EXHIBIT 10.3
EXECUTION COPY
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PUT/CALL OPTION AGREEMENT
between
COVAD COMMUNICATIONS GROUP, INC.
and
BEAR XXXXXXX CORPORATE LENDING INC.
Dated as of June 15, 2000
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TABLE OF CONTENTS
Page
ARTICLE IDEFINITIONS........................................................-1-
SECTION 1.1 CERTAIN DEFINED TERMS.......................................-1-
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS...............................-6-
ARTICLE IIPUT OPTION.........................................................-6-
SECTION 2.1 PURCHASE OBLIGATION.........................................-6-
SECTION 2.2 ASSIGNMENT..................................................-6-
SECTION 2.3 RESALE TRUE-UP..............................................-7-
SECTION 2.4 INTERIM TRUE-UP.............................................-7-
SECTION 2.5 RESERVATION OF RESALE RIGHTS................................-7-
SECTION 2.6 DELAY FEE...................................................-7-
ARTICLE IIICALL OPTION.......................................................-8-
SECTION 3.1 CALL RIGHT..................................................-8-
ARTICLE IVREGISTRATION RIGHTS................................................-8-
SECTION 4.1 DEMAND REGISTRATIONS........................................-8-
SECTION 4.2 PRESERVATION OF RIGHTS......................................-9-
SECTION 4.3 REGISTRATION PROCEDURES.....................................-9-
SECTION 4.4 SELLING FEES...............................................-12-
SECTION 4.5 REGISTRATION EXPENSES......................................-13-
SECTION 4.6 LIMITATIONS ON SALE OR DISTRIBUTION OF OTHER SECURITIES....-13-
SECTION 4.7 COMPANY RIGHT TO POSTPONE RESALE...........................-14-
SECTION 4.8 NO REQUIRED SALE...........................................-14-
SECTION 4.9 INDEMNIFICATION............................................-14-
SECTION 4.10 CONTRIBUTION..............................................-16-
ARTICLE VCONDITIONS OF EFFECTIVENESS........................................-18-
SECTION 5.1 CONDITIONS OF EFFECTIVENESS................................-18-
ARTICLE VIREPRESENTATIONS AND WARRANTIES....................................-19-
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............-19-
ARTICLE VIICOVENANTS........................................................-22-
SECTION 7.1 COVENANTS OF THE COMPANY...................................-22-
SECTION 7.2 COVENANTS OF BEAR XXXXXXX..................................-23-
ARTICLE VIII MISCELLANEOUS..................................................-24-
SECTION 8.1 TAXES......................................................-24-
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SECTION 8.2 ABSOLUTE NATURE OF OBLIGATION..............................-24-
SECTION 8.3 RESALE INDEMNITY...........................................-25-
SECTION 8.4 WAIVER OF DEFENSES.........................................-25-
SECTION 8.5 REINSTATEMENT..............................................-26-
SECTION 8.6 PLACE OF CLOSING...........................................-26-
SECTION 8.7 NOTICES....................................................-26-
SECTION 8.8 REMEDIES...................................................-27-
SECTION 8.9 NO RIGHT TO PURCHASE.......................................-27-
SECTION 8.10 NO WAIVER; CUMULATIVE REMEDIES............................-27-
SECTION 8.11 COUNTERPARTS..............................................-27-
SECTION 8.12 SEVERABILITY..............................................-27-
SECTION 8.13 AMENDMENTS IN WRITING; NO WAIVER..........................-27-
SECTION 8.14 INTEGRATION...............................................-27-
SECTION 8.15 GOVERNING LAW.............................................-28-
SECTION 8.16 SUBMISSION TO JURISDICTION; WAIVERS.......................-28-
SECTION 8.17 ACKNOWLEDGMENTS............................................-28-
SECTION 8.18 WAIVERS OF JURY TRIAL.....................................-29-
SECTION 8.19 ASSIGNMENT................................................-29-
SECTION 8.20 PAYMENT OF CERTAIN FEES AND EXPENSES......................-29-
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EXHIBIT A - Form of Assignment and Acceptance
EXHIBIT B - Form of Opinion of Irell & Xxxxxxx
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PUT/CALL OPTION AGREEMENT
PUT/CALL OPTION AGREEMENT, dated as of June 15, 2000
(this "AGREEMENT") between Covad Communications Group, Inc., a Delaware
Corporation (the "COMPANY") and Bear Xxxxxxx Corporate Lending Inc. ("BEAR
XXXXXXX").
W I T N E S S E T H:
WHEREAS, the Company has entered into that certain Agreement
and Plan of Merger and Reorganization, dated as of June 15, 2000 (the "Merger
Agreement"), among the Company, Covad Acquisition Corp., a Delaware Corporation,
and BlueStar Communications Group, Inc., a Delaware Corporation ("BLUESTAR");
WHEREAS, pursuant to the Merger Agreement, the Company has
agreed to make or cause to be made certain loans to BlueStar until the earlier
of the Effective Time (as defined in the Merger Agreement) and termination of
the Merger Agreement;
WHEREAS, BlueStar, as borrower, and Bear Xxxxxxx, as lender,
have entered into that certain Demand Loan Agreement of even date herewith (the
"LOAN AGREEMENT"); and
WHEREAS, Bear Xxxxxxx is willing to enter into the Loan
Agreement only if the Company agrees to purchase the Loans thereunder from Bear
Xxxxxxx upon the terms and conditions hereinafter set forth;
NOW THEREFORE, to induce Bear Xxxxxxx to enter into the Loan
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby covenants and
agrees with Bear Xxxxxxx as follows:
ARTICLE I
DEFINITIONS
SECTION I.1 CERTAIN DEFINED TERMS. As used in this
Agreement, the following terms shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any other
Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control
with, such specified Person, for so long as such Person remains so
associated to the specified Person.
"ALL-IN LOAN VALUE", on any date, means an amount equal to
the aggregate outstanding principal balance of the Loans, plus accrued
and unpaid interest thereon from
the closing of the Loans through and including the date or dates Bear
Xxxxxxx receives cash in complete satisfaction of the Put Option or
the Call Option, as the case may be (including, without limitation,
interest accruing at the applicable rate provided in the Loan
Agreement, including any applicable default margin, after the maturity
of the Loans and after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding,
relating to BlueStar, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), any other
outstanding amounts payable under the Loan Agreement, together with
any accrued and unpaid fees and expenses through and including the
date or dates Bear Xxxxxxx receives cash in complete satisfaction of
the Put Option or the Call Option, as the case may be, which fees and
expenses, under the Loan Agreement, are payable to Bear Xxxxxxx, and
any accrued and unpaid fees and expenses (including, without
limitation, Selling Fees and any Delay Fee) payable to Bear Xxxxxxx
under this Agreement.
"BLACKOUT PERIOD" has the meaning set forth in Section 4.7
hereof.
"BUSINESS DAY" means any day that is not a Saturday, a
Sunday or other day on which banks are required or authorized by law
to be closed in The City of New York.
"CHANGE OF CONTROL," with respect to BlueStar, means the
occurrence of any of the following: (i) the consummation of the merger
pursuant to the Merger Agreement (ii) the sale, lease, transfer,
conveyance or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of BlueStar
and its subsidiaries, taken as a whole, to any Person or group (as
such term is used in Section 13(d)(3) and 14(d)(2) of the Exchange
Act), (iii) any Person or group (as defined above) is or becomes the
beneficial owner, directly or indirectly, of more than 50% of the
total voting stock of BlueStar, including by way of merger,
consolidation or otherwise or (iv) the first day on which a majority
of the members of the Board of Directors of BlueStar are not
Continuing Directors.
"CLAIMS" has the meaning set forth in Section 4.9(a).
"CLOSING DATE" means the date on which the conditions
precedent set forth in Section 5.1 shall have been satisfied.
"COMMENCEMENT DATE" means the earliest to occur of the
following dates:
(i) the date 180 days following the Closing Date,
(ii) the date on which a Change of Control occurs with
respect to BlueStar,
(iii) the date of commencement by or against BlueStar
or any of its subsidiaries of any bankruptcy proceedings,
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(iv) the date on which the Merger Agreement is (x)
terminated or (y) amended without the prior written consent
of Bear Xxxxxxx,
(v) such day as the bid price per Company Share is at
or below per share at the close of the afternoon session
for the immediately preceding three (3) Nasdaq trading days,
as determined by Bear Xxxxxxx, and
(vi) the date on which (x) the holder or holders of
any indebtedness of BlueStar for borrowed money (or a
trustee or agent on behalf of such holder or holders) causes
or has the right to cause such indebtedness for borrowed
money to be declared to be due and payable prior to its
stated maturity, (y) BlueStar fails to make any payment in
respect of any indebtedness for borrowed money when due
(whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) or (z) BlueStar fails to
perform or observe any other condition or covenant, or any
other event shall occur or condition exist, under any
agreement or instrument relating to any such indebtedness
for borrowed money, that results in an event of default
under such indebtedness.
