Exhibit 1.4
MCLEODUSA INCORPORATED
$300,000,000 9 1/2% Senior Notes Due 2008
PURCHASE AGREEMENT
New York, New York
October 22, 1998
Salomon Smith Barney Inc.
Bear, Stearns & Co. Inc
Morgan Stanley & Co. Incorporated
Chase Securities Inc.
c/o Salomon Smith Barney Inc
Seven World Trade Center
New York, New York 10048
Dear Ladies and Gentlemen:
McLeodUSA Incorporated, a Delaware corporation (the "Company"), proposes to
issue and sell to you (the "Purchasers") $300,000,000 principal amount of its 9
1/2% Senior Notes Due 2008 (the "Securities"), to be issued under an indenture
(the "Indenture") to be dated as of October 30, 1998, between the Company and
United States Trust Company of New York, as trustee (the "Trustee").
The sale of the Securities to you will be made without registration of the
Securities under the Securities Act of 1933, as amended (the "Act"), in reliance
upon the exemption from the registration requirements of the Act provided by
Section 4(2) thereof. You have advised the Company that you will make an
offering of the Securities purchased by you hereunder in accordance with Section
4 hereof on the terms set forth in Exhibit D and as will be described in the
Final Memorandum (as defined below), as soon as you deem advisable after this
Agreement has been executed and delivered, solely to persons who you reasonably
believe to be (i) "qualified institutional buyers" as defined in Rule 144A under
the Act ("QIBs") and (ii) persons who are not "U.S. persons," in offers and
sales outside the United States made in reliance on Regulation S under the Act
("Regulation S"), that make certain representations and agreements in the form
of Exhibit A hereto (each, a "Foreign Purchaser") (such persons specified in
clause (i) and (ii) being referred to herein as the "Eligible Purchasers").
In connection with the sale of the Securities, the Company will prepare a
final offering memorandum, to be dated October 22, 1998 (the "Final
Memorandum"). The Final Memorandum will set forth certain information
concerning the Company and the Securities. The Company hereby confirms that it
has authorized the use of the Final Memorandum in connection with the offering
and resale by the Purchasers of the Securities. Any references herein to the
Final Memorandum shall be deemed to include all exhibits thereto.
I. Representations and Warranties. The Company represents and
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warrants to, and agrees with, the Purchasers as set forth below in this Section
1.
(a)(i) The Final Memorandum as of its date did not, and the Final
Memorandum (as the same may have been amended or supplemented) as of the
Closing Date (as defined below) will not, contain or incorporate by
reference any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
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however, that the Company makes no representations or warranties as to the
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information contained in or omitted from the Final Memorandum (and any
amendment or supplement thereof or thereto) in reliance upon and in
conformity with information furnished in writing to the Company by or on
behalf of any Purchaser specifically for inclusion in the Final Memorandum
(and any amendment or supplement thereof or thereto).
(ii) The Prospectus dated May 26, 1998, used in connection with the
Company's exchange offer for its 8-3/8% Senior Notes due March 15, 2008
(including incorporated documents filed prior to the Execution Time and
excluding incorporated documents filed after the Execution Time, the
"Exchange Offer Prospectus") does not contain or incorporate by reference
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with
the offering of the Securities.
(c) The documents filed by the Company under the Exchange Act at the
time they were filed with the Commission, complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of
the Securities and Exchange Commission (the "Commission") thereunder and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein, in light of the circumstances
under which they were made, or necessary to make the statements therein not
misleading; and any further documents so filed, when such documents are
filed with the Commission, will conform in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein, in light of the
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circumstances under which they were made, or necessary to make the
statements therein not misleading.
(d) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Act ("Regulation D")) of the Company has
directly, or through any agent (provided that no representation is made as
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to the Purchasers or any person acting on their behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Act) which is or will be integrated with
the sale of the Securities in a manner that would require the registration
of the Securities under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offering of the Securities.
(e) It is not necessary in connection with the offer, sale and
delivery of the Securities to the Purchasers in the manner contemplated by
this Agreement to register the Securities under the Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
(f) Assuming (i) that the representations and warranties of the
Purchasers in Section 4 are true, and (ii) compliance by the Purchasers
with their covenants set forth in Section 4, it is not necessary in
connection with the initial resale of the Securities by the Purchasers in
the manner contemplated by this Agreement to register the Securities under
the Act.
(g) None of the Company, its affiliates or any person acting on behalf
of the Company or its affiliates has engaged in any directed selling
efforts (as that term is defined in Regulation S) with respect to the
Securities, and the Company and its affiliates and any person acting on its
or their behalf have complied with the offering restrictions requirement of
Regulation S (provided that no representation is made as to the Purchasers
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or any person acting on their behalf).
(h) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Act.
