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$65,000,000 ESCHELON OPERATING COMPANY 83/8% Senior Second Secured Notes due 2010 PURCHASE AGREEMENT

Note Purchase Agreement

$65,000,000 

ESCHELON OPERATING COMPANY 

83/8% Senior Second Secured Notes due 2010 

PURCHASE AGREEMENT | Document Parties: ESCHELON OPERATING COMPANY  | JEFFERIES & COMPANY, INC. You are currently viewing:
This Note Purchase Agreement involves

ESCHELON OPERATING COMPANY | JEFFERIES & COMPANY, INC.

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Title: $65,000,000 ESCHELON OPERATING COMPANY 83/8% Senior Second Secured Notes due 2010 PURCHASE AGREEMENT
Governing Law: New York     Date: 1/26/2005
Law Firm: Piper Rudnick, LLP; Mayer, Brown, Rowe & Maw LLP    

$65,000,000 

ESCHELON OPERATING COMPANY 

83/8% Senior Second Secured Notes due 2010 

PURCHASE AGREEMENT, Parties: eschelon operating company  , jefferies & company  inc.
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Exhibit 1.1

$65,000,000

ESCHELON OPERATING COMPANY

8 3 / 8 % Senior Second Secured Notes due 2010

PURCHASE AGREEMENT

        November 19, 2004

JEFFERIES & COMPANY, INC.
520 Madison Avenue
New York, New York 10022

Ladies and Gentlemen:

        Eschelon Operating Company, a Minnesota corporation (the " Company "), and the guarantors signatory hereto (the " Guarantors "), jointly and severally, hereby agree (this " Agreement ") with you as follows:

         1.      Issuance of Notes.     Subject to the terms and conditions herein contained, the Company proposes to issue and sell to Jefferies & Company, Inc. (the " Initial Purchaser ") $65,000,000 aggregate principal amount at maturity of 8 3 / 8 % Senior Second Secured Notes due 2010 (each a " Note " and, collectively, the " Notes "). The Notes will be issued pursuant to an indenture (the " Indenture "), dated as of March 17, 2004, by and among the Company, the Guarantors and The Bank of New York Trust Company, N.A., as trustee (the " Trustee "). Capitalized terms used but not defined herein shall have the meanings set forth in the Offering Circular.

        The Notes will be offered and sold to the Initial Purchaser pursuant to an exemption from the registration requirements under the Securities Act of 1933, as amended (the " Act "). Upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Act, the Notes shall bear the legends set forth in the final offering circular related to the issuance of the Notes, dated the date hereof (the " Final Offering Circular "). The Company has prepared a preliminary offering circular, dated November 17, 2004 (the " Preliminary Offering Circular "), and the Final Offering Circular relating to the offer and sale of the Notes (the " Offering "). "Offering Circular" means, as of any date or time referred to in this Agreement, the most recent offering circular (whether the Preliminary Offering Circular or the Final Offering Circular, and any amendment or supplement to either such document), including exhibits and schedules thereto.

         2.      Terms of Offering.     The Initial Purchaser has advised the Company, and the Company understands, that the Initial Purchaser will make offers to sell (the " Exempt Resales ") some or all of the Notes purchased by the Initial Purchaser hereunder on the terms set forth in the Final Offering Circular, as amended or supplemented, to persons (the " Subsequent Purchasers ") (i) outside the United States in compliance with Regulation S of the Act, or (ii) whom the Initial Purchaser (A) reasonably believes to be "qualified institutional buyers" as defined in Rule 144A under the Act (" QIBs "), as such Rule may be amended from time to time, or (B) reasonably believes (based upon written representations made by such persons to the Initial Purchaser) to be institutional "accredited investors" (" Accredited Investors ") as defined in Rule 501(a)(1), (2), (3) or (7) under the Act.