"COMPANY SHARE VALUE" means, for each Company Share, an
amount equal to 90% of the average bid price per Company Share at the
close of the afternoon session for the two Nasdaq trading days
immediately preceding the related Exercise Date, as determined by Bear
Xxxxxxx.
"COMPANY SHARES" means shares of the common stock, par value
$0.001 per share, of the Company.
"CONTINUING DIRECTORS" means, with respect to BlueStar, as
of any date of determination, any member of the Board of Directors of
BlueStar who (i) was a member of such Board of Directors on the date
of this Agreement or (ii) was nominated for election to such Board of
Directors with the affirmative vote of a majority of the Continuing
Directors who were members of such Board at the time of such
nomination or election or who was elected or appointed in the ordinary
course by Continuing Directors or other directors so elected or
appointed.
"DELAY FEE" has the meaning set forth in Section 2.5 hereof.
"EFFECTIVE PERIOD" has the meaning set forth in Section
4.3(b).
"EXCHANGE ACT" means the U.S. Securities Exchange Act of
1934, as amended.
"EXERCISE DATE" means the date on which Bear Xxxxxxx
exercises the Put Option or the Company exercises the Call Option.
"GOVERNMENTAL AUTHORITY" means any governmental, regulatory
or administrative agency, authority, instrumentality or commission or
any court, tribunal or judicial or
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arbitral body of the United States (federal, state or local) or any
other country or the European Community or any other supranational
organization or body.
"IN CASH" means in U.S. dollars.
"INDENTURES" means the Indenture dated as of March 11, 1998
between the Company and The Bank of New York, the Indenture dated as
of February 18, 1999 between the Company and The Bank of New York and
the Indenture dated as of January 28, 2000 between the Company and
United States Trust Company of New York.
"LOANS" has the meaning set forth in the Loan Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(a) the business, operations, property, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries taken as a
whole or (b) the validity or enforceability of this Agreement or the
rights or remedies of Bear Xxxxxxx hereunder.
"OTHER TAXES" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, this Agreement.
"PERSON" means any individual, corporation, limited
liability company, limited or general partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivisions thereof or any
group comprised of two or more of the foregoing.
"PURCHASE PRICE" has the meaning set forth in Section 2.1.
"REGISTRABLE SECURITIES" means the Company Shares (including
Company Shares issued and delivered pursuant to Section 2.3 or 2.4 of
this Agreement) whether beneficially owned by Bear Xxxxxxx as of the
Closing Date or thereafter acquired by Bear Xxxxxxx or an Affiliate of
Bear Xxxxxxx. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities
shall have been declared effective under the Securities Act and such
securities shall have been disposed of in accordance with such
registration statement, (ii) such securities shall have been sold
(other than in a privately-negotiated sale) pursuant to Rule 144 (or
any successor provision) under the Securities Act, (iii) such
securities are eligible for sale pursuant to Rule 144 without being
subject to applicable volume limitations thereunder or (iv) such
securities shall have ceased to be outstanding.
"REGISTRATION PERIOD" means the period from the Closing Date
and ending on the date when, after the Settlement Date, neither Bear
Xxxxxxx nor an Affiliate of Bear Xxxxxxx
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holds Registrable Securities or otherwise is entitled to receive
Company Shares pursuant to this Agreement.
"REGISTRATION RIGHTS EXPENSES" means any and all fees and
expenses incident to the Company's performance of or compliance with
its obligations under Article IV of this Agreement, including, without
limitation: (i) registration, filing and other fees of the SEC or
relating to any U.S. securities exchange or market registration or
qualification, (ii) fees and expenses of compliance with U.S. state
and local securities or "blue sky" laws and in connection with the
preparation of a "blue sky" survey, including reasonable fees and
expenses of "blue sky" counsel, (iii) printing and copying expenses,
(iv) messenger and delivery expenses, (v) expenses incurred in
connection with any road show, (vi) fees and disbursements of counsel
for the Company, (vii) with respect to each registration, the
reasonable fees and disbursements of one counsel for Bear Xxxxxxx and
(viii) fees and disbursements of the Company's independent public
accountants (including the expenses relating to any audit or limited
review and "comfort" letters).
"REQUIREMENT OF LAW" means, as to any Person, the
Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of
its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer, the
president or chief financial officer of the Company, or any other
officer having substantially the same authority and responsibility.
"SEC" means the U.S. Securities and Exchange Commission.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended.
"SELLING FEE" has the meaning set forth in the Section 4.4
hereof.
"SETTLEMENT DATE" means the first practicable day following
the Exercise Date, but no later than the second day following the
Exercise Date, that is a business day for The Depository Trust
Company.
"SHARE CAPITAL" means any and all shares, interest,
participation or other equity equivalents (however designated and
whether voting or non-voting) and any and all rights (other than any
evidence of indebtedness), warrants or options exchangeable for or
convertible into such shares, interest, participation or other equity
equivalents.
"TRANSFER" means, as to any security, directly or
indirectly, to sell, transfer, assign, pledge, encumber, hypothecate
or similarly dispose of, either voluntarily or involuntarily, or to
enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, assignment, pledge, encumbrance,
hypothecation or similar disposition,
5
of such security beneficially owned by a Person or any interest in any
such security beneficially owned by a Person.
"VOTING SHARES" means shares of the class or classes of Share
Capital pursuant to which the holders thereof have the general voting
power to vote at meetings of Shareholders (irrespective of whether or
not at the time shares of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
SECTION I.2 OTHER DEFINITIONAL PROVISIONS. (a) The words
"HEREOF," "HEREIN" and "HEREUNDER" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Section, Annex and Schedule references
are to this Agreement unless otherwise specified; and
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
ARTICLE II
PUT OPTION
SECTION II.1 PURCHASE OBLIGATION. If all or any portion of the
Loans is outstanding as of the Commencement Date and for so long as the Loans
remain outstanding, Bear Xxxxxxx shall have the right, at any time after the
Commencement Date, to sell and assign all of such Loans to the Company ("PUT
OPTION"), in the manner and for the purchase price set forth in this Article II.
On the Exercise Date for the Put Option, Bear Xxxxxxx shall provide written
notice (which may be notice by telecopy with an oral confirmation of delivery)
to the Company stating that the Put Option is being exercised pursuant to this
Article II. On the Settlement Date, the Company shall purchase the Loans from
the Company in cash in an amount equal to the All-In Loan Value or, at the
Company's election, in Company Shares with an aggregate Company Share Value then
equal to the All-In Loan Value (such cash amount or Company Share amount
sometimes hereinafter referred to as the "PURCHASE PRICE"). Payment of such
Purchase Price shall be made without reduction or setoff of any kind whatsoever.
Any such Purchase Price paid in cash shall be paid to Bear Xxxxxxx in federal
funds or other immediately available funds.
SECTION II.2 ASSIGNMENT. Promptly upon receipt of the Purchase
Price, Bear Xxxxxxx shall deliver to the Company an assignment of its rights
with respect to the Loans and the Loan Documents in substantially the form of
ANNEX A attached, with blanks filled in appropriately (each, an "ASSIGNMENT").
The Company and Bear Xxxxxxx shall cooperate in taking any other action
reasonably requested by either of them (with the Company to bear the reasonable
out-of-pocket costs incurred by either party in taking such action) to perfect
or further evidence the assignment of the Loans to the Company including,
without limitation, in the event of a bankruptcy with respect to BlueStar, any
required registration of transfers of claims in such bankruptcy. In the event
that the purchase of the Loans under this Article II is enjoined, excused
6
or stayed in connection with any bankruptcy case commenced by BlueStar, the
Company shall (to the extent not so enjoined, excused or stayed) nevertheless
pay the Purchase Price as required herein and shall have a participating
interest in the Loans until such time as the assignment of the Loans
contemplated herein shall be permitted. In such event, Bear Xxxxxxx will
promptly deliver to the Company any consideration it receives in respect of the
Loans after the Settlement Date, less any applicable fees and expenses incurred
by Bear Xxxxxxx, with all necessary endorsements.
SECTION II.3 RESALE TRUE-UP. Upon completion of each resale of
any Company Shares by Bear Xxxxxxx (but not more frequently than daily), Bear
Xxxxxxx shall furnish to the Company a statement setting forth the aggregate
proceeds received from all such resales and the applicable selling concessions,
transfer taxes and other fees and expenses. Bear Xxxxxxx further agrees to (i)
remit to the Company the excess of the aggregate proceeds received from the
resale of such Company Shares over the All-In Loan Value, after deducting from
such proceeds of sale any selling concessions, transfer taxes and other fees and
expenses and (ii) to the extent not sold by Bear Xxxxxxx to satisfy the All-In
Loan Value, return to the Company any remaining Company Shares. If the All-In
Loan Value exceeds the aggregate proceeds received by Bear Xxxxxxx from the
resale of all Company Shares, less applicable selling concessions, transfer
taxes and other fees and expenses, the Company shall, immediately upon
completion of the last such resale, pay such excess amount to Bear Xxxxxxx in
cash or, at the Company's option, in additional Company Shares. This procedure
shall be repeated until Bear Xxxxxxx realizes in cash the total All-In Loan
Value.