(i) Since the date of the most recent financial statements included or
incorporated by reference in the Exchange Offer Prospectus, there has been
no material adverse change, or any development which could reasonably be
expected to result in a material adverse change, in the condition
(financial or other), earnings, business, prospects or properties of the
Company and its subsidiaries, whether or not arising from transactions in
the ordinary course of business, except as set forth in the Exchange Offer
Prospectus; and, since the respective dates as of which information is
given or incorporated by reference in the Exchange Offer Prospectus, there
has not been any change in the capital stock (other than grants of options
and issuances of common stock in connection with the Company's acquisition
of QST Communications, Inc. or pursuant to existing employee stock option
plans, 401(k) plans, stock ownership plans or stock purchase plans,
repurchases by the
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Company of its common stock in the ordinary course of business or
conversions of outstanding convertible securities) of the Company or any of
its subsidiaries or long-term debt (other than changes as a result of
borrowings of the Company or any of its subsidiaries in the ordinary course
of business not exceeding $12,000,000, maturities, regularly scheduled
payments and payments contemplated as a result of the application of
proceeds of the offering of the Securities as described in the Final
Memorandum, amortization of debt discount or currency fluctuations) of the
Company or any of its subsidiaries.
(j) Each of (a) the Company, and (b) McLeodUSA Telecommunications
Services, Inc., McLeodUSA Network Services, Inc., McLeodUSA Publishing
Company, McLeodUSA Media Group, Inc., McLeodUSA Diversified, Inc., Ruffalo,
Cody & Associates, Inc., Consolidated Communications Inc., Illinois
Consolidated Telephone Company, Consolidated Communications Directories,
Inc., Consolidated Communications Operator Services Inc., Consolidated
Market Response Inc., Consolidated Communications Public Services Inc., and
CCD/Scripps, L.L.C. (individually a "Subsidiary" and collectively the
"Subsidiaries") has been duly incorporated or organized and is validly
existing as a corporation or, as applicable, limited liability company in
good standing under the laws of the jurisdiction in which it is chartered
or organized, with full corporate or organizational power and authority to
own its properties and conduct its business as described in or incorporated
by reference in the Exchange Offer Prospectus and the Final Memorandum, and
is duly qualified to do business as a foreign corporation or, as
applicable, limited liability company and is in good standing under the
laws of each jurisdiction which requires such qualification, except where
the failure to be so qualified could not reasonably be expected to have a
material adverse effect on the Company and the subsidiaries. Except for the
Subsidiaries, the Company has no subsidiaries which, considered in the
aggregate as a single subsidiary, would constitute a "significant
subsidiary" as defined in Rule 1-02(w) of Regulation S-X promulgated under
the Act.
(k) All the outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth or incorporated by
reference in the Exchange Offer Prospectus and the Final Memorandum, each
considered separately, all outstanding shares of capital stock of the
Subsidiaries are owned by the Company, either directly or through wholly
owned subsidiaries free and clear of any security interests, claims, liens
or encumbrances.
(l) The Company's authorized equity capitalization is as set forth or
incorporated by reference in the Exchange Offer Prospectus and the Final
Memorandum, each considered separately, and the outstanding shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and nonassessable.
(m) Except as disclosed or incorporated by reference in the Exchange
Offer Prospectus and the Final Memorandum, each considered separately,
there is no pending or, to the Company's knowledge, threatened action, suit
or proceeding before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of
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its subsidiaries which, if finally determined adversely to the Company or
any of its subsidiaries, would have a material adverse effect on the
condition (financial or other), earnings, business, prospects or properties
of the Company and its subsidiaries; and the statements in or incorporated
by reference in the Exchange Offer Prospectus and the Final Memorandum,
each considered separately, under the headings "Risk Factors -Dependence on
Regional Bell Operating Companies; US West Centrex Action," "Risk Factors -
Refusal of US WEST to Improve its Processing of Service Orders" and
"Business - Legal Proceedings" fairly summarize the actions, suits and
proceedings therein described except for such changes with respect to such
actions, suits and proceedings which could not have a material adverse
effect on the Company and the statements in or incorporated by reference in
the Final Memorandum under the heading "Management - Investor Agreement and
Stockholders' Agreement" fairly summarize the franchises, contracts or
other documents therein described except for such changes with respect to
such franchises, contracts or other documents which could not have a
material adverse effect on the Company.
(n) This Agreement has been duly authorized, executed and delivered by
the Company.
(o) The Indenture has been duly authorized, and, when duly executed by
the proper officer of the Company and delivered by the Company (assuming
due execution and delivery thereof by the Trustee), will constitute a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity
or at law).
(p) The registration agreement, to be dated as of the Closing Date,
between the Company and the Purchasers (the "Registration Agreement") has
been duly authorized and when executed by the proper officer of the Company
and delivered by the Company will be duly executed.
