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EXHIBIT 4.2
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MAXXAM GROUP HOLDINGS INC.
MAXXAM INC.
$130,000,000
12% Senior Secured Notes due 2003
Purchase Agreement
December 17, 1996
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
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MAXXAM GROUP HOLDINGS INC.,
A DELAWARE CORPORATION
$130,000,000
12% Senior Secured Notes due 2003
PURCHASE AGREEMENT
December 17, 1996
New York, New York
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
MAXXAM Group Holdings Inc., a Delaware corporation (the
"Issuer"), confirms its agreement with Bear, Stearns & Co. Inc. ("Bear
Stearns") and Donaldson, Lufkin & Jenrette Securities Corporation (together
with Bear Stearns, the "Initial Purchasers") with respect to the sale by the
Issuer and the purchase by the Initial Purchasers of $130,000,000 aggregate
principal amount of 12% Series A Senior Secured Notes due 2003 (the "Series A
Notes"), subject to the terms and conditions set forth herein. Payment of
principal and interest on the Series A Notes will be guaranteed (the
"Guarantee") on a senior unsecured basis by MAXXAM Inc., a Delaware corporation
(the "Guarantor"). The Issuer is a newly formed, wholly owned subsidiary of
the Guarantor. The Series A Notes will be issued pursuant to an indenture (the
"Indenture"), to be dated as of the Closing Date (as defined), among the
Issuer, the Guarantor and First Bank National Association, as trustee (the
"Trustee"), and will be secured by, among other things, a first priority pledge
of (i) all outstanding shares (the "Pledged MGI Shares") of MAXXAM Group Inc.
("MGI") and (ii) that certain intercompany note payable by the Guarantor to the
Issuer, maturing August 1, 2003 (the "Intercompany Note"). In addition,
subject to the release of such shares as security for public indebtedness of
MGI, the Series A Notes may be secured by up to 16,055,000 of the 27,938,250
shares (the "Kaiser Shares") of Kaiser Aluminum Corporation, which Kaiser
Shares are to be transferred by the Guarantor to the Issuer as of the Closing
Date. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Indenture or the Offering Memorandum, as
applicable.
1. Issuance of Securities. The Issuer proposes, upon the terms
and subject to the conditions set forth herein, to issue and sell to the
Initial Purchasers an aggregate of $130,000,000 principal amount of Series A
Notes. The Series A Notes and the Series B Notes (as defined below) issuable
in exchange therefor are collectively referred to herein as the "Notes."
Upon original issuance of the Series A Notes, and until such time as
the same is no longer required under the applicable requirements of the
Securities Act of 1933, as amended (the "Act"), the Series A Notes (and all
securities issued in exchange therefor) shall bear the following legend:
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"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE ISSUER SO REQUEST), (ii) TO THE ISSUER OR (iii)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
2. Offering. The Series A Notes are being offered and sold to
the Initial Purchasers pursuant to an exemption from the registration
requirements under the Act. The Issuer has prepared a preliminary offering
memorandum, dated November 27, 1996 (the "Preliminary Offering Memorandum"),
and will prepare a final offering memorandum (the "Offering Memorandum"),
relating to the Issuer, the Guarantor, their respective subsidiaries, the
Series A Notes and the Guarantee.
The Initial Purchasers have advised the Issuer that the Initial
Purchasers will make offers (the "Exempt Resales") of the Series A Notes on the
terms set forth in the Offering Memorandum, as amended or supplemented, solely
to persons whom the Initial Purchasers reasonably believe to be qualified
institutional buyers (as defined in Rule 144A under the Act) ("Qualified
Institutional Buyers") in reliance on the exemption from the registration
requirements of the Securities Act provided by Rule 144A, and to a limited
number of institutional accredited investors (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Act) ("Accredited Investors") that, prior to their
purchase of Series A Notes, deliver to the Initial Purchasers an Accredited
Investor Letter (as defined in the Offering Memorandum). The Qualified
Institutional Buyers and the Accredited Investors are referred to herein as the
"Eligible Purchasers." The Initial Purchasers will offer the Series A Notes to
such Eligible Purchasers initially at a price equal to 100% of the principal
amount thereof. Such price may be changed at any time without notice.
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Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement
relating thereto (the "Registration Rights Agreement"), to be dated the Closing
Date, for so long as such Series A Notes constitute "Registrable Securities"
(as defined in the Registration Rights Agreement). Pursuant to the
Registration Rights Agreement, the Issuer and the Guarantor will agree to file
with the Securities and Exchange Commission (the "Commission"), under the
circumstances set forth therein, (i) a registration statement under the Act
(the "Exchange Offer Registration Statement") relating to the 12% Senior
Secured Notes due 2003, Series B (the "Series B Notes") to be offered in
exchange for the Series A Notes (the "Exchange Offer") and (ii) under certain
circumstances, a shelf registration statement under the Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the
Series A Notes, and to use their best efforts to cause such registration
statement to be declared effective and to consummate the Exchange Offer. This
Agreement, the Series A Notes, the Series B Notes, the Registration Rights
Agreement, the Indenture and the Intercompany Note are hereinafter sometimes
referred to collectively as the "Operative Documents."
3. Purchase, Sale and Delivery. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions set forth herein, the Issuer agree to issue
and sell to the Initial Purchasers, and the Initial Purchasers agree, severally
and not jointly, to purchase from the Issuer, in the proportions specified in
Schedule A hereto, $130,000,000 aggregate principal amount of Series A Notes,
at an aggregate purchase price equal to 97.25% of the principal amount thereof.
(b) Payment of the purchase price and delivery of the certificate
representing the Series A Notes shall be made at the offices of Kramer, Levin,
Naftalis & Frankel, 919 Third Avenue, New York, New York 10022, or such other
location as may be agreed upon by the Initial Purchasers and the Issuer. Such
delivery and payment shall be made at 9:00 A.M. New York time, on December 23,
1996 or at such other time as shall be agreed upon by the Initial Purchasers
and the Issuer. The time and date of such delivery and payment are herein
called the "Closing Date."