SECTION II.4 INTERIM TRUE-UP. In the event that the average
bid price per share of the Company's common stock at the close of the afternoon
session for any two consecutive Nasdaq trading days shall have decreased after
the Settlement Date such that the All-In Loan Value at that time exceeds the
product of (i) the number of Company Shares received by Bear Xxxxxxx on the
Settlement Date and (ii) that average bid price by at least $1 million, the
Company shall, immediately upon notice by Bear Xxxxxxx, pay such excess amount
to Bear Xxxxxxx in cash or, at the Company's option, in additional Company
Shares.
SECTION II.5 RESERVATION OF RESALE RIGHTS. Bear Xxxxxxx
reserves the absolute right to sell, in its sole discretion, any or all of the
Company Shares in a transaction exempt from registration under the Securities
Act or pursuant to a registration statement and to effect such sale, in its sole
discretion, in any amount of Company Shares and at any time or from time to
time.
SECTION II.6 DELAY FEE. The Company shall pay to Bear Xxxxxxx
a Delay Fee ("DELAY FEE") of 2% of the All-In Loan Value, which shall accrue
from and after the date that the Company fails to deliver cash or Company Shares
in an amount then equal to the All-In-Loan Value when required pursuant to the
terms of this Agreement.
ARTICLE III
CALL OPTION
7
SECTION III.1 CALL RIGHT. The Company may, at any time and at
its sole option, give Bear Xxxxxxx written notice (which may be notice by
telecopy with an oral confirmation of delivery) of its intention to call the
Loans (the "CALL OPTION"). The date of such notice shall be deemed the Exercise
Date for such Call Option. On the Settlement Date, the Company shall purchase
the Loans from Bear Xxxxxxx for cash in an amount equal to the All-In Loan
Value, and Bear Xxxxxxx shall deliver the Assignments to the Company. Such cash
payment shall be paid to Bear Xxxxxxx in federal funds or other immediately
available funds.
ARTICLE IV
REGISTRATION RIGHTS
SECTION IV.1 DEMAND REGISTRATIONS. (a) At any time and from
time to time after the Closing Date and during the Registration Period, Bear
Xxxxxxx shall have the right on one occasion to require the Company to file a
"shelf" registration statement on any appropriate form pursuant to Rule 415 (or
similar rule that may be adopted by the SEC) under the Securities Act covering
all or any part of its Registrable Securities, within three (3) Business Days of
written request (which may be notice by telecopy with an oral confirmation of
delivery) by Bear Xxxxxxx and in any event no later than the date that is three
months after the Closing Date (each such date, a "FILING DATE"), to permit
resales of Registrable Securities as contemplated by this Agreement. A request
pursuant to this Section 4.1(a) is referred to herein as a "DEMAND REGISTRATION
REQUEST" and a registration so requested is referred to herein as a "DEMAND
REGISTRATION."
(b) The Company shall include in a Demand Registration
requested under Section 4.1(a) any or all of the Registrable Securities of Bear
Xxxxxxx as requested by Bear Xxxxxxx.
(c) The Company shall, as expeditiously as practicable
following a Demand Registration Request, use its best efforts to (i) effect the
registration under the Securities Act (including by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested by
Bear Xxxxxxx) of the Registrable Securities which the Company has been so
requested to register by Bear Xxxxxxx, for distribution, in accordance with such
intended method of distribution, (ii) to cause such registration to become
effective no later than the Exercise Date of the Put Option, (iii) if requested
by Bear Xxxxxxx, to obtain acceleration of the effective date of the
registration statement relating to such registration and (iv) to keep any Demand
Registration required by this Section 4.1 continuously effective, supplemented
and amended as required by and subject to the provisions of Section 4.3 hereof
to the extent necessary to ensure that it is available for sales of Registrable
Securities by Bear Xxxxxxx and to ensure that it conforms with the requirements
of this Agreement, the Securities Act and the policies, rules and regulations of
the SEC as announced from time to time during the Effective Period.
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SECTION IV.2 PRESERVATION OF RIGHTS. From the Closing Date and
for so long as Bear Xxxxxxx or an Affiliate of Bear Xxxxxxx holds Registrable
Securities, the Company shall not effect any registration under the Securities
Act of Voting Shares or otherwise grant any rights to third parties which
contravene the rights of Bear Xxxxxxx granted hereunder.
SECTION IV.3 REGISTRATION PROCEDURES. If and whenever the
Company is required by the provisions of this Agreement to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in this Agreement, the Company shall, as expeditiously as practicable:
(a) prepare and file with the SEC a registration statement on
an appropriate registration form of the SEC for the disposition of such
Registrable Securities in accordance with the intended method of disposition
thereof, which form shall be selected by the Company and shall, in the case of a
shelf registration, be available for the sale of the Registrable Securities by
Bear Xxxxxxx and such registration statement shall comply as to form in all
material respects with the requirements of the applicable form and include all
financial statements required by the SEC to be filed therewith during the
Effective Period, and the Company shall use its best efforts to cause such
registration statement to become effective (PROVIDED, HOWEVER, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, or comparable statements under U.S. state securities or "blue sky"
laws, the Company will, upon request by Bear Xxxxxxx, furnish to one counsel for
Bear Xxxxxxx copies of all such documents proposed to be filed (including all
exhibits thereto), which documents will be subject to the reasonable review and
reasonable comment of such counsel, and the Company shall not file any
registration statement or amendment thereto or any prospectus or supplement
thereto with respect to a Demand Registration to which Bear Xxxxxxx shall
reasonably object in writing;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Registrable
Securities covered by such registration statement in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement in each case for a period until the earlier of (i)
such time as all such Registrable Securities have been disposed of in accordance
with the intended methods of disposition set forth in such registration
statement by Bear Xxxxxxx and (ii) the expiration of 10 Nasdaq trading days from
the Settlement Date; PROVIDED that the period described in this clause (ii)
shall be extended (x) to the date two Nasdaq trading days after Bear Xxxxxxx
last receives any additional Company Shares pursuant to Section 2.3 of this
Agreement and (y) by the number of days that resales in the Company Shares
(including resales contemplated by Section 2.3 of this Agreement) are prohibited
by the Company pursuant to Section 4.7 of this Agreement (such period, the
"EFFECTIVE PERIOD").
(c) furnish, without charge, to Bear Xxxxxxx such number of
copies of such registration statement, each amendment and supplement thereto (in
each case including all exhibits), and the prospectus included in such
registration statement (including each preliminary
9
prospectus and summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such registration
statement, and such other documents, as Bear Xxxxxxx may reasonably request in
order to facilitate the disposition of the Registrable Securities as
contemplated by such registration statement;
(d) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions within the United States as Bear Xxxxxxx
shall reasonably request, to the extent such registration or qualification is
required by law, and do any and all other acts and things that may be necessary
or advisable to enable Bear Xxxxxxx to consummate the disposition of the
Registrable Securities in such jurisdictions, except that in no event shall the
Company be required to qualify generally to do business as a foreign corporation
in any jurisdiction where it would not, but for the requirements of this
paragraph (d), be required to be so qualified, to subject itself to taxation in
any such jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) enter into such customary agreements (including an agreement which
may include customary indemnification provisions in favor of underwriters and
other persons in addition to, or in substitution for, the provisions of Section
4.9 hereof) and take such other actions as Bear Xxxxxxx shall reasonably request
in order to expedite or facilitate the disposition of such Registrable
Securities;
(f) obtain (i) any opinion of counsel for the Company, dated the
Settlement Date, in customary form and in form and scope reasonably satisfactory
to Bear Xxxxxxx and its counsel and (ii) any "comfort" letter signed by the
independent public accountants in customary form and covering matters of the
type customarily covered by "comfort" letters;
(g) notify Bear Xxxxxxx as soon as practicable: (i) when the
registration statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed and, with respect to the registration
statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for amendments or
supplements to the registration statement or the prospectus related thereto or
for additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the U.S. state securities or "blue sky"
laws or the initiation of any proceeding for such purpose; and (v) of the
existence of any fact of which the Company becomes aware that results in the
registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and, if the notification
relates to an event described in clause (v), the Company shall, as soon as
reasonably practicable, prepare and furnish to Bear Xxxxxxx a reasonable number
of copies of a prospectus as supplemented or amended so that, as thereafter
delivered to Bear Xxxxxxx the prospectus shall not include an untrue statement
of a material fact or omit to state a material fact
10
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;
(h) use its best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earning statement (which need
not be audited) covering the period of at least 12 consecutive months beginning
with the first day of the Company's first calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and regulations
thereunder;
(i) use its best efforts to (i) cause all such Registrable Securities
covered by such registration statement to be listed on each U.S. securities
exchange or market or quotation system on which similar securities issued by the
Company are then listed or quoted, and provide a transfer agent and registrar
for such Registrable Securities not later than the effective date of such
registration statement; (ii) comply with all applicable laws and the
requirements of the relevant securities exchange or market or quotation system
in respect of such listing and (iii) consult with Bear Xxxxxxx in respect of all
aspects of such listing;
(j) deliver, as soon as practicable, to Bear Xxxxxxx and one counsel
for Bear Xxxxxxx copies of all correspondence between the SEC and the Company,
its counsel or auditors and any memoranda relating to discussions with the SEC
or its staff with respect to the registration statement, other than those
portions of any such memoranda that contain information subject to
attorney-client privilege with respect to the Company or other shareholders,
and, upon receipt of such confidentiality agreements as the Company may
reasonably request, make reasonably available for inspection by Bear Xxxxxxx and
by any attorney, accountant or other agent retained by Bear Xxxxxxx, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company's officers, directors
and employees to supply all information reasonably requested by Bear Xxxxxxx,
any such attorney, accountant or agent in connection with such registration
statement;
(k) use reasonable efforts to prevent the issuance of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment;
(l) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to Bear Xxxxxxx (taking into account the
needs of the Company's businesses and the requirements of the resale process) in
the resale of Registrable Securities as contemplated in this Agreement.