(q) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Purchasers pursuant to this Agreement,
will constitute valid and binding obligations of the Company entitled to
the benefits of the Indenture and will be enforceable in accordance with
their terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law) and the Securities
are accurately summarized in all material respects in the Final Memorandum.
(r) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
of the transactions contemplated herein, except for the declaration of
effectiveness of the Exchange Offer
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Registration Statement and/or the Shelf Registration Statement (as such
terms are defined in the Registration Agreement) and except such as may be
required under all applicable state securities and blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Purchasers and such other approvals as have been
obtained.
(s) Neither the issue and sale of the Securities, the execution and
performance of the Indenture or the Registration Agreement, the
consummation of any other of the transactions herein or therein
contemplated nor the fulfillment of the terms hereof, in each case by the
Company, will conflict with, result in a breach or violation of, or
constitute a default under the charter or by-laws of the Company or the
terms of any indenture or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or bound or (assuming
compliance with all applicable state securities and blue sky laws and that
the Exchange Offer Registration Statement and/or Shelf Registration
Statement has been declared effective) any law, rule or regulation
applicable to the Company or any of the Subsidiaries or any judgement,
order or decree applicable to the Company or any of its Subsidiaries of any
court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company or any of its Subsidiaries.
(t) Arthur Andersen LLP, who have reported upon the audited financial
statements incorporated by reference in the Exchange Offer Prospectus and
the Final Memorandum, are independent public accountants within the meaning
of the Act and the rules and regulations of the Commission thereunder.
(u) The consolidated financial statements of the Company and of
certain Subsidiaries included or incorporated by reference in the Exchange
Offer Prospectus and the Final Memorandum, each considered separately,
present fairly the financial position of the Company and its subsidiaries
and such Subsidiaries as of the dates indicated and the consolidated
results of the operations and cash flows of the Company and its
subsidiaries and such Subsidiaries for the periods specified. Such
financial statements (except as disclosed in the notes thereto or otherwise
stated therein) have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the entire
period involved. The financial statement schedules, if any, included or
incorporated by reference in the Exchange Offer Prospectus and the Final
Memorandum, each considered separately, present fairly the information
stated therein. The selected financial data included or incorporated by
reference in the Exchange Prospectus and the Final Memorandum, each
considered separately, present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited
consolidated financial statements included or incorporated by reference in
the Exchange Offer Prospectus and the Final Memorandum, each considered
separately. The pro forma financial statements and other pro forma
financial information included or incorporated by reference in the Exchange
Offer Prospectus and the Final Memorandum, each considered separately,
present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements, have been properly compiled
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on the pro forma bases described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(v) Neither the Company nor any of the Subsidiaries is in violation of
its charter or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture or
other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any of the
Subsidiaries is subject, other than defaults (considered in the aggregate)
which could not reasonably be expected to have a material adverse effect on
the condition (financial or other), earnings, business, prospects or
properties of the Company and its subsidiaries.
(w) The Company and the Subsidiaries possess adequate certificates,
authorities or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them and are in compliance in all material respects with all
such certificates, authorities and permits. Neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit,
other than any such revocation or modification that could not reasonably be
expected to, singly or in the aggregate, have a material adverse effect on
the condition (financial or other), earnings, business, prospects or
properties of the Company and its subsidiaries.
(x) The Company and its subsidiaries have timely filed all United
States federal income tax returns and all other material tax returns which
are required to be filed by them and have paid all taxes due and payable
(other than taxes, the payment of which are being contested in good faith),
and no tax liens have been filed and no claims are being asserted with
respect to any such taxes, which could reasonably be expected to have a
material adverse effect on the condition (financial or other), earnings,
business, prospects or properties of the Company and its subsidiaries. The
provisions for taxes on the books of the Company are adequate in all
material respects for all open years and for its current fiscal period.
(y) The Company and the Subsidiaries (A) are in compliance with all
applicable federal, state, local and foreign and other laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (B) have received all permits, licenses and other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (C) are in compliance with all terms and
conditions of any such permit, license and approval, except, in each case,
where such noncompliance with Environmental Law, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals could not
reasonably be expected, singly or in the aggregate, to have a material
adverse effect on the
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condition (financial or other), earnings, business, prospects or properties
of the Company and its subsidiaries.
(z) The Company and the Subsidiaries have good and marketable title to
all real property and good and valid title to all personal property owned
by them, in each case free and clear of all liens, encumbrances and
defects, and any real property and buildings held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases, except, in each case, for such exceptions as are set
forth in the Exchange Offer Prospectus and the Final Memorandum, each
considered separately, or which could not reasonably be expected to have a
material adverse effect on the condition (financial or other), earnings,
business, prospects or properties of the Company and its subsidiaries.