        Pursuant to the Indenture, all Domestic Restricted Subsidiaries of Eschelon Telecom, Inc. (the " Parent ") as of the Closing Date (as hereinafter defined) and all future Domestic Restricted Subsidiaries of the Parent (other than the Company), jointly and severally, shall fully and unconditionally guarantee, on a senior basis, to each holder of the Notes and the Trustee, the payment and performance of the Company's obligations under the Indenture and the Notes (each such guarantee being referred to herein as a " Guarantee ").


 

        Pursuant to the terms of the Collateral Agreements (as defined in the Indenture), all of the Company's obligations under the Indenture and the Notes will be secured by a second priority lien and security interest in substantially all of the assets of the Parent and its Domestic Restricted Subsidiaries (except for a prior ranking lien in favor of the lenders under a Credit Agreement and in favor of the holders of certain other Permitted Liens) in favor of the Trustee, as secured party for itself and for the benefit of the holders of the Notes, the Exchange Notes and the Private Exchange Notes (the " Secured Parties ").

        Holders of the Notes (including Subsequent Purchasers) will have the registration rights set forth in the registration rights agreement applicable to the Notes (the " Registration Rights Agreement "), to be executed on and dated as of the Closing Date (as hereinafter defined). Pursuant to the Registration Rights Agreement, Parent and the Company will agree, among other things, to file with the Securities and Exchange Commission (the " SEC ") (i) a registration statement under the Act (the " Exchange Offer Registration Statement ") relating to senior second secured notes (the " Exchange Notes ") which shall be identical to the Notes (except that the Exchange Notes shall have been registered pursuant to such registration statement and will not be subject to restrictions on transfer or contain additional interest provisions) to be offered in exchange for the Notes (such offer to exchange being referred to as the " Exchange Offer "), and/or (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Act (the " Shelf Registration Statement ") relating to the resale by certain holders of the Notes. If required under the Registration Rights Agreement, the Company will issue Exchange Notes to the Initial Purchaser (the " Private Exchange Notes "). If the Company fails to satisfy its obligations under the Registration Rights Agreement, it will be required to pay additional interest to the holders of the Notes under certain circumstances, as set forth in the Registration Rights Agreement.

        This Agreement, the Indenture, the Collateral Agreements, the Registration Rights Agreement, the Notes, the Guarantees, the Exchange Notes, the Private Exchange Notes and the Escrow Agreement, to be dated November 29, 2004 (the " Escrow Agreement "), among the Company, the Guarantors and The Bank of New York Trust Company, N.A., as escrow agent (the " Escrow Agent "), pursuant to which the Company will deposit the gross proceeds from the Offering in an escrow account (the " Escrow Account "), are collectively referred to herein as the " Documents ."

        The Parent (as defined below) is proposing to acquire 100% of the issued and outstanding shares of Advanced TelCom, Inc. (the " ATI Acquisition "), subject to receipt of the consents, approvals, authorizations and orders listed in Exhibit 8.2(b) of the Acquisition Agreement (as defined below) (the " ATI Approvals "), and substantially all of the assets of GE Business Productivity Systems, subject to receipt of regulatory consents, approvals, authorizations and orders in connection therewith (the " GEBPS Approvals "), in each case, following completion of the Offering. The ATI Approvals, the GEBPS Approvals and regulatory approvals of the encumbrance of the assets of the Company and its subsidiaries in connection with this Offering are collectively referred to herein as the " Approvals ", and all such Approvals are expected to be received after the Closing Date.

         3.      Purchase, Sale and Delivery.     On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase from the Company, the Notes at a purchase price of 79% of the principal amount at maturity thereof plus accrued interest from September 15, 2004. Pending the receipt of the ATI Approvals, the receipt of a new equity investment and certain other events, the gross proceeds of the Offering will be placed into the Escrow Account.

        Delivery to the Initial Purchaser of, and payment for, the Notes shall be made at a closing (the " Closing ") to be held at 10:00 a.m., New York time, on November 29, 2004 (the " Closing Date ") at the New York offices of Mayer, Brown, Rowe & Maw LLP.