(c) One or more Series A Notes in definitive form, registered in the
name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), having
an aggregate amount corresponding to the aggregate amount of the Series A Notes
sold pursuant to Exempt Resales to Qualified Institutional Buyers (the "Global
Note") shall be delivered by the Issuer to the Initial Purchasers (or as the
Initial Purchasers direct), against payment by the Initial Purchasers of the
purchase price therefor, by wire transfer of same day funds, to an account
designated by the Issuer, provided that the Issuer shall give at least two
business days' prior written notice to the Initial Purchasers of the
information required to effect such wire transfer. The Global Note shall be
made available to the Initial Purchasers for inspection not later than 9:30
A.M. on the business day immediately preceding the Closing Date.
(d) One or more Series A Notes in definitive certificated form,
registered in the name of the respective Accredited Investors, having an
aggregate amount corresponding to the aggregate amount of the Series A Notes
sold pursuant to Exempt Resales to such Accredited Investors (the "Certificated
Notes") shall be delivered by the Issuer to the Initial Purchasers (or as the
Initial Purchasers direct), against payment by the Initial Purchasers of the
purchase price therefor, by wire transfer of same day funds, to an account
designated by the Issuer, provided that the Issuer shall give at least two
business days' prior written notice to the Initial Purchasers of the
information required to effect such wire transfer. The Certificated Notes
shall be made available to the Initial Purchasers for inspection not later than
9:30 A.M. on the business day immediately preceding the Closing Date.
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4. Covenants of the Issuer and the Guarantor. The Issuer and the
Guarantor hereby covenant and agree with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing,
(i) of the issuance against the Issuer or the Guarantor by any state
securities commission of any stop order suspending the qualification
or exemption from qualification of any Notes for offering or sale in
any jurisdiction, or the initiation of any proceeding for such purpose
by any state securities commission or other regulatory authority and
(ii) of the happening of any event that makes any statement of a
material fact made in the Preliminary Offering Memorandum or the
Offering Memorandum untrue or that requires the making of any
additions to or changes in the Preliminary Offering Memorandum or the
Offering Memorandum in order to make the statements of material fact
therein, in the light of the circumstances under which they are made,
not misleading. The Issuer and the Guarantor shall make every
reasonable effort to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Notes under any state
securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any Notes under any state
securities or Blue Sky laws, the Issuer and the Guarantor shall make
every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Issuer, without charge, as
many copies of the Preliminary Offering Memorandum and the Offering
Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request. The Issuer and the Guarantor
consent to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto
required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum prior to the Closing Date unless
the Initial Purchasers shall previously have been advised thereof and
shall not have objected thereto within a reasonable time after being
furnished a copy thereof. The Issuer shall promptly prepare, upon the
Initial Purchasers' reasonable request, any amendment or supplement to
the Preliminary Offering Memorandum or the Offering Memorandum that
may be necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of
any Exempt Resale, any event shall occur as a result of which, in the
reasonable judgment of the Issuer or in the reasonable opinion of
counsel for the Issuer or counsel for the Initial Purchasers, it
becomes necessary or advisable to amend or supplement the Preliminary
Offering Memorandum or Offering Memorandum in order to make such
statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser which is a
prospective purchaser, not misleading, or if it is necessary or
advisable to amend or supplement the Preliminary Offering Memorandum
or Offering Memorandum to comply with applicable law, (i) to notify
the Initial Purchasers and (ii) promptly to prepare an appropriate
amendment or supplement to such Preliminary Offering Memorandum or
Offering Memorandum so that the statements therein as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Preliminary Offering
Memorandum or Offering Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel for
the Initial Purchasers in connection with the qualification or
registration of the Series A Notes under the securities or Blue
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Sky laws of such jurisdictions of the United States as the Initial
Purchasers may reasonably request and to continue such qualification
in effect so long as required for the Exempt Resales; provided,
however, that neither the Issuer nor the Guarantor shall be required
in connection therewith to register or qualify as a foreign
corporation where it is not now so qualified or to take any action
that would subject it to service of process in suits or taxation, in
each case, in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, to pay all costs, expenses, fees and taxes incident to the
performance of the obligations of the Issuer and the Guarantor
hereunder, including (i) the printing, filing and distribution of the
Preliminary Offering Memorandum and the Offering Memorandum
(including, without limitation, financial statements) and all
amendments and supplements thereto required pursuant hereto (other
than legal fees and expenses of counsel to the Initial Purchasers in
connection with any of the foregoing), (ii) the preparation
(including, without limitation, duplication costs) and delivery of all
preliminary and final Blue Sky Memoranda and all other agreements,
memoranda, correspondence and all other documents prepared and
delivered in connection herewith and with the Exempt Resales
(including Blue Sky filing fees, but excluding legal fees and expenses
of counsel to the Initial Purchasers in connection with any of the
foregoing), (iii) the issuance, transfer and delivery by the Issuer of
the Series A Notes to the Initial Purchasers, (iv) the qualification
or registration of the Series A Notes for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the cost of duplicating and mailing a preliminary and
final Blue Sky Memorandum and the reasonable fees and disbursements of
counsel for the Initial Purchasers relating thereto), (v) furnishing
such copies of the Preliminary Offering Memorandum and the Offering
Memorandum, and all amendments and supplements thereto, as may be
reasonably requested for use in connection with Exempt Resales, (vi)
the preparation of certificates for the Series A Notes (including,
without limitation, printing and engraving thereof), (vii) the fees,
disbursements and expenses of the Issuer's counsel and accountants,
(viii) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc. ("NASD") Private Offering,
Resales and Trading through Automated Linkages ("PORTAL") market, (ix)
all fees and expenses (including fees and expenses of counsel) of the
Issuer in connection with the approval of the Series A Notes by DTC
for "book-entry" transfer, (x) rating the Series A Notes by rating
agencies, (xi) the reasonable fees and expenses of the Trustee and its
counsel in connection with the Indenture and the Series A Notes, (xii)
the performance by the Issuer and the Guarantor of their other
obligations under this Agreement and the other Operative Documents and
(xiii) "roadshow" travel and other expenses incurred by the Issuer and
the Guarantor (including one half of the expense of chartered
aircraft) in connection with the marketing and sale of the Series A
Notes.
(g) To use the net proceeds from the sale of the Series A
Notes in the manner described in the Offering Memorandum under the
caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders
of any Notes.
(i) To do and perform in all material respects all things
required to be done and performed under this Agreement by it prior to
or after the Closing Date, and to satisfy all conditions precedent on
its part to the delivery of the Series A Notes.