(aa) The Company together with its subsidiaries own and possess all
right, title and interest in and to, or have duly licensed from third
parties a valid, enforceable right to use, all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by the Company and its subsidiaries in connection with the
business conducted by them (collectively, "Patent and Proprietary Rights")
and neither the Company nor any of its subsidiaries has received notice of
infringement or misappropriation of or conflict with asserted rights of
others with respect to any Patent and Proprietary Rights, or of any facts
which would render any Patent and Proprietary Rights invalid or inadequate
to protect the interest of the Company or of its subsidiaries therein, and
which infringement, misappropriation or conflict or invalidity or
inadequacy, individually or in the aggregate, could reasonably be expected
to result in a material adverse effect on the condition (financial or
other), earnings, business, prospects or properties of the Company and its
subsidiaries.
(bb) The Company has complied with all provisions of Section 1 of Laws
of Florida, Chapter 92-198 Securities-Business with Cuba.
2. Purchase and Sale. Subject to the terms and conditions and in
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reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Purchasers, and the Purchasers agree to purchase from the
Company, at a purchase price of 97.625% of the principal amount thereof, plus
accrued interest, if any, from October 30, 1998 to the Closing Date, the
principal amount of the Securities.
3. Delivery and Payment. Delivery of and payment for the Securities
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shall be made at 10:00 AM, New York City time, on October 30, 1998, or such
later date (not later than November __, 1998) as the Purchasers designate, which
date and time may be postponed by agreement between the Purchasers and the
Company or as provided in Section 9 hereof (such date and time of delivery and
payment for the Securities being herein called the "Closing Date"). Delivery of
the Securities shall be made to the Purchasers against payment by the Purchasers
of the
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purchase price thereof to or upon the order of the Company by certified or
official bank check or checks drawn on or by a New York Clearing House bank and
payable in same day funds or by wire transfer of same day funds to an account or
accounts specified by the Company at least one business day prior to the Closing
Date. Delivery of the Securities shall be made at such location as the
Purchasers shall reasonably designate at least one business day in advance of
the Closing Date and payment for the Securities shall be made at the office of
Hogan & Hartson L.L.P., 555 Thirteenth Street, N.W., Washington, D.C. 20004.
Certificates for the Securities shall be registered in such names and in such
denominations as the Purchasers may request not less than two business days in
advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Purchasers in New York, New York, not later than
1:00 PM on the business day prior to the Closing Date.
4. Offering of Securities; Restrictions on Transfer. The Purchasers
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acknowledge that they are purchasing the Securities pursuant to a private
sale exemption from registration under the Act, and that the Securities
have not been registered under the Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except pursuant to an exemption from the registration requirements
of the Act. Each Purchaser represents and warrants to and agrees with the
Company that (i) it, its affiliates and any person acting on its or its
affiliates behalf, have not solicited and will not solicit any offer to buy
or offer to sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Regulation D) or
in any manner involving a public offering within the meaning of Section
4(2) of the Act or, with respect to Securities to be sold in reliance on
Regulation S, by means of any directed selling efforts and (ii) it has
solicited and willsolicit offers to buy the Securities only from, and has
offered and will offer, sell or deliver the Securities only to, (A) persons
who it reasonably believes to be QIBs or, if any such person is buying for
one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each
such account is a QIB, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A and (B) Foreign Purchasers to whom, and under
circumstances which, it reasonably believes offers and sales of Securities
may be made without registration of the Securities under the Act in
reliance upon Regulation S thereunder and who provide to it a letter (a
"Regulation S Letter") in the form of Exhibit A hereto. Each Purchaser
agrees, with respect to resales made in reliance on Rule 144A, other than
through the National Association of Securities Dealers, Inc. PORTAL Market,
of any Securities purchased from the Company hereunder, to deliver either
with the confirmation of such resale or otherwise prior to settlement of
such resale a notice to the effect that the resale of such Securities has
been made in reliance upon the exemption from the registration requirements
of the Act provided by Rule 144A. Each Purchaser agrees, with respect to
resales made in reliance on Regulation S, to deliver either with the
confirmation of such resale or otherwise prior to settlement of such resale
a notice substantially to the following effect:
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"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act") and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of the distribution thereof at
any time or (ii) otherwise until 40 days after the later of the date
of commencement of the offering and the latest closing date, except in
either case in accordance with Regulation S under the Securities Act.
Terms used above have the meaning given them by Regulation S."
(b) The Purchasers represent and warrant that (i) they have not
offered or sold, and will not offer or sell, in the United Kingdom, by
means of any document, any Securities other than to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995; (ii) they have complied and
will comply with all applicable provisions of the Financial Services Act
1986 and the Public Offers of Securities Regulations of 1995 of the United
Kingdom with respect to anything done by them in relation to the Securities
in, from or otherwise involving the United Kingdom and (iii) they have only
issued or passed on, and will only issue or pass on, in the United Kingdom
any document received by them in connection with the issue of the
Securities to a person who is of the kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom the document may otherwise lawfully be issued
or passed on.