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        As consideration for the placement of the Notes and financial advisory services rendered, the Company agrees to pay to the Initial Purchaser the following fees:

        (i)    $1,027,000, representing a commission on the placement of the Notes equal to 2.0% of the gross proceeds; and

        (ii)   a financial advisory fee of $1,027,000;

in each case due and payable on the Closing Date.

        The Company will deliver to the Initial Purchaser against payment of the purchase price the Notes to be offered and sold by the Initial Purchaser (i) in reliance on Regulation S (the " Regulation S Notes ") in the form of one or more permanent global notes, in such denominations as the Initial Purchaser shall request, in registered form without interest coupons (the " Offered Regulation S Global Notes ") which will be deposited with the Trustee as custodian for The Depository Trust Company (" DTC ") for the respective accounts of the DTC participants for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System (" Euroclear "), and Clearstream Banking, société anonyme, Luxembourg (" Clearstream , Luxembourg ") and registered in the name of Cede & CO., as nominee for DTC, (ii) in reliance on Rule 144A under the Securities Act (the " 144A Notes ") in the form of one permanent global security, in such denominations as the Initial Purchaser shall request, without interest coupons (the " Restricted Global Notes ") which will be deposited with the Trustee as custodian for DTC and registered in the name of Cede & Co., as nominee for DTC and (iii) to Accredited Investors in the form of one or more certificated notes, in such denominations as the Initial Purchaser shall request, without interest coupons (the " AI Notes "). The Offered Regulation S Global Notes, the AI Notes and the Restricted Global Notes shall be assigned separate CUSIP numbers.

        Payment for the Regulation S Notes, the AI Notes and the 144A Notes shall be made by the Initial Purchaser in Federal (same day) funds by official check or checks or wire transfer to one or more accounts as the Company shall designate to the Initial Purchaser at least one (1) business day prior to the Closing Date, drawn to the order of the Company at the office of Mayer, Brown, Rowe & Maw LLP at the Closing on the Closing Date, against delivery (A) to the Trustee as custodian, for DTC; of (i) the Offered Regulation S Global Notes representing all of the Regulation S Notes for the respective accounts of the DTC participants for Euroclear and Clearstream, Luxembourg and (ii) the Restricted Global Notes representing all of the 144A Notes and (B) of the AI Notes to the Initial Purchaser. The Offered Regulation S Global Notes and the Restricted Global Notes will be made available for inspection at the above office of Mayer, Brown, Rowe & Maw LLP at least 24 hours prior to the Closing Date.

         4.      Representations and Warranties of the Company.     The Company and the Guarantors, jointly and severally, represent and warrant to the Initial Purchaser that, as of the date hereof and as of the Closing Date:

        (a)   The Preliminary Offering Circular as of its date did not, and the Final Offering Circular as of its date did not, and as of the Closing Date will not, and each supplement or amendment thereto as of its date will not, contain any untrue statement of a material fact or omit to state any material fact (except, in the case of the Preliminary Offering Circular, for pricing terms and other financial terms intentionally left blank) necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided , however , that neither the Company nor the Guarantors makes any representation or warranty as to the Initial Purchaser Information (as defined in Section 11 hereof). Each of the Preliminary Offering Circular and the Final Offering Circular, as of their respective dates, contained, and the Final Offering Circular, as amended or supplemented, as of the Closing Date, will contain, all the information specified in, and meet the requirements of, Rule 144A(d)(4) under the Act. There are no related party transactions that would be required to be

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disclosed in the Final Offering Circular if the Final Offering Circular were a prospectus included in a registration statement on Form S-1 filed under the Act that are not disclosed in the Final Offering Circular.

        (b)   Each corporation, partnership or other entity in which the Company or Parent, directly or indirectly through any of their respective Subsidiaries, owns more than fifty percent (50%) of any class of Capital Stock is listed on Schedule I attached hereto (the " Subsidiaries "), and such Capital Stock is free and clear of all Liens (as hereinafter defined) other than Permitted Liens.