(m) promptly prior to the filing of any document that is to be
incorporated by reference into the registration statement or the prospectus
(after the initial filing of such registration statement), provide copies of
such document to one counsel for Bear Xxxxxxx and make the Company's
representatives reasonably available for discussion of such document and
11
make such changes in such document concerning Bear Xxxxxxx prior to the filing
thereof as such counsel for Bear Xxxxxxx may reasonably request;
(n) furnish to Bear Xxxxxxx, without charge, at least one signed copy
of the registration statement and each post-effective amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference);
(o) cooperate with Bear Xxxxxxx and each agent participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.;
(p) cooperate with Bear Xxxxxxx to facilitate the timely preparation
and delivery of certificates not bearing any restrictive legends representing
the Registrable Securities to be sold, and cause such Registrable Securities to
be issued in such denominations and registered in such names in accordance with
the instructions of Bear Xxxxxxx at least two Business Days prior to any sale of
Registrable Securities; and
(q) take all such other reasonable actions as are necessary or
advisable or reasonably requested by Bear Xxxxxxx in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require as a condition precedent to the Company's obligations
under this Section 4.3 that Bear Xxxxxxx furnish the Company such information
regarding Bear Xxxxxxx and the distribution of such securities as the Company
may from time to time reasonably request in writing and as shall be required by
law, by the SEC or by any securities exchange or market or quotation system on
which the Registrable Securities are to be listed or quoted in connection
therewith; PROVIDED, that such information shall be used only in connection with
such registration and the fulfillment of the Company's obligations under this
Agreement. If any such registration statement or comparable statement under
"blue sky" laws refers to Bear Xxxxxxx by name or otherwise as Bear Xxxxxxx,
then Bear Xxxxxxx shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to Bear Xxxxxxx and the Company, to
the effect that the holding by Bear Xxxxxxx of such securities is not to be
construed as a recommendation by Bear Xxxxxxx of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
Bear Xxxxxxx will assist in meeting any future financial requirements of the
Company or (ii) in the event that such reference to Bear Xxxxxxx by name or
otherwise is not in the judgment of the Company, as advised by counsel, required
by the Securities Act or any similar federal statute or any state "blue sky" or
securities law then in force, the deletion of the reference to Bear Xxxxxxx.
SECTION IV.4 SELLING FEES. All Purchase Price amounts due that are
satisfied in Company Shares, whether on the Settlement Date or on any subsequent
date on which the Company pays Bear Xxxxxxx in additional Company Shares
pursuant Section 2.3 hereof, shall be subject to a selling fee (a "SELLING
FEE"), payable by the Company to Bear Xxxxxxx in cash or
12
Company Shares on the Settlement Date or on such subsequent date, as the case
may be, as follows:
(a) If a registration statement is effective in respect of
such Company Shares at the time of the their delivery to Bear Xxxxxxx,
and such registration statement is useable for its intended purpose,
the Selling Fee shall be an amount equal to 2% of the All-In Loan
Value.
(b) If a registration statement is not effective in respect
of such Company Shares at the time of their delivery to Bear Xxxxxxx,
or if a registration statement is effective but fails to be useable
for its intended purpose (including, without limitation, due to any
Blackout Period), the Selling Fee shall be an amount equal to 5% of
the All-In Loan Value; provided, however, that such Selling Fee shall
increase at the rate of .25%, payable weekly in cash or Company
Shares, for each additional week or portion thereof that a
registration statement is not effective or fails to be useable for its
intended purpose (including, without limitation, due to any Blackout
Period); PROVIDED, FURTHER, that the Selling Fee under this subsection
(b) shall not exceed 9% of the All-In Loan Value. If the Company
delivers an effective registration statement after the date Company
Shares are delivered to Bear Xxxxxxx and such registration statement
is useable for its intended purpose at the time such registration
statement becomes effective, the Selling Fee shall be reduced by an
amount equal to 1% of the All-In Loan Value in respect of shares sold
under such registration statement.
SECTION IV.5 REGISTRATION EXPENSES. To the fullest extent permitted by
applicable laws, the Company will pay (or promptly reimburse the payment of) all
Registration Expenses incurred in connection with each registration statement
filed pursuant to this Agreement and the fulfillment of the Company's
obligations under this Agreement.
SECTION IV.6 LIMITATIONS ON SALE OR DISTRIBUTION OF OTHER SECURITIES.
(a) To the extent reasonably requested in writing by Bear Xxxxxxx, the Company
hereby agrees (except that the Company may effect any sale or distribution of
any such securities pursuant to a registration on Form S-8 or any successor or
similar form that is then in effect or upon the conversion, exchange or exercise
of any then outstanding options, warrants, rights or other securities
convertible into or exchangeable or exercisable for Registrable Securities or on
Form S-4 or any successor or similar form that is then in effect for a merger,
acquisition or other transaction and related distributions of securities) to use
its reasonable best efforts to cause each holder, directly or indirectly, of at
least 1% of any Share Capital of the Company purchased from the Company at any
time other than in a public offering to agree) not to Transfer, including,
without limitation, any sale pursuant to Rule 144 under the Securities Act, any
common stock of the Company (other than as part of such underwritten public
offering) during the time period reasonably requested by the Bear Xxxxxxx, not
to exceed 90 days from the effective date of the registration statement.
(b) The Company hereby agrees that, if it shall previously have
received a request for registration pursuant to Section 4.1 hereof or postponed
pursuant to Section 4.7
13
hereof, and if such previous registration shall not have
been withdrawn or abandoned, the Company shall not Transfer any common stock of
the Company (other than as part of such underwritten public offering, a
registration on Form S-8 or any successor or similar form that is then in effect
or upon the conversion, exchange or exercise of any then outstanding options,
warrants, rights or other securities convertible into or exchangeable or
exercisable for Registrable Securities or on Form S-4 or any successor or
similar form that is then in effect for a merger, acquisition or other
transaction and related distributions of securities) during the time period
reasonably requested by Bear Xxxxxxx.
SECTION IV.7 COMPANY RIGHT TO POSTPONE RESALE. The Company shall be
entitled to postpone for a reasonable period of time (but not exceeding 120
days) the resale of Registrable Securities under any effective registration
statement filed by it pursuant to this Agreement if the Company determines in
its good faith judgment, based upon the advice of external counsel, that
maintaining the effectiveness of the Registration Statement would require
premature disclosure of non-public material information that would reasonably be
likely to have a material adverse effect on the Company's material financing
plans or any planned material transaction involving the Company, PROVIDED THAT
the Company promptly gives Bear Xxxxxxx written notice of such prohibition (such
prohibitions, "BLACKOUT EVENTS", and the period during which any such Blackout
Event continues, a "BLACKOUT PERIOD").
SECTION IV.8 NO REQUIRED SALE. Nothing in this Agreement shall be
deemed to create an independent obligation on the part of Bear Xxxxxxx to sell
any Registrable Securities pursuant to any effective registration statement.