(c) Each Purchaser represents and warrants that it is a QIB and that
it will offer the Securities for resale only upon the terms and conditions
set forth in this Agreement and in the Final Memorandum.
5. Agreements. The Company agrees with the Purchasers that:
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(a) The Company will furnish to the Purchasers, without charge, during
the period mentioned in paragraph (c) below, as many copies of the Final
Memorandum and any supplements and amendments thereof or thereto as the
Purchasers may reasonably request. The Company will pay the expenses of
printing or other production of all documents relating to the offering.
(b) The Company will not distribute, amend or supplement the Final
Memorandum without prior consent of Salomon Smith Barney Inc., which
consent shall not be unreasonably withheld.
(c) If, at any time prior to the completion of the sale of the
Securities by the Purchasers, any event occurs as a result of which the
Final Memorandum as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
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which they were made not misleading, or if it shall be necessary to amend
or supplement the Final Memorandum to comply with applicable law, the
Company promptly will notify the Purchasers of the same and will prepare
and provide to the Purchasers pursuant to paragraph (a) of this Section 5
an amendment or supplement which will correct such statement or omission or
effect such compliance.
(d) The Company will use its best efforts to qualify the Securities
for sale under the laws of such jurisdictions as the Purchasers may
reasonably designate, will use its best efforts to maintain such
qualifications in effect so long as required for the sale of the Securities
and will arrange for the determination of the legality of the Securities
for purchase by institutional investors under the laws of such
jurisdictions as the Purchasers may reasonably request. The Company will
promptly advise the Purchasers of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. Notwithstanding the foregoing, the Company
shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to file a general consent
to service of process in any jurisdiction.
(e) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D) of the Company will solicit any offer to buy or offer or
sell the Securities by means of any form of general solicitation or general
advertising (within the meaning of Regulation D).
(f) None of the Company, its affiliates nor any person acting on
behalf of the Company or its affiliates will engage in any directed selling
efforts with respect to the Securities within the meaning of Regulation S,
and the Company, its affiliates and each such person acting on its or their
behalf will comply with the offering restrictions requirement of Regulation
S.
(g) The Company shall, during any period in the two years after the
Closing Date in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act, make available, upon request, to any holder of such
Securities in connection with any sale thereof and any prospective
purchaser of Securities from such holder the information ("Rule 144A
Information") specified in Rule 144A(d)(4) under the Act.
(h) The Company will not, and will not permit any of its affiliates
(as defined in Rule 501(b) of Regulation D) to, resell any Securities which
constitute "restricted securities" under Rule 144 that have been acquired
by any of them, otherwise than pursuant to an effective registration
statement under the Act.
(i) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D) will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) the
offering of which security will be integrated with
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the sale of the Securities in a manner which would require the registration
of the Securities under the Act.
(j) The Company shall use its best efforts in cooperation with the
Purchasers to permit the Securities to be eligible for clearance and
settlement through The Depository Trust Company.
(k) The Company will not, for a period of 90 days following the date
and time that this Agreement is executed and delivered by the parties
hereto (the "Execution Time"), without prior written consent of Salomon
Smith Barney Inc, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any debt securities
issued or guaranteed by the Company (other than the securities offered
pursuant to an Exchange Offer Registration Statement for the Securities).
(l) The Company shall include information substantially in the form
set forth in Exhibit B in each Final Memorandum.
6. Conditions to the Obligations of the Purchasers. The obligations
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of the Purchasers to purchase the Securities shall be subject to the accuracy of
the representations and warranties on the part of the Company contained herein
as of the Execution Time and the Closing Date, to the accuracy of the statements
of the Company made in any certificates pursuant to the provisions hereof, to
the performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Company shall have furnished to the Purchasers the opinion of
counsel for the Company, dated the Closing Date, substantially in the form
of Exhibit C.