        (c)   The Company, Parent and each of their respective Subsidiaries (i) has been duly organized or formed, as the case may be, is validly existing and is in good standing under the laws of its jurisdiction of organization, (ii) has all requisite power and authority to carry on its business and to own, lease and operate its properties and assets, and (iii) is duly qualified or licensed to do business and is in good standing as a foreign corporation, partnership or other entity, as the case may be, authorized to do business in each jurisdiction in which the nature of such businesses or the ownership or leasing of such properties requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on (A) the properties, business, prospects, operations, earnings, assets, liabilities or condition (financial or otherwise) of the Company, Parent and their respective Subsidiaries, taken as a whole, (B) the ability of any of the Company or the Guarantors to perform its obligations in all material respects under any Document, (C) the enforceability of any Collateral Agreement or the attachment, perfection or priority of any of the Liens intended to be created thereby or (D) the validity of any of the Documents or the consummation of any of the transactions contemplated therein (each, a " Material Adverse Effect ").

        (d)   All of the issued and outstanding shares of Capital Stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable, and were not issued in violation of any preemptive or similar rights. The table under the caption "Capitalization" in the Final Offering Circular (including the footnotes thereto) sets forth, as of the date of such table, (i) the actual cash and cash equivalents and capitalization of Parent and its Subsidiaries on a consolidated basis and (ii) the pro forma cash and cash equivalents and capitalization of the Parent and its Subsidiaries, on a consolidated basis, after giving effect to the offer and sale of the Notes and the application of the net proceeds therefrom as described in the Final Offering Circular under the section entitled "Use of Proceeds." After giving effect to the offer and sale of the Notes, all of the outstanding shares of Capital Stock or other equity interests of each of the Company's Subsidiaries (other than as required by applicable law or issuances of directors' qualifying shares) will be owned, directly or indirectly, by the Company, free and clear of all liens, security interests, mortgages, pledges, charges, equities, claims or restrictions on transferability or encumbrances of any kind (collectively, " Liens "), other than those imposed by the Act and the securities or "Blue Sky" laws of certain domestic or foreign jurisdictions, requirements for regulatory approvals and Liens constituting Permitted Liens. There are no outstanding (A) options, warrants or other rights for third parties to purchase from the Company or any of its Subsidiaries, (B) agreements, contracts, arrangements or other obligations of the Company or any of its Subsidiaries to issue to third parties or (C) other rights of third parties to convert any obligation into or exchange any securities for, in the case of each of clauses (A) through (C) , shares of Capital Stock of or other ownership or equity interests in the Company or any of its Subsidiaries.

        (e)   No holder of securities of the Company or any of its Subsidiaries will be entitled to have such securities registered under the registration statements required to be filed by the Company and the Guarantors with respect to the Exchange Notes or Private Exchange Notes pursuant to the Registration Rights Agreement.

        (f)    The Company and each of the Guarantors have all requisite corporate power and authority to execute, deliver and perform their respective obligations under the Documents to which they are a party and to consummate the transactions contemplated thereby. Each of this Agreement, the

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Indenture and the Collateral Agreements have been duly and validly authorized, executed and delivered by the Company and the Guarantors.

        (g)   Each of the Indenture and the Collateral Agreements constitutes a legal, valid and binding obligation of each of the Company and the Guarantors, enforceable against each of the Company and the Guarantors in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.

        (h)   The Registration Rights Agreement has been duly and validly authorized by the Company and the Guarantors. The Registration Rights Agreement, when executed and delivered by the Company and the Guarantors, will constitute a legal, valid and binding obligation of each of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought and (B) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations.

        (i)    The Escrow Agreement has been duly and validly authorized by the Company and the Guarantors. The Escrow Agreement, when executed and delivered by the Company and the Guarantors, will constitute a legal, valid and binding obligation of each of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought.