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(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Notes in a
manner that would require the registration under the Act of the sale
to the Initial Purchasers or the Eligible Purchasers of the Series A
Notes or to take any other action that would result in the Exempt
Resales not being exempt from registration under the Act.
(k) For so long as any of the Series A Notes remain
outstanding and during any period in which the Issuer is not subject
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to make available to any holder or
beneficial owner of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Notes from such holder or
beneficial owner, the information required by Rule 144A(d)(4) under
the Act.
(l) To cause the Exchange Offer to be made in the appropriate
form to permit registered Series B Notes to be offered in exchange for
the Series A Notes and to comply in all material respects with all
applicable federal and state securities laws in connection with the
Exchange Offer.
(m) To comply in all material respects with all of its
agreements set forth in the Operative Documents to which it is a party
and all agreements set forth in the representation letters of the
Issuer to DTC relating to the approval of the Series A Notes by DTC
for "book-entry" transfer.
(n) To use best reasonable efforts to effect the inclusion of
the Series A Notes in PORTAL and to obtain approval of the Series A
Notes by DTC for "book-entry" transfer.
(o) During a period of five years following the Closing Date,
to deliver without charge to the Initial Purchasers, as they may
reasonably request, promptly upon their becoming available, copies of
all reports or other publicly available information that either the
Issuer or the Guarantor shall mail or otherwise make available to its
stockholders.
(p) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared in the ordinary course
by the Issuer, the Guarantor or any of their respective subsidiaries,
copies of any unaudited interim financial statements for any period
subsequent to the periods covered by the financial statements
appearing in the Offering Memorandum.
(q) On or prior to the Closing Date, the Guarantor will
transfer to the Issuer the Kaiser Shares. On the Closing Date, the
Issuer will represent and warrant to the Initial Purchasers that the
Kaiser Shares (a) have been duly authorized, validly issued, and are
fully paid and nonassessable, (b) were not issued in violation of any
preemptive or similar rights and (c) except as disclosed in the
Offering Memorandum, are owned by the Issuer free and clear of any
security interest, claim, mortgage, lien, limitation on voting rights
or encumbrance.
(r) Not to take, directly or indirectly, through any of their
respective subsidiaries or otherwise, any action designed to, or that
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of either of the Issuer or
the Guarantor to facilitate the sale or resale of the Series A Notes,
and not to distribute, except as permitted by the Act, any (i)
preliminary offering memorandum, including, without limitation, the
Preliminary Offering Memorandum, (ii) offering memorandum, including,
without limitation, the Offering Memorandum or (iii) other offering
material in connection with the offering and sale of the Series A
Notes.
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(s) On the Closing Date, to furnish to the Initial Purchasers
Federal Reserve Form G-3 pursuant to Regulation G of the Federal
Reserve Board; on and after the Closing Date, to comply with the
provisions of the Indenture described in the Offering Memorandum under
the caption "Description of Notes--Certain Covenants--Use of
Proceeds."
5. Representations and Warranties. (a) The Issuer and the
Guarantor, jointly and severally, represent and warrant to the Initial
Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, except that the representations
and warranties contained in this paragraph shall not apply to
statements in or omissions from the Preliminary Offering Memorandum
and the Offering Memorandum (or any supplement or amendment thereto)
made in reliance upon and in conformity with information relating to
the Initial Purchasers furnished to the Issuer in writing by the
Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, or any
order asserting that any of the transactions contemplated by this
Agreement are subject to the registration requirements of the Act, has
been issued.
(ii) Except as disclosed in the Offering Memorandum, since
the date of the most recent audited financial statements included
therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings or business
affairs of the Issuer and its subsidiaries or the Guarantor and its
subsidiaries, in each case taken as a whole (a "Material Adverse
Change"), whether or not arising in the ordinary course of business,
(B) there have been no transactions entered into by the Issuer, the
Guarantor or any of their respective subsidiaries, other than those in
the ordinary course of business, which are material with respect to
the Issuer, the Guarantor and their respective subsidiaries taken as a
whole and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Issuer or the Guarantor on any class of
its capital stock.
(iii) Each of the Issuer and the Guarantor (A) has been duly
incorporated and is validly existing as a corporation and is in good
standing under the laws of its jurisdiction of incorporation, (B) has
all requisite corporate power and authority to carry on its business
as it is currently being conducted and as described in the Offering
Memorandum and to own, lease and operate its properties, and (C) is
duly qualified and in good standing as a foreign corporation,
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to (x) result, individually or in the
aggregate, in a material adverse effect on the properties, business,
results of operations, condition (financial or otherwise), or affairs
of the Issuer and its subsidiaries or the Guarantor and its
subsidiaries, in each case taken as a whole, (y) materially interfere
with or materially adversely affect the issuance of the Series A Notes
pursuant hereto or (z) in any manner draw into question the validity
of this Agreement or any other Operative Document or the transactions
described in the Offering Memorandum under the caption "Use of
Proceeds" (any of the events set forth in clauses (x), (y) or (z), a
"Material Adverse Effect").
(iv) All of the outstanding capital stock of the Issuer (a)
has been duly authorized, validly issued, and is fully paid and
nonassessable, (b) was not issued in violation of any preemptive or
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similar rights and (c) is owned by the Guarantor free and clear of any
security interest, claim, mortgage, lien, limitation on voting rights
or encumbrance. On September 30, 1996, after giving pro forma effect
to the issuance and sale of the Series A Notes pursuant hereto (A) the
Issuer would have had an authorized and outstanding capitalization as
set forth in the Offering Memorandum under the caption "Capitalization
of the Company," subject to the notes and assumptions included therein
and (B) the Guarantor would have had an authorized and outstanding
capitalization as set forth in the Offering Memorandum under the
caption "Capitalization of the MAXXAM," subject to the notes and
assumptions included therein.
(v) Each subsidiary of either of the Issuer or the Guarantor
listed on Exhibit A hereto (each a "Significant Subsidiary"), Sam
Houston Race Park, Ltd. ("SHRP") and Palmas del Mar Properties, Inc.
("Palmas") (A) has been duly formed or incorporated and is validly
existing as a partnership or corporation, as applicable, and is in
good standing under the laws of its jurisdiction of formation or
incorporation, as applicable, (B) has all requisite power (corporate
or otherwise) and authority to carry on its business as it is
currently being conducted and as described in the Offering Memorandum
and to own, lease and operate its properties, and (C) is duly
qualified and in good standing as a foreign corporation or
partnership, as applicable, authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect.