(b) The Company shall have furnished to the Purchasers the opinion of
Swidler Berlin Shereff Friedman, LLP, special counsel to the Company on
regulatory matters, dated the Closing Date, to the effect that:
(i) the statements in or incorporated by reference in the Final
Memorandum under the headings "Risk Factors - Wireline Competition,"
"Risk Factors -Wireless Competition," "Risk Factors - PCS System
Implementation Risks," "Risk Factors- Relocation of Fixed Microwave
Licensees," "Risk Factors - Regulation," "Business - Business
Strategy," "Business - Market Potential," "Business -Expansion of
Certain Facilities-based Services," "Business - Wireless Services,"
"Business - Competition" and "Business - Regulation" fairly and
accurately summarize the laws, case law, rules, regulations and orders
of the Federal Communications Commission ("FCC") and the comparable
state regulatory agencies or bodies with direct regulatory
jurisdiction over telecommunications matters in the states in which
the Company and any of the Subsidiaries provide intrastate services
(the "State Regulatory Agencies") except for such changes with respect
to such laws, case law, rules, regulations and orders which could not
have a material adverse effect
12
on the Company and, to the best knowledge of such counsel, the
statements in or incorporated by reference in the Final Memorandum
under the headings "Risk Factors - Dependence on Regional Bell
Operating Companies; US West Centrex Action," "Risk Factors - Refusal
of US West to Improve its Processing of Service Orders," "Business-
Current Products and Services" and "Business - Legal Proceedings"
fairly and accurately summarize the legal proceedings set forth
therein with respect to the US West Centrex Action (as defined in or
incorporated by reference in the Final Memorandum) and the action
against US West Communications, Inc. concerning the processing of
orders except for such changes with respect to such legal proceedings
and action which could not have a material adverse effect on the
Company;
(ii) the Company and the Subsidiaries possess all material
certificates, authorities and permits required by the FCC and State
Regulatory Agencies for the provision of the telecommunications
services currently provided by the Company and the Subsidiaries,
except where the failure to possess such certificates, authorities or
permits could not reasonably be expected to have a material adverse
effect on the Company and its subsidiaries; and the Company and the
Subsidiaries are in compliance in all material respects with such
certificates, authorities and permits;
(iii) to the best knowledge of such counsel, neither the Company
nor any of the Subsidiaries is subject to any pending or threatened
action, suit or proceeding before the FCC or any State Regulatory
Agency or (with respect to federal or state telecommunications laws)
any court which could reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, except as
disclosed in the Final Memorandum;
(iv) no consent, approval, authorization or order of the FCC or
any State Regulatory Agency is required for the issuance and sale of
the Securities or the consummation of the transactions contemplated
hereby; and
(v) neither the issuance and sale of the Securities nor the
consummation of the transactions contemplated hereby will result in a
breach or violation of any law, rule, regulation, judgment, order or
decree of the FCC or any State Regulatory Agency applicable to the
Company or any of the Subsidiaries.
In rendering such opinion, such counsel may rely as to matters of fact, to
the extent they deem proper and reasonable, on certificates of public
officials and responsible officers of the Company, including certificates
that define the scope of the telecommunications services provided by the
Company and the Subsidiaries.
(c) The Purchasers shall have received from Mayer, Brown & Platt,
counsel for the Purchasers, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the
Indenture, the Final Memorandum (together with any
13
amendment or supplement thereof or thereto) and other related matters as
the Purchasers may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(d) The Company shall have furnished to the Purchasers a certificate
of the Company, signed by the Chairman of the Board or the President and
the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have
carefully examined the Final Memorandum, any amendment or supplement to the
Final Memorandum and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date; and
(ii) since the date of the most recent financial statements
included or incorporated by reference in the Exchange Offer
Prospectus, there has been no material adverse change in the condition
(financial or other), earnings, business or properties of the Company
and its subsidiaries, whether or not arising from transactions in the
ordinary course of business, except as set forth, incorporated by
reference or contemplated in the Exchange Offer Prospectus.
(e) At the Closing Date, Arthur Andersen LLP shall have furnished to
the Purchasers a letter or letters, dated as of the Closing Date, in form
and substance satisfactory to the Purchasers, confirming that they are
independent accountants within the meaning of Rule 101 of the American
Institute of Certified Public Accountants' Code of Professional Conduct and
its interpretations and rulings and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules, if any, included or incorporated by
reference in the Final Memorandum and reported on by them, as
applicable, comply in form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries;
carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of the
meetings of the stockholders, directors and the Audit and Compensation
Committee of the Company and the Subsidiaries; and inquiries of
certain officials of the Company who have responsibility for financial
and accounting matters of the Company and its
14
subsidiaries as to transactions and events subsequent to December 31,
1997, nothing came to their attention which caused them to believe
that:
(1) to the extent applicable, any unaudited financial
statements included or incorporated by reference in the Final
Memorandum do not comply in form in all material respects with
applicable accounting requirements and with the published rules
and regulations of the Commission with respect to financial
statements included or incorporated in quarterly reports on Form
10-Q under the Exchange Act; and said unaudited financial
statements are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent
with that of the audited financial statements included or
incorporated by reference in the Final Memorandum; or
(2) with respect to the period subsequent to June 30, 1998,
there were any changes, at a specified date not more than five
business days prior to the date of the letter, in the long-term
debt of the Company and its subsidiaries or capital stock of the
Company or decreases in the stockholders' equity of the Company
and its subsidiaries as compared with the amounts shown on the
June 30, 1998 consolidated balance sheet included or incorporated
by reference in the Final Memorandum, or for the period from July
1, 1998 to such specified date as compared with the corresponding
period in the preceding year, there were any decreases in revenue
or increases in operating loss or net loss of the Company and its
subsidiaries, except in all instances for changes, decreases or
increases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Purchasers;
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in or incorporated by reference the Final Memorandum, including
the information set forth under the captions "Selected Consolidated
Financial Data", "Pro Forma Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Final Memorandum, agrees with the accounting
records of the Company and its subsidiaries, excluding any questions
of legal interpretation; and
(iv) on the basis of a reading of the unaudited pro forma
financial statements included or incorporated by reference in the
Final Memorandum (the "pro forma financial statements"); carrying out
certain specified procedures; inquiries of certain officials of the
Company who have responsibility for financial and accounting
15
matters; and proving the arithmetic accuracy of the application of the
pro forma adjustments to the historical amounts in the pro forma
financial statements, nothing came to their attention which caused
them to believe that the pro forma financial statements do not comply
in form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts
in the compilation of such statements.
