount not purchased by the defaulting
Initial Purchaser (or as otherwise mutually agreeable to each such Initial
Purchaser); if, however, any non-defaulting Initial Purchaser shall not have
completed such arrangements within such five calendar day period, then this
Agreement shall terminate without liability on the part of the non-defaulting
Initial Purchaser.
Nothing in this Section shall relieve any defaulting Initial Purchaser from its
liability, if any, to the Company or the non-defaulting Initial Purchasers for
damages occasioned by its default.
In the event of any such default which does not result in a termination of this
Agreement, either the non-defaulting Initial Purchasers or the Company shall
have the right to postpone the Closing Date for a period not exceeding seven
days in order to effect any required changes in the Offering Memorandum or in
any other documents or arrangements.
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.
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 Effect 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)
26
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 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., Xxxxxx Xxxxxxx & Co.
Incorporated, Credit Suisse First Boston Corporation Deutsche Bank Securities,
Inc. and Xxxxxxx, Xxxxx & Co., c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Corporate Finance Department, telecopy
number: (000) 000-0000, with a copy, which shall not constitute notice, to
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 Xxxxxx Xxxxx,
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.
27
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 law 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]
28
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: /s/ Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
Title: V.P. of Finance,
Treasurer and Controller
[Signatures continue on next page]
Accepted and agreed to as of
the date first above written:
BEAR, XXXXXXX & CO. INC.
XXXXXX XXXXXXX & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
DEUTSCHE BANK SECURITIES, INC.
XXXXXXX, XXXXX & CO.
By: BEAR, XXXXXXX & CO. INC.
By: /s/ Xxxx Xxxxxxxxx
--------------------
Name: Xxxx Xxxxxxxxx
Title:
29
Schedule I
AGGREGATE PRINCIPAL
AMOUNT OF NOTES TO
INITIAL PURCHASERS BE PURCHASED
Bear, Xxxxxxx & Co. Inc............................................$250,000,000
Xxxxxx Xxxxxxx & Co. Incorporated..................................$150,000,000
Credit Suisse First Boston Corporation............................. $33,334,000
Deutsche Bank Securities, Inc...................................... $33,333,000
Xxxxxxx, Xxxxx & Co................................................$333,333,000
------------
Total: $500,000,000
============
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. To such counsel's knowledge, All of the outstanding shares of capital
stock of the Company issued since January 21, 2000 have been 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. The shares of Common Stock issuable upon conversion of the Notes have
been duly authorized by the Company and, when issued and delivered upon such
conversion in accordance with the terms and provisions of the Notes and the
Indenture (assuming payment for and delivery of the Notes in accordance with the
Purchase Agreement), will be validly issued, fully paid and nonassessable, and
to the knowledge of such counsel, no holder of currently outstanding shares of
the Common Stock has any preemptive or other similar rights to subscribe for or
purchase any shares of Common Stock of the Company (or any shares of capital
stock exchangeable into or convertible for Common Stock).
5. To such counsel's knowledge, except as disclosed in or contemplated by
the Offering Memorandum, no holders of securities of the Company have rights
which have not been satisfied or waived to the registration of shares of Common
Stock or other securities of the Company because of the filing of the Shelf
Registration Statement by the Company or the offerings contemplated thereby.
6. When the Notes are issued and delivered pursuant to the Purchase
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.
7. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Purchase 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.
8. The Purchase 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.
9. 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.
10. 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 the Purchase 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 the Purchase 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.
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 the Purchase
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 the Purchase 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 expressed), complies as to form with the
requirements of Rule 144A(d)(4) under the Securities Act.
13. Prior to the effectiveness of 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
the Purchase Agreement and the other Operative Documents or (B) the issuance and
sale of the Securities 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 requires consent
or waiver under, or results 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 the Purchase 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 on the Company and its subsidiaries
taken as a whole 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 the Purchase Agreement, the Operative Documents or
the issuance and sale of the Securities, 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 the Purchase 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 the
Purchase 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.
17. None of the execution, delivery and performance of the Purchase
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, 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,
pending or threatened in writing or 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 Convertible Notes", "Description of Capital Stock", "Description
of Certain Indebtedness", "Notice to Investors", "Plan of Distribution" and
"Certain United States Federal Income and Estate Tax Consequences", 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,
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, statistical and industry data, included therein, as to which such
counsel need express no opinion).
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 modified on unfavorable terms", "Risk Factors--Out
intellectual property protection may be inadequate to protect our proprietary
rights, and we may be subject to infringement claims", "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",
"Business--Government Regulation" and "Business--Intellectual Property", to the
extent such statements constitute summaries of the Telecommunications Act of
1996 or rules and regulations of the FCC or any of the State Telecommunications
Agencies or laws related to intellectual property rights, 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, 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: Alabama, Arizona, California,
Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio,
Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota,
Tennessee, 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 two additional States where such applications, as of the date hereof, are
pending approval.
8. The shares of Common Stock issuable upon conversion of the Notes have
been duly authorized by the Company and, when issued and delivered upon such
conversion in accordance with the terms and provisions of the Notes and the
Indenture (assuming payment for and delivery of the Notes in accordance with the
Purchase Agreement), will be validly issued, fully paid and nonassessable, and
to the knowledge of such counsel, no holder of currently outstanding shares of
the Common Stock has any preemptive or other similar rights to subscribe for or
purchase any shares of Common Stock of the Company (or any shares of capital
stock exchangeable into or convertible for Common Stock).
9. To such counsel's knowledge, except as disclosed in or specifically
contemplated by the Offering Memorandum, no holders of securities of the Company
have rights which have not been satisfied or waived to the registration of
shares of Common Stock or other securities of
the Company because of the filing of the Shelf Registration Statement by the
Company or the respective offerings contemplated thereby.