SECTION IV.9 INDEMNIFICATION. (a) In the event of any registration of
any securities of the Company under the Securities Act pursuant this Agreement,
the Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by all applicable laws, Bear Xxxxxxx, its directors, officers,
affiliates, employees, shareholders, members and general and limited partners
(and the directors, officers, affiliates, employees, shareholders, members and
general and limited partners thereof), each other Person who participates as an
underwriter in the offering or sale of such securities, each director, officer,
employee, shareholder, member or general and limited partner of such
underwriter, and each other Person, if any, who controls such seller or any such
underwriter within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act (the "INDEMNITEES"), against any and all losses, claims,
damages or liabilities, joint or several, actions or proceedings (whether
commenced or threatened) in respect thereof ("CLAIMS") and expenses (including
reasonable fees of counsel and any amounts paid in any settlement effected with
the Company's consent, which consent shall not be unreasonably withheld) to
which each such indemnified party may become subject under the Securities Act or
otherwise, insofar as such Claims or expenses arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement under which such securities were registered under the
Securities Act, together with the documents incorporated by reference therein or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary, final or summary prospectus or listing particulars
or
14
any amendment or supplement thereto, together with the documents incorporated by
reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, however, that the Company shall not be liable to
any such indemnified party in any such case to the extent such Claim or expense
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission of a material fact made in
such registration statement or amendment thereof or supplement thereto or in any
such prospectus or any preliminary, final or summary prospectus in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such indemnified party specifically for use therein. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by or on behalf of such indemnified party and shall
survive the Transfer of such securities by such seller.
(b) Bear Xxxxxxx shall indemnify and hold harmless (in the same manner
and to the same extent as set forth in paragraph (a) of this Section 4.9) to the
extent permitted by law the Company, its directors and officers, each Person
controlling the Company within the meaning of the Securities Act and all other
prospective sellers and their directors, officers, general and limited partners
and respective controlling Persons with respect to any untrue statement or
alleged untrue statement of any material fact in, or omission or alleged
omission of any material fact from, such registration statement, any
preliminary, final or summary prospectus or listing particulars, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or its representatives by or on
behalf of Bear Xxxxxxx specifically for use therein and reimburse such
indemnified party for any legal or other expenses reasonably incurred in
connection with investigating or defending any such Claim as such expenses are
incurred; PROVIDED, HOWEVER, that the aggregate amount that Bear Xxxxxxx shall
be required to pay pursuant to this Section 4.9(b) and Section 4.10 shall in no
case be greater than the amount of the net proceeds received by Bear Xxxxxxx
upon the sale of the Registrable Securities pursuant to the registration
statement giving rise to such Claim.
(c) Indemnification similar to that specified in the preceding
paragraph (a) of this Section 4.9 (with appropriate modifications) shall be
given by the Company with respect to any required registration or other
qualification of securities under any U.S. state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this Agreement shall
notify promptly the indemnifying party in writing of the commencement of any
action or proceeding with respect to which a claim for indemnification may be
made pursuant to this Section 4.9, but the failure of any indemnified party to
provide such notice shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 4.9, except to the extent the
indemnifying party is materially prejudiced thereby, and shall not relieve the
indemnifying party from any liability that it may have to any indemnified party
otherwise than under Sections 4.9 and 4.10. In case any action or proceeding is
brought against an indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party
15
shall be entitled to participate therein and, unless in the reasonable opinion
of outside counsel to the indemnified party a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, to
assume the defense thereof jointly with any other indemnifying party similarly
notified, to the extent that it chooses, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; PROVIDED,
HOWEVER, that if (i) the indemnifying party fails to take reasonable steps
necessary to defend diligently the action or proceeding within 20 days after
receiving notice from such indemnified party that the indemnified party believes
it has failed to do so; (ii) such indemnified party who is a defendant in any
action or proceeding that is also brought against the indemnifying party
reasonably shall have concluded that there may be one or more legal defenses
available to such indemnified party that are not available to the indemnifying
party; or (iii) representation of both parties by the same counsel is otherwise
inappropriate under applicable standards of professional conduct, then, in any
such case, the indemnified party shall have the right to assume or continue its
own defense as set forth above (but with no more than one firm of counsel for
all indemnified parties in each jurisdiction who shall be approved by Bear
Xxxxxxx), and, to the fullest extent permitted by all applicable laws, the
indemnifying party shall be liable for any expenses therefor. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (x) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (y) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) The indemnity agreements contained herein shall be in addition to
any other rights to indemnification or contribution that any indemnified party
may have pursuant to law or contract and shall remain operative and in full
force and effect regardless of any investigation made or omitted by or on behalf
of any indemnified party and shall survive the Transfer of the Registrable
Securities by any such party.
(f) The indemnification and contribution required by this Section 4.9
and Section 4.10 shall be made by periodic payments of reasonable frequency of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
SECTION IV.10 CONTRIBUTION. (a) If for any reason the indemnity
provided for in Section 4.9 is unavailable or is insufficient to hold harmless
an indemnified party under Sections 4.9(a), (b) or (c) in respect of any Claims
or expenses (including reasonable fees of counsel and any amounts paid in any
settlement effected with the indemnifying party's consent, which consent shall
not be unreasonably withheld), then each indemnifying party, in lieu of
indemnifying such indemnified party, shall, to the fullest extent permitted by
all applicable laws,
16
contribute to the amount paid or payable by such indemnified party as a result
of such Claims or expenses (i) as between the Company and Bear Xxxxxxx, on the
one hand, and the underwriters, on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company and Bear
Xxxxxxx, on the one hand, and the underwriters, on the other, from the offering
of the Registrable Securities, or if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but also the relative fault of the Company and Bear Xxxxxxx,
on the one hand, and of the underwriters, on the other, in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations, and (ii) as
between the Company, on the one hand, and Bear Xxxxxxx, on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
Bear Xxxxxxx in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and Bear Xxxxxxx, on the one hand, and the underwriters, on the other,
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and Bear Xxxxxxx bear to the total
underwriting discounts and commissions received by the underwriters. The
relative fault of the Company and Bear Xxxxxxx, on the one hand, and of the
underwriters, on the other, 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 and Bear Xxxxxxx or by the underwriters. The relative
fault of the Company, on the one hand, and of Bear Xxxxxxx, on the other, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by such
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(b) The Company and Bear Xxxxxxx agree that it would not be just and
equitable if contribution pursuant to this Section 4.10 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the next preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the next preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4.10, no underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities underwritten by it and distributed to the public exceeds
the amount of any damages that such underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission, and Bear Xxxxxxx shall not be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities of Bear Xxxxxxx were offered to the public exceeds the amount of any
damages that such holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The aggregate amount that
17
Bear Xxxxxxx shall be required to pay pursuant to this Section 4.10 and Section
4.9(b) shall in no case be greater than the amount of the net proceeds received
by Bear Xxxxxxx upon the sale of the Registrable Securities pursuant to the
registration statement giving rise to such Claim.
ARTICLE V
CONDITIONS OF EFFECTIVENESS
SECTION V.1 CONDITIONS OF EFFECTIVENESS. The effectiveness of this
Agreement is subject to the following conditions:
(a) RESOLUTIONS; INCUMBENCY. Bear Xxxxxxx shall have received:
(i) copies of the resolutions of the board of directors of
the Company authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary or an Assistant
Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Company certifying the names and true signatures of the officers of
the Company authorized to execute, deliver and perform this Agreement;
(b) ORGANIZATION DOCUMENTS; GOOD STANDING. Bear Xxxxxxx shall
have received each of the following documents:
(i) the Certificate of Incorporation and the By-laws of the
Company as in effect on the date of this Agreement, certified by the
Secretary or Assistant Secretary of the Company as of the date of this
Agreement;
(ii) a good standing certificate for the Company from the
appropriate Delaware authorities as of a recent date; and
(iii) a certificate signed by a Responsible Officer, dated
as of the Closing Date, stating that:
(x) the representations and warranties contained in Section
6.1 are true and correct on and as of such date, as
though made on and as of such date; and
(y) since March 31, 2000, there has occurred no event
or circumstance that has resulted or could reasonably be
expected to result in a Material Adverse Effect.
(c) LEGAL OPINION. Bear Xxxxxxx shall have received on the
Closing Date an opinion, dated the Closing Date, in form and substance
satisfactory to Bear Xxxxxxx and counsel
18
to Bear Xxxxxxx, of Irell & Xxxxxxx LLP, counsel for the Company, to the effect
set forth in EXHIBIT B.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION VI.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to Bear Xxxxxxx that:
(a) CORPORATE EXISTENCE AND POWER; COMPLIANCE WITH LAWS. Each of
the Company and its subsidiaries:
(i) is a company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(ii) has the corporate power and authority, and the legal right,
and all governmental licenses, authorizations, consents and approvals
to own its assets, carry on its business and to execute, deliver, and
perform its obligations under this Agreement;
(iii) is duly qualified as a foreign corporation and is licensed
and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its
business requires such qualification or license except where the
failure to be so qualified or licensed is not reasonably likely to
result in a Material Adverse Effect; and
(iv) is in compliance with all Requirement of Law except where
the failure to so comply is not reasonably likely to result in a
Material Adverse Effect.
(b) CORPORATE AUTHORIZATION. The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby,
including, without limitation, the corporate power and authority to issue and
deliver the Company Shares as provided herein.