(vi) All of the outstanding capital stock of each Significant
Subsidiary, SHRP and Palmas (a) has been duly authorized, validly
issued, and are fully paid and nonassessable, (b) was not issued in
violation of any preemptive or similar rights and (c) except as
disclosed in the Offering Memorandum, is owned by the Issuer or the
Guarantor, directly or through subsidiaries, free and clear of any
security interest, claim, mortgage, lien, limitation on voting rights
or encumbrance, except any such security interest, claim, mortgage,
lien, limitation or encumbrance as would not have a material effect on
the value of such capital stock or the ability of the Issuer, any
Significant Subsidiary, SHRP or Palmas to control the transfer or
other disposition thereof.
(vii) There are not currently any outstanding subscriptions,
rights, warrants, calls, commitments of sale or options to acquire, or
instruments convertible into or exchangeable for capital stock or
other equity interest of the Issuer, MGI or Kaiser, except for
Kaiser's PRIDES and the Guarantor's Class A Non-Cumulative
Participating Convertible Preferred Stock, and except as disclosed or
referred to in the Offering Memorandum or pursuant to existing option
or employee or director benefit plans.
(viii) When the Series A Notes are issued and delivered
pursuant to this Agreement, no Series A Note will be of the same class
(within the meaning of Rule 144A under the Act) as securities of
either of the Issuer or the Guarantor that are listed on a national
securities exchange registered under Section 6 of the Exchange Act or
that are quoted in a United States automated inter-dealer quotation
system.
(ix) Each of the Issuer and the Guarantor has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other Operative
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including (in the case of the
Issuer), without limitation, the corporate power and authority to
issue, sell and deliver the Series A Notes as provided herein and
therein.
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(x) This Agreement has been duly and validly authorized,
executed and delivered by each of the Issuer and the Guarantor and
(assuming the due authorization, execution and delivery of this
Agreement by the Initial Purchasers) is the legal, valid and binding
agreement of each of the Issuer and the Guarantor, enforceable against
each of them in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject
to general principles of equity.
(xi) The Indenture has been duly and validly authorized by
each of the Issuer and the Guarantor and, when duly executed and
delivered by each of the Issuer and the Guarantor, will be the legal,
valid and binding obligation of each of the Issuer and the Guarantor,
enforceable against each of them in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or other laws affecting the rights of creditors
generally and subject to general principles of equity. The
description of the terms of the Indenture contained in the Offering
Memorandum conforms in all material respects to the terms of the
Indenture.
(xii) The Registration Rights Agreement has been duly and
validly authorized by each of the Issuer and the Guarantor and, when
duly executed and delivered by each of the Issuer and the Guarantor,
will be the legal, valid and binding obligation of each of the Issuer
and the Guarantor, enforceable against each of them in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or other laws affecting the rights of
creditors generally and subject to general principles of equity. The
description of the terms of the Registration Rights Agreement
contained in the Offering Memorandum conforms in all material respects
to the terms of the Registration Rights Agreement.
(xiii) The Series A Notes have been duly and validly
authorized by the Issuer for issuance and sale to the Initial
Purchasers pursuant to this Agreement and, when issued and
authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms hereof
and thereof, will be the legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their terms
and entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or other
laws affecting the rights of creditors generally and subject to
general principles of equity. The description of the terms of the
Series A Notes contained in the Offering Memorandum conforms in all
material respects to the terms of the Series A Notes.
(xiv) The Series B Notes have been duly and validly
authorized for issuance by the Issuer and, when issued and
authenticated in accordance with the terms of the Exchange Offer and
the Indenture, will be the legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their terms
and entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or other
laws affecting the rights of creditors generally and subject to
general principles of equity. The description of the terms of the
Series B Notes contained in the Offering Memorandum conforms in all
material respects to the terms of the Series B Notes.
(xv) The Intercompany Note has been duly and validly
authorized by the Guarantor and, when issued and delivered against
payment therefor in accordance with the terms thereof, will be the
legal, valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or other laws affecting the rights of creditors
generally and subject to general principles of equity. The
description of the terms of the Intercompany Note contained in the
Offering Memorandum conforms in all material respects to the terms of
the Intercompany Note.
11
(xvi) Reserved.
(xvii) Upon (1) authentication and execution of the Series A
Notes in accordance with the terms of the Indenture, (2) delivery of
the Series A Notes against payment therefor in accordance with the
terms of the Purchase Agreement and (3) delivery to the Trustee in New
York of the certificates representing the Pledged MGI Shares listed on
Exhibit D to the Indenture, certificates representing the Pledged MGI
Shares listed on Exhibit D to the Indenture, registered in the name of
the Issuer, accompanied by stock powers duly endorsed in blank, the
Indenture will create a valid security interest, free of any adverse
claim (within the meaning of Section 8-302 of the UCC), in all of the
Issuer's right, title and interest in and to such Pledged MGI Shares
in favor of the Trustee under the Uniform Commercial Code as in effect
on the date of the Indenture in the State of New York (the "UCC").
Such security interest will be a perfected security interest in all of
the Issuer's right, title and interest in and to such Pledged MGI
Shares that have been delivered to the Trustee (accompanied by stock
powers duly endorsed in blank) and are in the physical possession of
the Trustee in the State of New York for the benefit of the holders of
the Series A Notes under the Indenture. The representation and
warranty in this paragraph (xvii) is based on the assumption, without
independent investigation, (a) that the Trustee will have received
such Pledged MGI Shares and that the purchasers of Series A Notes on
the date of execution of the Indenture are purchasing the Series A
Notes in good faith and without notice (as such term is used in
subsections (1), (3) and (4) of Section 8-304 of the UCC) of an
adverse claim within the meaning of Section 8- 302 of the UCC with
respect to such Pledged MGI Shares, (b) that such Pledged MGI Shares
will at all relevant times be in the actual physical possession of the
Trustee in the State of New York and (c) that the issuer is the record
and beneficial owner of, and has all rights in and title to, such
Pledged MGI Shares.