        (j)    The Notes, when issued, will be in the form contemplated by the Indenture. The Indenture meets the requirements for qualification under the Trust Indenture Act of 1939, as amended (the " TIA "). The Notes, Exchange Notes and Private Exchange Notes have each been duly and validly authorized by the Company and, in the case of the Notes, when delivered to and paid for by the Initial Purchaser in accordance with the terms of this Agreement and the Indenture, will have been duly executed, issued and delivered and will be legal, valid and binding obligations of the Company, entitled to the benefit of the Indenture, the Guarantee, the Collateral Agreements and the Registration Rights Agreement, and enforceable against the Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought. Upon and following delivery to the Initial Purchaser, the Notes will rank pari passu with all senior Indebtedness of the Company that is outstanding on the date hereof or that may be incurred hereafter and senior to all subordinated Indebtedness of the Company that is outstanding on the date hereof or that may be incurred hereafter.

        (k)   The Guarantees have been duly and validly authorized by the Guarantors and, when executed by the Guarantors, will have been duly executed, issued and delivered and will be legal, valid and binding obligations of the Guarantors, entitled to the benefit of the Indenture and the Registration Rights Agreement, and enforceable against the Guarantors in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, receivership,

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moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (whether applied by a court of law or equity) and the discretion of the court before which any proceeding therefor may be brought. Upon and following delivery to the Initial Purchaser, the Guarantees will rank pari passu with all senior Indebtedness of the Guarantors that is outstanding on the date hereof or that may be incurred hereafter and senior to all subordinated Indebtedness of the Guarantors that is outstanding on the date hereof or that may be incurred hereafter.

        (l)    Neither the Company, Parent, nor any of their respective Subsidiaries, is in violation of its certificate of incorporation, by-laws or any other of its organizational documents (collectively with respect to such entity, its " Charter Documents "). Neither the Company nor any of its Subsidiaries is (i) in violation of any Federal, state, local or foreign statute, law (including, without limitation, common law) or ordinance, or any judgment, decree, rule, regulation or order (collectively, " Applicable Law ") of any federal, state, local and other governmental authority, governmental or regulatory agency or body, court, arbitrator or self-regulatory organization, domestic or foreign (each, a " Governmental Authority ") or (ii) in breach of or default under any bond, debenture, note or other evidence of indebtedness, indenture, mortgage, deed of trust, lease or any other material agreement or instrument to which any of them is a party or by which any of them or their respective property is bound (collectively, " Applicable Agreements "). All material Applicable Agreements are in full force and effect and are legal, valid and binding obligations of the Company, the Parent or their respective Subsidiaries, as applicable, or, to the Company's knowledge, the other parties thereto. There exists no condition that, with the passage of time or otherwise, would constitute (a)(i) a violation of such Charter Documents or (ii) Applicable Law, (b) a breach of or default under any Applicable Agreement or (c) result in the imposition of any penalty or the acceleration of any indebtedness other than in the case of clauses (a)(ii) , (b) and (c) as would reasonably be expected, individually or in the aggregate, not to have a Material Adverse Effect.

        (m)  Neither the execution, delivery or performance of the Documents nor the consummation of any transactions contemplated therein will conflict with, violate, constitute a breach of or a default (with the passage of time or otherwise) under, require the consent of any person (other than consents already obtained and in full force and effect or the Approvals) under, result in the imposition of a Lien on any assets of the Company or any of its Subsidiaries (except for Liens created pursuant to the Documents), or result in an acceleration of indebtedness under or pursuant to (i) the Charter Documents, (ii) any material Applicable Agreement, or (iii) any Applicable Law. After consummation of the Offering and the transactions contemplated in the Documents, no Default or Event of Default under the Indenture will exist.

        (n)   When executed and delivered, the Documents will conform in all material respects to the descriptions thereof in the Final Offering Circular.