(c) NON-CONTRAVENTION, ETC. None of (A) the execution, delivery
or performance by the Company of this Agreement, (B) the issuance and delivery
of the Company Shares 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, or an acceleration of any indebtedness of the Company or any of its
subsidiaries pursuant to, (i) any Requirement of Law or (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
19
which the Company or its subsidiaries or their properties is or may be bound,
except in the case of clause (ii), 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. No consent,
approval, authorization or order of, or filing, registration, qualification,
license or permit of or with, (A) any court or governmental agency, body or
administrative agency (including, without limitation, the FCC) or (B) any other
person is required for (1) the execution, delivery and performance by the
Company of this Agreement, (2) the issuance and delivery of the Company Shares
and the transactions contemplated hereby, except (x) such as have been obtained
and made (or, in the case of the Company's obligations under Article IV hereof
(registration rights), 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.
(d) BINDING EFFECT. 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. Each Assignment, upon execution, will have been duly and validly
authorized, executed and delivered by the Company and constitute the legally
valid and binding agreement of the Company, enforceable against it in accordance
with its terms.
(e) COMPANY SHARES. (i) On the Settlement Date, and on any other
date on which the Company pays additional Company Shares to Bear Xxxxxxx
pursuant to this Agreement, the Company Shares delivered on such date will have
been duly and validly authorized by the Company for issuance and delivery to
Bear Xxxxxxx pursuant to this Agreement and will be fully paid and
nonassessable.
(f) LITIGATION. There are no actions, suits, proceedings, claims
or disputes pending, or to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against the Company or its Subsidiaries or any of their respective
properties which:
(i) purport to affect or pertain to this Agreement or the Merger
Agreement or any of the transactions contemplated hereby or thereby;
or
(ii) if determined adversely to the Company or its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or any order of any
nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or
performance of this Agreement, or directing that the transactions
provided for herein not be consummated as herein provided.
20
(g) NO DEFAULT. As of the Closing Date, neither the Company nor any of its
subsidiaries is in default under or with respect to any Contractual Obligation
in any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect.
(h) CERTAIN DOCUMENTS. The Company has delivered to Bear Xxxxxxx a complete
and correct copy of the Merger Agreement and any other agreements to which the
Company or any of its Affiliates, on the one hand, and BlueStar or any of its
Affiliates, on the other hand, are parties, including any amendments,
supplements or modifications with respect to any of the foregoing.
(i) TAXES. The Company and its subsidiaries have filed all federal and
other material tax returns and reports required to be filed, and have paid all
federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with G.A.A.P. There is no proposed tax assessment against the Company
or any of its subsidiaries that would, if made, have a Material Adverse Effect.
(j) TITLE TO PROPERTIES. The Company and each Subsidiary have good record
and marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(k) FINANCIAL CONDITION. The unaudited condensed consolidated balance sheet
of the Company and its Subsidiaries as of March 31, 2000, and the related
unaudited condensed consolidated statements of income or operations and cash
flows for the fiscal quarter ended on that date:
(i) were prepared in accordance with G.A.A.P. consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, subject to normal year end audit adjustments and the absence of
footnotes;
(ii) fairly present the financial condition of the Company and its
Subsidiaries as of the date thereof and results of operations for the
period covered thereby; and
(iii)show any material guarantee obligation, material Contingent
Obligation or material liability for taxes, or any long-term lease or
unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange agreement.
21
(l) MATERIAL ADVERSE EFFECTS. Since March 31, 2000, there has been no
development or event that has had or could reasonably be expected to have a
Material Adverse Effect.
(m) REGULATED ENTITIES. Neither the Company for any subsidiary of the
Company is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended. The Company is not subject to regulation under any
Requirement of Law limiting its ability to incur Indebtedness.
(n) COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. To the best
knowledge of the Company, the Company or its Subsidiaries own or are licensed or
otherwise have the right to use all of the patents, trademarks, service marks,
trade names, copyrights, contractual franchises, authorizations and other rights
that are reasonably necessary for the operation of their respective businesses,
without conflict with the rights of any other Person except to the extent that
any such conflict is not reasonably likely to have a Material Adverse Effect. To
the best knowledge of the Company, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Company or any Subsidiary infringes upon any
rights held by any other Person except to the extent that any such infringement
is not reasonably likely to have a Material Adverse Effect. No claim or
litigation regarding any of the foregoing is pending or threatened, and the
Company knows of no violation of any patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code is pending or,
to the knowledge of the Company, proposed, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
ARTICLE VII
COVENANTS
SECTION VII.1 COVENANTS OF THE COMPANY. The Company hereby agrees that, so
long as this Agreement remains outstanding:
(a) The Company shall not file any motion seeking to enjoin or otherwise
postpone the enforcement of its obligations hereunder (including, without
limitation, seeking an order under Section 105 of the Bankruptcy Code) in any
bankruptcy case by or with respect to BlueStar or any of its subsidiaries;
(b) Immediately upon the acquisition of BlueStar by the Company pursuant to
the Merger Agreement, the Company shall cause BlueStar to be a "Restricted
Subsidiary" under the Company's Indentures;
(c) The Company shall not under any circumstance file against Bear Xxxxxxx
any action, suit or proceeding with any court or Governmental Authority for any
losses, claims or damages arising out of or based upon or in any way related to
Bear Xxxxxxx' resale of the
22
Company Shares, except any such claims arising from Bear Xxxxxxx' bad faith or
willful misconduct; and
(d) So long as applicable, each certificate representing the Company Shares
shall bear the following legend:
"The securities represented hereby have not been registered under the U.S.
Securities Act of 1933, as amended, and may not be offered, sold, transferred or
otherwise disposed of except in compliance with such Act."
The Company agrees that, promptly upon the request of Bear Xxxxxxx or any
transferee, it will remove such legend from the certificates representing
Company Shares in the event that U.S. counsel for Bear Xxxxxxx or such
transferee determines that the transfer thereof is no longer restricted by the
Securities Act.
SECTION VII.2 COVENANTS OF BEAR XXXXXXX. Bear Xxxxxxx hereby agrees that,
so long as this Agreement remains outstanding:
(a Bear Xxxxxxx shall agree to deliver a copy of any and all documentation,
including financial reports, received by it from BlueStar pursuant to the Loan
Agreement promptly after receipt thereof and shall further agree to promptly
notify the Company of any borrowing request received by BlueStar pursuant to the
terms thereof and deliver copies of the documentation supporting such borrowing
request at least two Business Days prior to making any Loan to BlueStar under
the Loan Agreement; provided, however, that the failure of Bear Xxxxxxx to
deliver to the Company any or all of such documentation shall not constitute a
defense against any obligations of the Company under this Agreement.
(b Bear Xxxxxxx shall use commercially reasonable efforts to effect any
resale of Company Shares;
(c Except upon the prior consent by the Company, Bear Xxxxxxx shall not
demand repayment of any Loans pursuant to subclause (a) of Section 2.3 of the
Loan Agreement prior to the date 30 days after the Closing Date. For the
avoidance of doubt, the preceding sentence shall not be deemed to restrict Bear
Xxxxxxx' right to demand repayment of any Loans after such date, or Bear
Xxxxxxx' right of repayment pursuant to subclauses (b), (c), (d) or (e) of
Section 2.3 of the Loan Agreement.
ARTICLE VIII
MISCELLANEOUS
23
SECTION VIII.1 TAXES. (a) Any and all payments by the Company to Bear
Xxxxxxx under this Agreement shall be made free and clear of, and without
deduction or withholding for, any Taxes. In addition, the Company shall pay all
Other Taxes.
(b If the Company shall be required by law to deduct or withhold any Taxes
from or in respect of any sum payable hereunder to Bear Xxxxxxx, then:
(i the sum payable shall be increased as necessary so that, after
making all required deductions and withholdings for Taxes (including
deductions and withholdings applicable to additional sums payable under
this Section 8.1), Bear Xxxxxxx receives an amount equal to the sum it
would have received had no such deductions or withholdings been made;
(ii the Company shall make such deductions and withholdings; and
(iii the Company shall pay the full amount deducted or withheld to the
relevant taxing authority or other authority in accordance with applicable
law.
(c The Company agrees to indemnify and hold harmless Bear Xxxxxxx for the
full amount of any Taxes or Other Taxes (including without limitation any Taxes
or Other Taxes imposed on amounts payable under this Section 8.1) paid by Bear
Xxxxxxx and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date Bear Xxxxxxx makes
written demand therefor.
(d Within 30 days after the date of any payment by the Company of Taxes or
Other Taxes, the Company shall furnish to Bear Xxxxxxx the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to Bear Xxxxxxx.