(xviii) Upon (1) authentication and execution of the
Series A Notes in accordance with the terms of the Indenture, (2)
delivery of the Series A Notes against payment therefor in accordance
with the terms of the Purchase Agreement and (3) delivery to the
Trustee in New York of the Intercompany Note duly endorsed in blank,
the Indenture will create a valid security interest in all of the
Issuer's right, title and interest in and to the Intercompany Note in
favor of the Trustee under the UCC. Such security interest will be a
perfected security interest in the Intercompany Note that has been
delivered to the Trustee (duly endorsed in blank) and is in the
physical possession of the Trustee in the State of New York for the
benefit of the holders of the Series A Notes under the Indenture. The
representation and warranty in this paragraph (xviii) is based on the
assumption, without independent investigation, (a) that the Trustee
will have received the Intercompany Note and that the purchasers of
Series A Notes on the date of execution of the Indenture are
purchasing the Series A Notes in good faith and without notice (as
such term is used in subsections (1), (3) and (4) of the Section 8-304
of the UCC) of an adverse claim within the meaning of Section 8-302 of
the UCC with respect to such Intercompany Note, (b) that such
Intercompany Note will at all relevant times be in the actual physical
possession of the Trustee in the State of New York and (c) that the
Issuer is the record and beneficial owner of, and has all rights in
and title to, such Intercompany Note.
(xix) The Issuer is not and, after giving effect to the
Offering, will not be, (A) in violation of its charter or bylaws, (B)
in default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties
is subject that could reasonably be expected to have a Material
Adverse Effect, or (C) in violation of any local, state, federal or
foreign law, statute, ordinance, rule, regulation, requirement,
judgment or court decree (including, without limitation, environmental
laws, statutes, ordinances, rules, regulations, judgments or court
12
decrees) applicable to it or any of its subsidiaries or any of its or
their assets or properties (whether owned or leased) that could
reasonably be expected to have a Material Adverse Effect.
(xx) The Guarantor is not and, after giving effect to the
Offering, will not be, (A) in violation of its charter or bylaws, (B)
in default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties
is subject that could reasonably be expected to have a Material
Adverse Effect, or (C) in violation of any local, state, federal or
foreign law, statute, ordinance, rule, regulation, requirement,
judgment or court decree (including, without limitation, environmental
laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to it or any of its subsidiaries or any of its or
their assets or properties (whether owned or leased) that could
reasonably be expected to have a Material Adverse Effect.
(xxi) Neither any Significant Subsidiary, nor SHRP nor Palmas
is and, after giving effect to the Offering, will be, (A) in violation
of its charter, bylaws or partnership agreement, as applicable, (B) in
default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties
is subject that could reasonably be expected to have a Material
Adverse Effect, or (C) in violation of any local, state, federal or
foreign law, statute, ordinance, rule, regulation, requirement,
judgment or court decree (including, without limitation, environmental
laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to it or any of its subsidiaries or any of its or
their assets or properties (whether owned or leased) that could
reasonably be expected to have a Material Adverse Effect.
(xxii) None of (A) the execution, delivery or performance by
either of the Issuer or the Guarantor of this Agreement or any of the
other Operative Documents to which it is a party, (B) the issuance and
sale of the Series A Notes or (C) except to the extent waived or
consented to on or prior to the Closing Date, neither the issuance of
the Intercompany Note by the Guarantor nor the transfer of the Kaiser
Shares to the Issuer violates, conflicts with or constitutes a breach
of any of the terms or provisions of, requires consent under, or
results in the imposition of a lien or encumbrance on, any properties
of the Issuer, the Guarantor or any of their respective subsidiaries,
or an acceleration of any indebtedness of the Issuer, the Guarantor or
any of their respective subsidiaries pursuant to (1) the respective
charter or bylaws of the Issuer, the Guarantor and their respective
subsidiaries, (2) any bond, debenture, note, indenture, mortgage, deed
of trust or other agreement or instrument to which the Issuer, the
Guarantor or any of their respective subsidiaries is a party or by
which any of them or their property is or may be bound, (3) any
statute, rule or regulation applicable to the Issuer, the Guarantor or
any of their respective subsidiaries or any of their assets or
properties or (4) any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over the Issuer,
the Guarantor or any of their respective subsidiaries or any of their
assets or properties, except, in the case of clauses (2), (3) and (4)
above, as could not reasonably be expected to have a Material Adverse
Effect. No consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, (A) any
court or governmental agency, body or administrative agency or (B) any
other person is required for (1) the execution, delivery and
performance by the Issuer or the Guarantor of this Agreement or any of
the other Operative Documents to which it is a party or (2) the
issuance and sale by the Issuer and Guarantor of the Series A Notes
and the transactions contemplated hereby and thereby, except such as
have been obtained and made (or, in the case of the Registration
Rights Agreement, will be obtained and made) under the Act, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
state securities or Blue Sky
13
laws and regulations or such as may be required by the NASD, and
except those the failure of which to obtain would not have a Material
Adverse Effect.
(xxiii) There is (A) no action, suit, investigation or
proceeding before or by any court, arbitrator or governmental agency,
body or official, domestic or foreign, now pending or, to the best
knowledge of the Issuer, threatened or contemplated to which either of
the Issuer, the Guarantor or any of their respective subsidiaries is
or may be a party or to which the business or property of the Issuer,
the Guarantor or any of their respective subsidiaries, (B) no statute,
rule, regulation or order that has been enacted, adopted or issued by
any governmental agency or that has been proposed by any governmental
body and (C) no injunction, restraining order or order of any nature
by a federal or state court or foreign court of competent jurisdiction
to which the Issuer, the Guarantor or any of their respective
subsidiaries is or may be subject or to which the business, assets, or
property of the Issuer, the Guarantor or any of their respective
subsidiaries is or may be subject, that, in the case of clauses (A),
(B) and (C) above, (1) is required to be disclosed in the Preliminary
Offering Memorandum and the Offering Memorandum and that is not so
disclosed, or (2) could reasonably be expected to have a Material
Adverse Effect.
(xxiv) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Series A Notes
or prevents or suspends the use of the Offering Memorandum; no
injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction has been issued that prevents
the issuance of the Series A Notes or prevents or suspends the sale of
the Series A Notes in any jurisdiction referred to in Section 4(e)
hereof; and every request of any securities authority or agency of any
jurisdiction for additional information has been complied with in all
material respects.