References to the Final Memorandum in this paragraph (e) include any
amendment or supplement thereof or thereto at the date of the letter.
(f) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum (exclusive of any
amendment or supplement thereof or thereto), there shall not have been (i)
any change or decrease specified in the letter or letters referred to in
paragraph (e)(ii)(2) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business or
properties of the Company and its subsidiaries the effect of which, in any
case referred to in clause (i) or (ii) above, is, in the judgment of the
Purchasers, so material and adverse as to make it impractical or
inadvisable to market the Securities as contemplated by the Final
Memorandum (exclusive of any amendment or supplement thereof or thereto).
(g) As of the Closing Date the Securities shall be rated not lower
than B by Standard & Poor's Corporation and B-3 by Moody's Investors
Service, Inc. Subsequent to the Execution Time, there shall not have been
any decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act) or any notice given of any intended
or potential decrease in any such rating or of a possible change in any
such rating that does not indicate the direction of the possible change.
(h) Prior to the Closing Date, the Company shall have furnished to the
Purchasers such further information, certificates and documents as the
Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Purchasers and counsel for the Purchasers, this Agreement
and all obligations of the Purchasers hereunder may be canceled at, or at any
time prior to, the Closing Date by the Purchasers. Notice of such cancellation
shall be given to the Company in writing or by telephone or telegraph confirmed
in writing.
The documents required to be delivered by this Section 6 shall be delivered
at the office of Hogan & Hartson L.L.P., Columbia Square, 555 Thirteenth Street,
N.W., Washington, DC 20004, counsel for the Company, at 9:00 a.m., on the
Closing Date.
16
7. Reimbursement of Purchasers' Expenses. If the sale of the
-------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 9(i) hereof due to suspension of
trading in the Company's class A common stock or because of any refusal,
inability or failure on the part of the Company to perform any agreement herein
or comply with any provision hereof other than by reason of a default by the
Purchasers, the Company will reimburse the Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by it in connection with the proposed purchase and
sale of the Securities.
8. Indemnification and Contribution. The Company agrees to indemnify
--------------------------------
and hold harmless the Purchasers, the directors, officers, employees and
agents of each Purchaser and each person who controls any Purchaser within
the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained or incorporated by
reference in the Final Memorandum or any Rule 144A Information provided by
the Company to any holder or prospective purchaser of Securities pursuant
to Section 5(g), or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
-------- -------
Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made in the Final Memorandum, or in any amendment thereof or
supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchasers
specifically for inclusion therein; and provided, further, that the
-------- -------
foregoing indemnity agreement with respect to the Final Memorandum shall
not inure to the benefit of the Purchasers from whom the person asserting
or causing any such losses, claims, damages or liabilities purchased
Securities (or to the benefit of any person controlling any Purchaser or
any directors, officers, employees and agents of any Purchaser), if a copy
of the Final Memorandum (or the Final Memorandum as amended or
supplemented) (if the Company shall have timely furnished the Purchasers
with sufficient copies thereof) was not sent or given by or on behalf of
the Purchasers to such person at or prior to the written confirmation of
the sale of the Securities to such person and if the Final Memorandum (or
the Final Memorandum as amended or supplemented) would have cured the
defect giving rise to such loss, claim, damage or liability. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have.