SECTION VIII.2 ABSOLUTE NATURE OF OBLIGATION. The Company agrees that its
obligation to pay the Purchase Price and purchase the Loans from Bear Xxxxxxx on
the Settlement Date pursuant to this Agreement is absolute and unconditional and
shall in no event be conditioned on or subject to a defense or setoff arising
from: (a) the enforceability, effectiveness, validity or value of the Merger
Agreement or any part thereof, (b) the existence or non-existence of defaults by
BlueStar under, or non-compliance with the terms of, the Loan Agreement or the
other Loan Documents, (c) the value or lack of value of the Loans, (d) the
validity, regularity or enforceability of the Loans, the Loan Agreement or the
other Loan Documents, (e) the financial condition of BlueStar, (f) the validity
of the organization of BlueStar, the Company or Bear Xxxxxxx, (g) any defense,
claim, set-off recoupment, abatement or other right, existing or future, which
BlueStar may have against Bear Xxxxxxx, the Company or any other Person or which
the Company may have against Bear Xxxxxxx, BlueStar or any other Person, (h)
whether the lien of any document or instrument securing the Loans shall have
been perfected or shall continue to be perfected or shall otherwise be impaired
in any manner, (i) whether any of the Loan Documents have been amended,
extended, supplemented,
24
accelerated, surrendered, released, waived, terminated or otherwise modified
(but any such amendment shall not increase or decrease the Purchase Price
payable hereunder), (j) the impossibility of performance by any party to any of
the Loan Documents or any party to the Merger Agreement or (k) the bankruptcy,
insolvency, reorganization, liquidation, dissolution, winding-up, arrangement,
composition, readjustment of debt or similar event with respect to BlueStar or
any other Person. Without limiting the generality of the foregoing, the Company
acknowledges and agrees that it is of the essence of this Agreement that the
Company shall be obligated to purchase the Loans in circumstances (including,
without limitation, bankruptcy of BlueStar) under which collection of the Loans
from BlueStar and obtaining control of the collateral for the Loans may be
difficult or impossible and the existence of such circumstances shall not impair
or delay the obligation of the Company to purchase the Loans hereunder.
SECTION VIII.3 RESALE INDEMNITY. The Company agrees to indemnify and hold
harmless, to the fullest extent permitted by all applicable laws, each
Indemnitee against any and all Claims and expenses (including reasonable fees of
counsel and any amounts paid in any settlement effected with the Company's
consent, which consent shall not be unreasonably held) to which any such
indemnified person may become subject, insofar as such Claims or expenses arise
out of or are based upon or related in any way to Bear Xxxxxxx' resale of
Company Shares after Bear Xxxxxxx' receipt thereof from the Company pursuant to
this Agreement, except any Claims arising from Bear Xxxxxxx' bad faith or
willful misconduct; provided, that insofar as any Claims or expenses arise out
of or are based upon any matter set forth under clause (i) or (ii) of Section
4.9(a), this Section 8.3 shall not apply to such Claims and the provisions of
Section 4.9 shall apply to such Claims.
SECTION VIII.4 WAIVER OF DEFENSES. The Company waives any and all notice of
the creation, renewal, extension or accrual of any of the Obligations (as
defined in the Loan Agreement) and notice of or proof of reliance by Bear
Xxxxxxx upon this Agreement or acceptance of this Agreement; the Obligations,
and any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon this
Agreement; and all dealings between BlueStar or the Company, on the one hand,
and Bear Xxxxxxx, on the other, shall likewise be conclusively presumed to have
been had or consummated in reliance upon this Agreement. The Company waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon BlueStar or the Company with respect to the Obligations.
This Agreement shall be construed as a continuing, absolute and unconditional
obligation of the Company without regard to (a) the validity, regularity or
enforceability of the Loan Agreement, any other Loan Document, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by Bear
Xxxxxxx, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
BlueStar against Bear Xxxxxxx, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of BlueStar or the Company) which constitutes, or
might be construed to constitute, an equitable or legal discharge of BlueStar
for the Obligations, or of the Company under this Agreement, in bankruptcy or in
any other instance. When pursuing its rights and remedies hereunder against the
Company, Bear Xxxxxxx shall be under no obligation to pursue such rights and
remedies as it may have against BlueStar
25
or any other Person or against any collateral security or guarantee for the
Obligations or any right of offset with respect thereto, and any failure by Bear
Xxxxxxx to pursue such other rights or remedies or to collect any payments from
BlueStar or any such other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of
BlueStar or any such other Person or of any such collateral security, guarantee
or right of offset, shall not relieve the Company of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of Bear Xxxxxxx against the Company. This
Agreement shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Company and its successors and
assigns thereof, and shall inure to the benefit of Bear Xxxxxxx, and its
successors, indorsees, transferees and assigns, until all the obligations of the
Company under this Agreement shall have been satisfied in full. Bear Xxxxxxx
shall have no duty of care to the Company with respect to the administration of
the Loans, the Loan Agreement or the other Loan Documents and the Company
expressly waives any defense to its obligations hereunder arising from any
course of conduct as between Bear Xxxxxxx and BlueStar, regardless of whether
the ability of the Company to collect the Loans is impaired by such course of
conduct.
SECTION VIII.5 REINSTATEMENT. This Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time any payment made
by the Company hereunder, or any part thereof, is rescinded or must otherwise be
restored or returned by Bear Xxxxxxx upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of BlueStar or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, BlueStar or any substantial part of its property, or
otherwise, all as though such payments had not been made.
SECTION VIII.6 PLACE OF CLOSING. The purchase of the Loans by the Company
pursuant to this Agreement shall take place at the offices of Xxxxxxx Xxxxxxx &
Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other place
as shall be designated by Bear Xxxxxxx.
SECTION VIII.7 NOTICES. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to Bear
Xxxxxxx shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to Bear Xxxxxxx Corporate Lending Inc., 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxxxxxxxx, telecopy number: (212)
272-4844, with a copy to Xxxxxxxxxxx Xxxxxxxx, telecopy number: (000) 000-0000,
with a copy, which shall not constitute notice, to Xxxxxxx Xxxxxxx & Xxxxxxxx,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxx X. Xxxxxxx, telecopy
number: (000) 000-0000; and if sent to the Company, shall be mailed, delivered
or telexed, telegraphed or telecopied and confirmed in writing to Covad
Communications Group, Inc., 0000 Xxxxxxx Xxxxxxxxxx, Xxxxx Xxxxx, XX 00000,
Attention: Chief Financial Officer, telecopy number: (000) 000-0000, with a
copy, which shall not constitute notice, to Irell & Xxxxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, XX 00000, Attn: Xxxxxxxx X. Xxxxxxx, telecopy
number: (000) 000-0000.
26
SECTION VIII.8 REMEDIES. The Company's obligations to purchase the Loans
may be enforced by Bear Xxxxxxx in an action for specific performance against
the Company.
SECTION VIII.9 NO RIGHT TO PURCHASE. Nothing contained in this Agreement
shall be construed as obligating Bear Xxxxxxx to sell the Loans (other than
pursuant to the Company's exercise of the Call Option) to the Company or as
restricting in any manner the right of Bear Xxxxxxx to sell or assign its
interest therein in whole or in part.
SECTION VIII.10 NO WAIVER; CUMULATIVE REMEDIES. (a) No failure to exercise
and no delay in exercising, on the part of Bear Xxxxxxx, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
(b No action by Bear Xxxxxxx pursuant to the provisions of the Loan
Agreement or the other Loan Documents, whether such action is optional or
obligatory, shall affect the absolute and unconditional obligation of the
Company to purchase the Loans pursuant to this Agreement.
SECTION VIII.11 COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and Bear Xxxxxxx.
SECTION VIII.12 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION VIII.13 AMENDMENTS IN WRITING; NO WAIVER. None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the Company and Bear
Xxxxxxx, provided that any provision of this Agreement may be waived by Bear
Xxxxxxx in a letter or agreement executed by Bear Xxxxxxx or by telex or
facsimile transmission from Bear Xxxxxxx.
SECTION VIII.14 INTEGRATION. This Agreement represents the agreement of the
Company and Bear Xxxxxxx with respect to the subject matter hereof, and there
are no promises, undertakings, representations or warranties by Bear Xxxxxxx
relative to the subject matter hereof not expressly set forth or referred to
herein.
27
SECTION VIII.15 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION VIII.16 SUBMISSION TO JURISDICTION; WAIVERS. The Company hereby
irrevocably and unconditionally:
(a submits for itself and its property in any legal action or proceeding
relating to this Agreement or for recognition and enforcement of any judgement
in respect hereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to BlueStar at its address
set forth in Section 8.7 or at such other address of which Bear Xxxxxxx shall
have been notified pursuant thereto;
(d agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to xxx in
any other jurisdiction; and
(e waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
subsection any special, exemplary, punitive or consequential damages.
SECTION VIII.17 ACKNOWLEDGMENTS. The Company hereby acknowledges that:
(a The Company has examined the Loan Agreement, and the other Loan
Documents as executed and delivered, and has relied solely upon such examination
in entering into this Agreement. The Company hereby acknowledges that Bear
Xxxxxxx has not made representations or warranties to the Company with respect
to the enforceability of the Loan Agreement or the other Loan Documents and that
Bear Xxxxxxx in entering into the Loan Agreement has relied upon the absolute
and unconditional obligation of the Company to purchase the Loans from Bear
Xxxxxxx pursuant to this Agreement.