(xxv) Except to the extent disclosed in the Offering
Memorandum, none of the Issuer, the Guarantor or any of their
respective subsidiaries has violated any foreign, federal, state or
local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws") which could
reasonably be expected to have a Material Adverse Effect.
(xxvi) There is no alleged liability, or to the best
knowledge of the Issuer, potential liability (including, without
limitation, alleged or potential liability or investigatory costs,
cleanup costs, governmental response costs, natural resource damages,
property damages, personal injuries or penalties) of the Issuer, the
Guarantor or any of their respective subsidiaries arising out of,
based on or resulting from (a) the presence or release into the
environment of any Hazardous Material (as defined below) at any
location, whether or not owned by the Issuer, the Guarantor or such
subsidiary, as the case may be, or (b) any violation or alleged
violation of any Environmental Law, which alleged or potential
liability is required to be disclosed in the Offering Memorandum,
other than as disclosed therein, or that could reasonably be expected
to have a Material Adverse Effect. The term "Hazardous Material"
means (i) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended, (iii) any petroleum or
petroleum product, (iv) any polychlorinated biphenyl, and (v) any
pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the meaning of
any other law relating to protection of human health or the
environment or imposing liability or standards of conduct concerning
any such chemical material, waste or substance.
14
(xxvii) Each of the Issuer, the Guarantor and their
respective subsidiaries has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits"),
including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease and operate their respective
properties and to conduct their businesses, except as could not
reasonably be expected to have a Material Adverse Effect; each of the
Issuer, the Guarantor and their respective 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, except as described in the Offering Memorandum, such permits
contain no restrictions that are materially burdensome to the Issuer,
the Guarantor or such subsidiary, as the case may be.
(xxviii) Each of the Issuer, the Guarantor and their
respective subsidiaries has (A) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has
made all declarations and filings with, all federal, state and local
authorities, all self-regulatory authorities and all courts and other
tribunals (each, an "Authorization") necessary to engage in the
business conducted by any of them in the manner described in the
Offering Memorandum, except as could not reasonably be expected to
have a Material Adverse Effect and (B) no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization. All such Authorizations are valid
and in full force and effect and each of the Issuer, the Guarantor and
their respective subsidiaries is in compliance in all material
respects with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities having
jurisdiction with respect thereto, except as could not reasonably be
expected to have a Material Adverse Effect.
(xxix) Each of the Issuer, the Guarantor and their respective
subsidiaries owns, possesses or has the right to employ all patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, software, systems or procedures),
trademarks, service marks and trade names, inventions, computer
programs, technical data and information (collectively, the
"Intellectual Property") presently employed by it in connection with
the businesses now operated by it or that are proposed to be operated
by it free and clear of and without violating any right, claimed
right, charge, encumbrance, pledge, security interest, restriction or
lien of any kind of any other person and, except as disclosed in the
Offering Memorandum, none of the Issuer, the Guarantor or any of their
respective subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing, except as could not reasonably be expected to have a
Material Adverse Effect. To the best knowledge of the Issuer, the use
of the Intellectual Property in connection with the business and
operations of either of the Issuer, the Guarantor or any of their
respective subsidiaries does not infringe on the rights of any person,
except as could not reasonably be expected to have a Material Adverse
Effect.
(xxx) All material tax returns required to be filed by either
of the Issuer, the Guarantor or any of their respective subsidiaries
in all jurisdictions have been so filed. All taxes, including
withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good
faith and for which adequate reserves have been provided or those
currently payable without penalty or interest. To the knowledge of
the Issuer, there are no material proposed additional tax assessments
against the Issuer, the Guarantor or any of their respective
subsidiaries, or the assets or property of the Issuer, the Guarantor
or any of their respective subsidiaries.
15
(xxxi) Neither the Issuer nor the Guarantor is required to be
registered as an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
(xxxii) The Indenture is in form eligible for qualification
under the Trust Indenture Act.
(xxxiii) None of the Issuer, the Guarantor or any of their
respective subsidiaries has (A) taken, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security
of the Issuer, the Guarantor or any of their respective subsidiaries
to facilitate the sale or resale of the Series A Notes or (B) since
the date of the Preliminary Offering Memorandum (1) sold, bid for,
purchased or paid any person any compensation for soliciting purchases
of the Series A Notes or (2) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities
of the Issuer, the Guarantor or any of their respective subsidiaries.
(xxxiv) No registration under the Act of the Series A Notes
is required for the sale of the Series A Notes to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming
(A) that the purchasers who buy the Series A Notes in the Exempt
Resales are Eligible Purchasers and (B) the accuracy of the Initial
Purchasers' representations regarding the absence of general
solicitation in connection with the sale of Series A Notes to the
Initial Purchasers and the Exempt Resales contained herein. No form
of general solicitation or general advertising was used by the Issuer,
the Guarantor or any of their respective representatives (other than
the Initial Purchasers, as to which the Issuer and the Guarantor make
no representation or warranty) in connection with the offer and sale
of any of the Series A Notes in connection with Exempt Resales,
including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes
have been issued and sold by the Issuer, the Guarantor or any of their
respective subsidiaries within the six-month period immediately prior
to the date hereof.
(xxxv) The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Series A Notes to be
purchased by the Qualified Institutional Buyers and the Accredited
Investors will not involve any prohibited transaction within the
meaning of Section 406 of the Employee Retirement Income Security Act
of 1974, as amended, or Section 4975 of the Internal Revenue Code of
1986, as amended. The representation made by the Issuer and the
Guarantor in the preceding sentence is made in reliance upon and
subject to the accuracy of, and compliance with, the representations
and covenants made or deemed made by the Qualified Institutional
Buyers and the Accredited Investors as set forth in the Offering
Memorandum under the caption "Notice to Investors."
(xxxvi) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement
thereto, as of its date, contains the information specified in, and
meets the requirements of, Rule 144A(d)(4) under the Act.
(xxxvii) Subsequent to September 30, 1996 and up to the
Closing Date, (A) there has not been, singly or in the aggregate, any
change or development of which the Issuer or Guarantor is aware which
could reasonably be expected to result in a Material Adverse Effect of
the type described in clause (x) of such definition and (B) there has
been no dividend or distribution of any kind declared, paid or made by
the Issuer or the Guarantor on any class of their capital stock.