        (o)   No consent, approval, authorization or order of any Governmental Authority or third party is required for the issuance and sale by the Company of the Notes to the Initial Purchaser or the consummation by the Company and the Guarantors of the other transactions contemplated hereby, except such as have been obtained (and are in full force and effect) and except for the Approvals and the approval of regulatory authorities in connection with the granting of the lien on the assets of one or more of the Guarantors and the exercise of remedies in respect of the lien and security interest granted pursuant to the Security Documents, and such as may be required under state securities or "Blue Sky" laws in connection with the purchase and resale of the Notes by the Initial Purchaser.

        (p)   There is no action, claim, suit, demand, hearing, notice of violation or deficiency, or proceeding, domestic or foreign (collectively, " Proceedings "), pending or, to the knowledge of the Company, the Parent or any of their respective Subsidiaries, threatened, that either (i) seeks to restrain, enjoin, prevent the consummation of, or otherwise challenge any of the Documents or any of the

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transactions contemplated therein, or (ii) except as disclosed in the Final Offering Circular, would, individually or in the aggregate, have a Material Adverse Effect. Except as disclosed in the Final Offering Circular, neither the Company, the Parent, nor any of their respective Subsidiaries, is subject to any judgment, order, decree, rule or regulation of any Governmental Authority that would, individually or in the aggregate, have a Material Adverse Effect. No injunction or order has been issued and no Proceeding is pending or, to the knowledge of the Company, the Parent or any of their respective Subsidiaries, threatened that (i) asserts that the offer, sale and delivery of the Notes to the Initial Purchaser pursuant to this Agreement or the initial resale of the Notes by the Initial Purchaser in the manner contemplated by this Agreement is subject to the registration requirements of the Act, or (ii) would prevent or suspend the issuance or sale of the Notes, including the Exempt Resales, or the use of the Preliminary Offering Circular, the Final Offering Circular, or any amendment or supplement thereto, in any jurisdiction.

        (q)   Each of the Company and its Subsidiaries possesses all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made all declarations and filings with, all Governmental Authorities, presently required or necessary to own or lease, as the case may be, and to operate their respective properties and to carry on their respective businesses as now or proposed to be conducted as set forth in the Final Offering Circular (" Permits "), except where the failure to obtain such Permits would not, individually or in the aggregate, have a Material Adverse Effect and except for the Approvals; each of the Company and its Subsidiaries has fulfilled and performed all of its obligations with respect to such Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit; and neither the Company nor any of its Subsidiaries has received any notice of any proceeding relating to revocation or modification of any such Permit, except as disclosed in the Final Offering Circular or except where such revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect.

        (r)   Each of the Parent and its Subsidiaries has good and marketable title to all real property owned by it and good title to all personal property owned by it and good and indefeasible title to all leasehold estates in real and personal property being leased by it and, as of the Closing Date, will be free and clear of all Liens (other than Permitted Liens). The assets of each of the Parent and its Subsidiaries include all of the assets and properties necessary or required in, or otherwise material to, the conduct of the businesses of each of them as currently conducted, and upon completion of the Acquisition, as proposed to be conducted (as described in the Final Offering Circular), and such assets are in good working condition, except where the failure of such assets to be in working condition would not, individually or in the aggregate, have a Material Adverse Effect.

        (s)   All Tax returns required to be filed by the Company, the Parent and each of their respective Subsidiaries have been filed, or valid extensions have been granted, and all such returns that have been filed are true, complete, and correct in all material respects. Except as disclosed in the Offering Circular, all material Taxes that are due from the Company, the Parent and their respective Subsidiaries have been paid other than those (i) currently payable without penalty or interest or (ii) being contested in good faith and by appropriate proceedings and for which adequate reserves have been established in accordance with generally accepted accounting principles of the United States, consistently applied (" GAAP "). Except as disclosed in the Offering Circular, there are no actual or proposed Tax assessments against the Company, the Parent or any of their respective Subsidiaries that would, individually or in the aggregate, have a Material Adverse Effect. The accruals and reserves on the books and records of the Company, the Parent and their respective Subsidiaries in respect of any material Tax liability for any taxable period not finally determined are adequate to meet any assessments of Tax for any such period. For purposes of this Agreement, the term "Tax" and "Taxes" shall mean all Federal, state, local and foreign taxes, and other assessments of a similar nature

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(whether imposed directly or through withholding), including, without limitation, any interest, additions to tax, or penalties applicable thereto.