17
(b) The Purchasers agree to indemnify and hold harmless the Company,
its directors, its officers, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Purchasers, but
only with reference to written information relating to the Purchasers
furnished to the Company by or on behalf of the Purchasers specifically for
inclusion in the Final Memorandum or in any amendment thereof or supplement
thereto. This indemnity agreement will be in addition to any liability
which the Purchasers may otherwise have. The Company acknowledges that the
statements set forth in the last paragraph of the cover page and under the
heading "Plan of Distribution" (excluding the fourth paragraph immediately
following the table contained under the heading "Plan of Distribution") in
the Final Memorandum constitute the only information furnished in writing
by or on behalf of the Purchasers for inclusion in the Final Memorandum.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
-------- -------
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
the institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or
18
potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Purchasers agree to
contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the
Company and the Purchasers may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company and by
the Purchasers from the offering of the Securities; provided, however, that
-------- -------
in no case shall the Purchasers be responsible for any amount in excess of
the purchase discount or commission applicable to the Securities purchased
by the Purchasers hereunder. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the
Purchasers shall contribute in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company
and of the Purchasers in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be
equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Purchasers shall be deemed to be
equal to the total purchase discounts and commissions, in each case as set
forth on the cover page of the Final Memorandum. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Purchasers. The
Company and the Purchasers agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls any Purchaser within the meaning
of either the Act or the Exchange Act and each director, officer, employee
and agent of any Purchaser shall have the same rights to contribution as
each Purchaser, and each person who controls the Company within the meaning
of either the Act or the Exchange Act and each officer and director of the
Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination in
-----------
the absolute discretion of the Purchasers, by notice given to the Company prior
to delivery of and payment for the Securities, if prior to such time (i) trading
in the Company's class A common stock shall have been suspended by the
Commission or the Nasdaq National Market or trading in securities generally on
the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on either of such Exchange or Market, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war
19
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the judgment of the Purchasers, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Final Memorandum (exclusive of any amendment or supplement thereof or thereto).
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Purchasers set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Purchasers or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
11. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Purchasers, will be mailed,
delivered or sent by facsimile transmission and confirmed to them at Salomon
Smith Barney Inc, Seven World Trade Center, New York, New York, 10048; or, if
sent to the Company, will be mailed, delivered or sent by facsimile transmission
and confirmed to it at McLeodUSA Incorporated, McLeodUSA Technology Park, 6400 C
Street, SW, P.O. Box 3177, Cedar Rapids, Iowa 52406, attention legal
department.
12. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
13. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the laws of the State of New York.
20
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and the Purchasers.
Very truly yours,
MCLEODUSA INCORPORATED
By: _________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Smith Barney Inc.
By: _________________________
Name:
Title:
Bear, Stearns & Co. Inc.
By: _________________________
Name:
Title:
Morgan Stanley & Co. Incorporated
By: _________________________
Name:
Title:
Chase Securities Inc.
By: _________________________
Name:
Title:
EXHIBIT A
Form of Investment Letter for
-----------------------------
Foreign Purchasers
------------------
Salomon Smith Barney Inc
Bear, Stearns & Co. Inc.
Morgan Stanley & Co. Incorporated
Chase Securities, Inc.
c/o Salomon Smith Barney Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
In connection with our proposed purchase of $300,000,000 aggregate
principal amount of the 9 1/2% Senior Notes Due 2008 (the "Notes") of McLeodUSA
Incorporated, a Delaware corporation (the "Company"), we confirm that:
1. We understand that the Notes have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and may not be sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf
of any accounts for which we are acting as hereinafter stated, that if we should
resell, pledge or otherwise transfer such Notes within two years after the
original issuance of the Notes or if at the proposed date of such transfer or
during the three months preceding the proposed date of transfer we were an
Affiliate of the Company, such Notes may be resold, pledged or transferred only
(i) to the Company, (ii) so long as such Notes are eligible for resale pursuant
to Rule 144A under the Securities Act ("Rule 144A"), to a person whom we
reasonably believe is a "qualified institutional buyer" (as defined in Rule
144A) ("QIB") that purchases for its own account or for the account of a QIB, to
whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the transferor on the
Certificate of Transfer on the reverse of the certificate for the Notes), (iii)
in an offshore transaction in accordance with Regulation S under the Securities
Act (as indicated by the box checked by the transferor on the Certificate of
Transfer on the reverse of the certificate for the Notes), or (iv) to an
institution that is an "Accredited Investor" as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the certificate for
the Notes) that is acquiring the Notes for investment purposes and not for
distribution and a Certificate in the form hereof is delivered to the Company
and to the Trustee under the Indenture relating to the Notes by such Accredited
Investor, in each case in accordance with any applicable securities laws of any
state of the United States, and we will notify any purchaser of the Notes from
us of the above resale restrictions, if then applicable. We
2
further understand that in connection with any transfer of the Notes by us that
the Company and the Trustee may request, and if so requested we will furnish,
such certificates and other information as they may reasonably require to
confirm that any such transfer complies with the foregoing restrictions.
2. We are not a "U.S. Person" as defined in Rule 902 of Regulation S under
the Securities Act and are acquiring (which acquisition is not for the account
or benefit of a U.S. Person) the Notes in an offshore transaction complying with
the provisions of Rule 904 of Regulation S under the Securities Act.
3. You and the Company are entitled to rely upon this letter and you and the
Company are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
_______________________________
(Name of Purchaser)
By:____________________________
Date:__________________________
EXHIBIT B
NOTICE TO INVESTORS
[To Come]
EXHIBIT C
[form of opinion of Hogan & Hartson LLP]