16
(xxxviii) The accountants who have certified or will certify
the financial statements included or to be included as part of the
Offering Memorandum are independent accountants. The historical
financial statements of the Issuer, the Guarantor and their respective
subsidiaries comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under
the Act and present fairly in all material respects the financial
position and results of operations of the Issuer, the Guarantor and
their respective subsidiaries, as the case may be, at the dates and
for the periods indicated. Such financial statements have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods presented. The
pro forma financial statements included in the Offering Memorandum
have been prepared on a basis consistent with such historical
statements, except for the pro forma adjustments specified therein,
and give effect to assumptions made on a reasonable basis and present
fairly in all material respects the historical and proposed
transactions contemplated by this Agreement and the other Operative
Documents. The other financial and statistical information and data
included in the Offering Memorandum, historical and pro forma, are
accurately presented on a basis consistent with the financial
statements, historical and pro forma, included in the Offering
Memorandum and the books and records of the Issuer, the Guarantor and
their respective subsidiaries, as applicable.
(xxxix) Upon the issuance of the Series A Notes, the present
fair saleable value of the assets of the Issuer, the Guarantor and
their respective subsidiaries, taken as a whole, will exceed the
amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent
liabilities) of the Issuer, the Guarantor and their respective
subsidiaries, taken as a whole, as they become absolute and matured.
Upon the issuance of the Series A Notes, the assets of the Issuer, the
Guarantor and their respective subsidiaries, taken as a whole, will
not constitute unreasonably small capital to carry out their
businesses as now conducted, including the capital needs of the
Issuer, the Guarantor and their respective subsidiaries, taking into
account the projected capital requirements and capital availability.
(xl) There exist no conditions that constitute a Default or
Event of Default by the Issuer or the Guarantor (or an event which
with notice or the lapse of time, or both, would constitute a default)
under the Indenture.
(xli) Each of the Issuer, the Guarantor and their respective
subsidiaries has complied with all of the provisions of Florida H.B.
1771, codified as Section 517.075 of the Florida statutes, and all
regulations promulgated thereunder relating to doing business with the
Government of Cuba or with any person or any affiliate located in
Cuba.
(xlii) Each certificate signed by any officer of the Issuer
or the Guarantor and delivered to the Initial Purchasers or counsel
for the Initial Purchasers shall be deemed to be a representation and
warranty by the Issuer and the Guarantor, as applicable, to the
Initial Purchasers as to the matters covered thereby.
The Issuer and the Guarantor acknowledge that the Initial
Purchasers and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 8 hereof, counsel for the Issuer and the
Guarantor and counsel for the Initial Purchasers, will rely upon the accuracy
and truth of the foregoing representations and hereby consent to such reliance.
(b) The Initial Purchasers represent, warrant and covenant to the
Issuer and the Guarantor and agree that:
17
(i) The Initial Purchasers are Qualified Institutional
Buyers, with such knowledge and experience in financial and business
matters as are necessary in order to evaluate the merits and risks of
an investment in the Series A Notes.
(ii) The Initial Purchasers (A) are not acquiring the Series
A Notes with a view to any distribution thereof that would violate the
Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling
the Series A Notes only to Qualified Institutional Buyers in reliance
on the exemption from the registration requirements of the Act
provided by Rule 144A and to Accredited Investors in a private
placement exempt from the registration requirements of the Act.
(iii) No form of general solicitation or general advertising
has been or will be used by the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the
Series A Notes, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation
or general advertising.
(iv) The Initial Purchasers agree that, in connection with
the Exempt Resales, they will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. The Initial Purchasers further agree (A) that they will
offer to sell the Series A Notes only to, and will solicit offers to
buy the Series A Notes only from (1) Qualified Institutional Buyers
who in purchasing such Series A Notes will be deemed to have
represented and agreed that they are purchasing the Series A Notes for
their own accounts or accounts with respect to which they exercise
sole investment discretion and that they or such accounts are
Qualified Institutional Buyers and (2) Accredited Investors who make
the representations contained in, and execute and return to the
Initial Purchasers, a letter in the form of Annex A attached to the
Offering Memorandum and (B) that, in the case of such Qualified
Institutional Buyers and Accredited Investors, acknowledges and agrees
that such Series A Notes will not have been registered under the Act
and may be resold, pledged or otherwise transferred only (x)(I) to a
person who the seller reasonably believes is a Qualified Institutional
Buyer in a transaction meeting the requirements of Rule 144A, (II) in
a transaction meeting the requirements of Rule 144, (III) outside the
United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Act or (IV) in accordance with
another exemption from the registration requirements of the Act (and
based upon an opinion of counsel if the Issuer so requests), (y) to
the Issuer or (z) pursuant to an effective registration statement
under the Act and, in each case, in accordance with any applicable
securities laws of any state of the United States or any other
applicable jurisdiction and (C) that the holder will, and each
subsequent holder is required to, notify any purchaser of the security
evidenced thereby of the resale restrictions set forth in (B) above.
The Initial Purchasers understand that the Issuer and the
Guarantor and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 8 hereof, counsel for the Issuer and the
Guarantor and counsel for the Initial Purchasers will rely upon the accuracy
and truth of the foregoing representations and the Initial Purchasers hereby
consent to such reliance.
6. Indemnification.
(a) The Issuer and the Guarantor, jointly and severally,
agree to indemnify and hold harmless (i) the Initial Purchasers, (ii)
each person, if any, who controls the Initial Purchasers
18
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of the Initial Purchasers or any
controlling person to the fullest extent lawful, from and against any
and all losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees and any and
all reasonable expenses whatsoever incurred in investigating,
preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any
supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Issuer and the Guarantor
will not be liable in any such case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense (i)
arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to
the Issuer and the Guarantor by or on behalf of the Initial Purchasers
expressly for use therein or (ii) is caused by an untrue statement or
omission or alleged untrue statement or omission that was contained or
made in the Preliminary Offering Memorandum and corrected in the
Offering Memorandum and (1) any such loss, liability, claim, damage or
expense suffered or insured by any indemnified party resulted from an
action, claim, or suit by any person who purchased Series A Notes from
the Initial Purchasers in the offering, (2) the Initial Purchasers
failed to deliver or provide a copy of the Offering Memorandum to such
person at or prior to the confirmation of the sale of such Series A
Notes in any case where such delivery is required by the Act and (3)
the Offering Memorandum (as so amended and supplemented) would have
cured the defect giving rise to such loss, liability, claim, damage or
expense. This indemnity agreement will be in addition to any
liability which the Issuer and the Guarantor may otherwise have,
including under this Agreement.