        (t)    Each of the Company and its Subsidiaries owns, or is licensed under, and has the right to use, all patents, patent rights, licenses, inventions, copyrights, know-how (including, without limitation, trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, " Intellectual Property ") necessary for the conduct of its businesses and, as of the Closing Date, will be free and clear of all Liens, other than Permitted Liens. Neither the Parent nor any Subsidiary has received any claims or notices of any potential claim asserted by any person challenging the use of any such Intellectual Property by the Parent or any of its Subsidiaries or questioning the validity or effectiveness of the Intellectual Property or any license or agreement related thereto and neither the Parent nor any Subsidiary has any knowledge of any facts or circumstances that would reasonably be expected to result in any such claim or potential claim. There is no valid basis for any such claim, other than any claims that would not, individually or in the aggregate, have a Material Adverse Effect. The use of such Intellectual Property by the Company or any of its Subsidiaries will not infringe on the Intellectual Property rights of any other person.

        (u)   The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) material transactions are executed in accordance with management's general or specific authorization, (ii) material transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any material differences.

        (v)   The audited consolidated financial statements and related notes of the Parent and its Subsidiaries contained in the Final Offering Circular (the " Financial Statements ") present fairly the financial position, results of operations and cash flows of the Parent and its consolidated Subsidiaries, as of the respective dates and for the respective periods to which they apply and have been prepared in accordance with GAAP and the requirements of Regulation S-X of the Act. The financial data set forth under "Summary Consolidated Historical and Pro Forma Financial and Other Data" and "Selected Consolidated Financial and Other Data" included in the Final Offering Circular have been prepared on a basis consistent with that of the Financial Statements and present fairly the financial position and results of operations of the Parent and its consolidated Subsidiaries as of the respective dates and for the respective periods indicated. All other financial, statistical, and market and industry-related data included in the Final Offering Circular are fairly and accurately presented and are based on or derived from sources that the Company believes to be reliable and accurate. Ernst & Young LLP (" E&Y ") are independent public accountants with respect to the Parent and the Company.

        (w)  The pro forma financial information and the related notes of Parent and its Subsidiaries set forth in the Final Offering Circular include assumptions that were made in good faith and provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein. The related pro forma adjustments give appropriate effect to those assumptions and the pro forma adjustments reflect the proper application of those adjustments to the historical financial statement amounts in the pro forma financial data included in the Final Offering Circular. The pro forma financial data set forth under "Summary Consolidated Historical and Pro Forma Financial and Other Data" and "Unaudited Pro Forma Consolidated Financial Information" in the Final Offering Circular comply as to form in all material respects with the applicable accounting requirements of Regulation S-X under the Act and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements.

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        (x)   Subsequent to the respective dates as of which information is given in the Final Offering Circular, except as disclosed in the Final Offering Circular, (i) neither the Parent nor any of its Subsidiaries has incurred any liabilities, direct or contingent, that are material, individually or in the aggregate, to the Parent and its Subsidiaries, taken as a whole, or has entered into any transactions not in the ordinary course of business and (ii) there has not been any material decrease in the Capital Stock or any material increase in long-term indebtedness or any material increase in short-term indebtedness of the Parent and its Subsidiaries, or any payment of or declaration to pay any dividends or any other distribution with respect to the Parent. There has not been any material adverse change in the properties, business, prospects, operations, earnings, assets, liabilities or condition (financial or otherwise) of the Parent and its Subsidiaries, taken as a whole (each of clauses (i) and (ii) in the immediately preceding sentence and the events in this sentence, a " Material Adverse Change "), since December 31, 2003. To the knowledge of the Company after due inquiry, there is no event that is reasonably likely to occur, which if it were to occur, would, individually or in the aggregate, have a Material Adverse Effect, except such events that have been adequately disclosed in the Final Offering Circular.