(b The Company has been advised by counsel in the negotiation, execution
and delivery of this Agreement and in its examination of the Loan Agreement and
the other Loan Documents.
28
(c Bear Xxxxxxx does not have any fiduciary relationship to the Company,
and the relationship between Bear Xxxxxxx and the Company is solely that of
obligor and obligee with respect to the purchase by the Company of the Loans.
(d No joint venture exists between the Company and Bear Xxxxxxx.
SECTION VIII.18 WAIVERS OF JURY TRIAL. THE COMPANY AND BEAR XXXXXXX HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
SECTION VIII.19 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other parties hereto, and any attempt to make
any such assignment without such consent shall be null and void; provided,
however, that Bear Xxxxxxx may, without the consent of the Company, (i assign
its rights and obligations hereunder in whole or in part to any Affiliate with
at least 90% common control. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by, the parties
and their respective successors and assigns.
SECTION VIII.20 PAYMENT OF CERTAIN FEES AND EXPENSES. The Company agrees
(a) to pay or reimburse Bear Xxxxxxx for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and any other documents prepared in connection herewith but excluding the Loan
Agreement and the other Loan Documents, and the consummation and administration
of the transactions contemplated hereby, including the Registration Rights
Expenses and reasonable fees and disbursements of counsel to Bear Xxxxxxx, with
statements with respect to the foregoing to be submitted to the Company prior to
the Closing Date (in the case of amounts to be paid on the Closing Date) and
from time to time thereafter on a quarterly basis or such other periodic basis
as Bear Xxxxxxx shall xxxx appropriate, (b) to pay or reimburse Bear Xxxxxxx for
all its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement and any such other documents,
including the fees and disbursements of counsel (including the allocated fees
and expenses of in-house counsel) to Bear Xxxxxxx, and (c) to pay, indemnify,
and hold Bear Xxxxxxx harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, that may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement and any such other documents.
[Signature page follows]
29
IN WITNESS WHEREOF, the Company and Bear Xxxxxxx have caused this Agreement
to be duly executed the day and year first above written.
COVAD COMMUNICATIONS GROUP, INC.
By:___________________________________
Name:
Title:
BEAR XXXXXXX CORPORATE LENDING INC.
By:__________________________________
Name:
Title:
ANNEX A
TO PUT/CALL OPTION AGREEMENT
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Demand Loan Agreement, dated as of June 15, 2000,
(as amended, supplemented or modified from time to time, the "LOAN AGREEMENT"),
between BlueStar Communications Group, Inc., a Delaware corporation (the
"COMPANY") and Bear Xxxxxxx Corporate Lending Inc., Xxxxxxx Corporate Lending
Inc. ("BEAR XXXXXXX"). Unless otherwise defined herein, terms defined in the
Loan Agreement and used herein shall have the meanings given to them in the Loan
Agreement.
The Assignor identified on Schedule l hereto (the "ASSIGNOR") and the
Assignee identified on Schedule l hereto (the "ASSIGNEE") agree as follows:
(a The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor, as-is, without any recourse or warranty
whatsoever to the Assignor, as of the Effective Date (as defined below), the
interest described in Schedule 1 hereto (the "ASSIGNED INTEREST") in and to the
Assignor's rights and obligations under the Loan Agreement with respect to those
credit facilities contained in the Loan Agreement as are set forth on Schedule 1
hereto (individually, an "ASSIGNED FACILITY"; collectively, the "ASSIGNED
FACILITIES"), in a principal amount for each Assigned Facility as set forth on
Schedule 1 hereto.
(b The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of BlueStar, any of its Subsidiaries or any other obligor or
the performance or observance by BlueStar, any of its Subsidiaries or any other
obligor of any of their respective obligations under the Loan Agreement or any
other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; and (c) attaches any Notes held by it evidencing the Assigned
Facilities and requests that BlueStar, upon request by the Assignee, exchange
the attached Notes for a new Note or Notes payable to the Assignee.
(c The Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
a copy of the Loan Agreement, together with copies of the financial statements
delivered pursuant to Section 6.1 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor or Bear Xxxxxxx and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; and (d) agrees that it will be bound by
the provisions of the Loan Agreement and will perform in accordance with its
terms all the obligations which by the terms of the Loan Agreement are required
to be performed by it as a Lender.
(d The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "Effective
Date"). Following the execution of this Assignment and Acceptance, it will be
delivered to BlueStar for its acknowledgment, effective as of the Effective
Date.
(e From and after the Effective Date, BlueStar shall make all payments in
respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to the
Effective Date and to the Assignee for amounts which have accrued subsequent to
the Effective Date.
(f From and after the Effective Date, (a) the Assignee shall be a party to
the Loan Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Agreement.
(g This Assignment and Acceptance and the rights and obligations of the
parties under this Assignment and Acceptance shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
2
Schedule 1
to Assignment and Acceptance
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
------------------------------------- -------------------------------------
Loan Principal
Facility Assigned Amount Assigned
Loan $
------------------------------------- -------------------------------------
[Name of Assignee] [Name of Assignor]
By: By:
Name: Name:
Title: Title:
------------------------------------
Acknowledged:
BLUESTAR COMMUNICATIONS
GROUP, INC.
By:
Name:
Title:
ANNEX B
[Form of Opinion of Irell & Xxxxxxx]
1. The Company (a) has been duly incorporated and is validly existing and
in good standing as a corporation under the laws of the jurisdiction of its
incorporation, and (b) has the corporate power and authority to own, lease and
operate its properties and conduct its business as presently operated.
2. The Company (a) has the corporate power and authority to execute,
deliver and perform its obligations under the Agreement and to consummate the
transactions contemplated thereby (including, without limitation, its
obligations in respect of the Company Shares and the issuance and delivery of
Company Shares upon exercise of the Put Option or in connection with a Resale
True-Up or Interim True-Up as contemplated by the Agreement) and (b) has duly
authorized, executed and delivered the Agreement.
3. Neither the execution, delivery or performance by the Company of the
Agreement nor the consummation of the transactions contemplated thereby
(including, without limitation, its obligations in respect of the Company Shares
and the issuance and delivery of Company Shares upon exercise of the Put Option
or in connection with a Resale True-Up or Interim True-Up as contemplated by the
Agreement) violates, conflicts with or constitutes a breach of any of the terms
or provisions of, or a default under (or an event that with notice or the lapse
of time, or both, would constitute a default), or require consent or waiver
under, or result in the imposition of a lien or encumbrance on any properties of
the Company, or an acceleration of any indebtedness of the Company pursuant to,
(a) the charter or bylaws of the Company, (b) 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
(including, for the avoidance of doubt, the Indentures), (c) the Delaware
General Corporation Law or any federal or New York statute, rule or regulation
applicable to the Company (other than federal or state securities laws) or (d)
to our knowledge, any judgment, order or decree of any court of governmental
agency or authority having jurisdiction over the Company or its assets or
properties, except in the case of clauses (b), (c) and (d) of this paragraph,
for such violations, conflicts, breaches, defaults, consents, impositions or
liens which would not, to our knowledge, reasonably be expected to have a
Material Adverse Effect.
4. Assuming that the Agreement is a valid and legally binding obligation of
Bear Xxxxxxx, the Agreement constitutes the valid and legally binding obligation
of the Company, enforceable against the Company in accordance with its terms.
5. Assuming compliance with applicable state securities and Blue Sky laws,
as to which we express no opinion, and except for the filing of one or more
registration statements under the Securities Act in connection with the sale of
the Company Shares contemplated by the 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 Agreement or the consummation of the transactions
contemplated thereby (including, without limitation, its obligations in respect
of the Company Shares and the issuance and delivery of Company Shares upon
exercise of the Put Option or in connection with a Resale True-Up or Interim
True-Up as contemplated by the Agreement.
6. To our knowledge, there is no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official, now pending, to
which the Company is a party or to which the business, assets or property of the
Company is subject, and, to our knowledge, no such action, suit or proceeding is
threatened to which the Company or its business, assets or property would be
subject that in either case questions the validity of the Agreement.
7. Assuming that the Company has invested all or substantially all of the
proceeds of its recent debt and equity securities offerings in its operations or
in United States Treasury obligations, the Company is not an "investment
company" within the meaning of and subject to regulation under the Investment
Company Act of 1940, as amended, or a "holding company," or a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
8. Any Company Shares issued and delivered upon exercise of the Put Option
or as required as a Resale True-Up or Interim True-Up, in each case, conducted
in accordance with the terms of the Put/Call Option Agreement, will be duly
authorized and if issued on the date hereof would be, upon their delivery,
validly issued, fully paid and nonassessable.
The foregoing opinions will be subject to customary exceptions,
qualifications, limitations and assumptions.