        (y)   No "nationally recognized statistical rating organization" (as such term is defined for purposes of Rule 436(g)(2) under the Act) (i) has imposed (or has informed the Company that it is considering imposing) any condition (financial or otherwise) on the Company retaining any rating assigned to the Company or any of its Subsidiaries or to any securities of the Company or any of its Subsidiaries, or (ii) has indicated to the Company that it is considering (A) the downgrading, suspension, or withdrawal of, or any review for a possible change that does not indicate the direction of the possible change in, any rating so assigned, or (B) any change in the outlook for any rating of the Company or any of its Subsidiaries or any securities of the Company or any of its Subsidiaries.

        (z)   All indebtedness represented by the Notes is being incurred for proper purposes and in good faith. On the Closing Date, each of the Company and the Guarantors (i) will be solvent, (ii) will have sufficient capital with which to conduct the business it is presently conducting and presently anticipates conducting and (iii) will be able to pay its debts as they mature.

        (aa) Except as disclosed in the Final Offering Circular and as it relates to the Initial Purchaser, the Company has not and, to its knowledge after due inquiry, no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Notes, (ii) sold, bid for, purchased, or paid anyone any compensation for soliciting purchases of, any of the Notes, or (iii) except as disclosed in the Final Offering Circular, paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

        (bb) Without limiting any provision herein, no registration under the Act and no qualification of the Indenture under the TIA is required for the sale of the Notes to the Initial Purchaser as contemplated hereby or for the Exempt Resales, assuming (i) that the purchasers in the Exempt Resales are QIBs or Accredited Investors or non-U.S. persons and (ii) the accuracy of the Initial Purchaser's representations contained herein regarding the absence of general solicitation in connection with the sale of the Notes to the Initial Purchaser and in the Exempt Resales.

        (cc) The Notes are eligible for resale pursuant to Rule 144A under the Act and no other securities of the Company are of the same class (within the meaning of Rule 144A under the Act) as the Notes and listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the " Exchange Act "), or quoted in a U.S. automated inter-dealer quotation system. No securities of the Company of the same class as the Notes have been offered, issued or sold by the Company or any of its Affiliates within the six-month period immediately prior to the date hereof.

9


 

        (dd) Neither the Company nor any of its Affiliates or other persons acting on behalf of the Company has offered or sold the Notes by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act or, with respect to Notes sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act, and the Company, each Affiliate of the Company and each other person acting on behalf of the Company have complied with and will implement the "offering restrictions" within the meaning of such Rule 902; provided , that no representation is made in this subsection with respect to the actions of the Initial Purchaser.

        (ee) Each of the Company, the Parent, their respective Subsidiaries, and each ERISA Affiliate has fulfilled its obligations, if any, under the minimum funding standards of Section 302 of the Employee Retirement Income Security Act of 1974, as amended (" ERISA ") with respect to each "pension plan" (as defined in Section 3(2) of ERISA), subject to Section 302 of ERISA which the Company, the Parent, their respective Subsidiaries, or any ERISA Affiliate sponsors or maintains, or with respect to which it has (or within the last three years had) any obligation to make contributions, and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and the Code (as defined below). Neither the Company, the Parent or their respective Subsidiaries, nor any ERISA Affiliate has incurred any material unpaid liability to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA. " ERISA Affiliate " means a corporation, trade or business that is, along with the Company, the Parent or any of their respective Subsidiaries, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Section 414 of the Internal Revenue Code of 1986, as amended (the " Code ") or Section 4001 of ERISA.

        (ff)  (i) Except as disclosed in the Final Offering Circular, neither the Company nor the Guarantors is party to


 
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