(b) The Initial Purchasers agree to indemnify and hold
harmless (i) the Issuer and the Guarantor, (ii) each person, if any,
who controls the Issuer or the Guarantor within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any
losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against
any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any
amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, in each case to the extent, but only to the extent,
that any such loss, liability, claim, damage or expense arises out of
or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Issuer and the
Guarantor by or on behalf of the Initial Purchasers expressly for use
therein; provided, however, that in no case shall the Initial
Purchasers be liable or responsible for any
19
amount in excess of the discounts and commissions received by the
Initial Purchasers, as set forth on the cover page of the Offering
Memorandum. This indemnity will be in addition to any liability which
the Initial Purchasers may otherwise have, including under this
Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, proceeding or investigation, such indemnified party shall, if
a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify, as promptly as practicable, each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section 6 or otherwise except to the extent that it has been
prejudiced in any material respect by such failure). In case any such
action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein, and to the extent it may
elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to
such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties
unless (i) the employment of such counsel shall have been authorized
in writing by the indemnifying parties in connection with the defense
of such action, (ii) the indemnifying parties shall not have employed
counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have been advised by counsel
that there may be legal defenses available to it or them which are
different from or additional to those available to the indemnifying
parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and
expenses of counsel shall be borne by the indemnifying parties;
provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel
(in addition to any local counsel and to their own counsel) for all
indemnified parties in connection with any one action or separate but
similar actions in the same jurisdiction arising out of the same
general allegations or claims. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable
for any settlement of any claim or action effected without its prior
written consent; provided, however, that such consent was not
unreasonably withheld.
7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 6 is for any reason held to be unavailable from the indemnifying party
or parties or is insufficient to hold harmless a party indemnified thereunder,
the Issuer and the Guarantor, on the one hand, and the Initial Purchasers, on
the other hand, shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
losses, claims, damages, liabilities and expenses suffered by the Issuer and
the Guarantor, any contribution received by the Issuer and the Guarantor from
persons, other than the Initial Purchaser, who may also be liable for
contribution, including persons who control the Issuer and the Guarantor within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to
which the Issuer, the Guarantor and the Initial Purchaser) may be subject, in
such proportion as is appropriate to reflect the relative benefits received by
the Issuer and the Guarantor, on one hand, and the Initial Purchasers, on the
other hand, from the offering of the Series A Notes or, if such allocation is
not permitted by applicable law or indemnification is not available as a result
of the
20
indemnifying party not having received notice as provided in Section 6, in such
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Issuer and the Guarantor, on one
hand, and the Initial Purchasers, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Issuer and the
Guarantor, on one hand, and the Initial Purchasers, on the other hand, shall be
deemed to be in the same proportion as (i) the total proceeds from the offering
of Series A Notes (net of discounts but before deducting expenses) received by
the Issuer and the Guarantor and (ii) the discounts and commissions received by
the Initial Purchasers, respectively, in each case as set forth in the table on
the cover page of the Offering Memorandum. The relative fault of the Issuer
and the Guarantor, on one hand, and of the Initial Purchasers, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Issuer, the Guarantor or the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Issuer, the Guarantor and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this
Section 7, (i) in no case shall the Initial Purchasers be required to
contribute any amount in excess of the amount by which the discounts and
commissions applicable to the Series A Notes purchased by the Initial
Purchasers pursuant to this Agreement exceeds the amount of any damages which
the Initial Purchasers has otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7,
(A) each person, if any, who controls the Initial Purchasers within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, directors, partners, employees, representatives and agents
of the Initial Purchasers or any controlling person shall have the same rights
to contribution as the Initial Purchasers, and each person, if any, who
controls either of the Issuer or the Guarantor within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as the Issuer and the Guarantor, subject in each case to clauses
(i) and (ii) of this Section 7. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 7, notify such
party or parties from whom contribution may be sought, but the failure to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 7 or otherwise, except to the extent that the party entitled to
contribution has been prejudiced in any material respect by such failure. No
party shall be liable for contribution with respect to any action or claim
settled without its prior written consent; provided, however, that such written
consent was not unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase and pay for the Series A
Notes, as provided herein, shall be subject to the satisfaction of the
following conditions:
(a) All of the representations and warranties of the Issuer
and the Guarantor contained in this Agreement shall be true and
correct in all material respects on the date hereof and on the Closing
Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. Each of the Issuer and the
Guarantor shall have performed or complied in all material respects
with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
21
(b) The Offering Memorandum shall have been printed and
copies distributed to the Initial Purchasers on the day following the
date of this Agreement or at such later date and time as to which the
Initial Purchasers may agree, and no stop order suspending the
qualification or exemption from qualification of the Series A Notes in
any jurisdiction referred to in Section 4(e) shall have been issued
and no proceeding for that purpose shall have been commenced or shall
be pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of the Series A Notes; no action, suit or proceeding shall
have been commenced and be pending against or affecting or, to the
best knowledge of each of the Issuer and the Guarantor, threatened
against, the Issuer, the Guarantor or any of their respective
subsidiaries before any court or arbitrator or any governmental body,
agency or official that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect; and no stop order
shall have been issued preventing the use of the Offering Memorandum,
or any amendment or supplement thereto, or which could reasonably be
expected to have a Material Adverse Effect.
(d) Except as disclosed in the Offering Memorandum, from the
date hereof and the dates as of which information is given in the
Offering Memorandum until the Closing Date there shall not have been
any material adverse change, or any development that is reasonably
likely to result in a material adverse change, in the capital stock or
the long-term debt, or material increase in the short-term debt, of
the Issuer, the Guarantor or any of their respective subsidiaries from
that set forth in the Offering Memorandum, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the
Issuer, the Guarantor or any of their respective subsidiaries on any
class of its capital stock and (iii) other than pursuant to this
Agreement, none of the Issuer, the Guarantor or any of their
respective subsidiaries shall have incurred any liabilities or
obligations, direct or contingent, that are material, individually or
in the aggregate, to the Issuer, the Guarantor and their respective
subsidiaries, taken as a whole, and that are required to be disclosed
on a balance sheet or notes thereto in accordance with generally
accepted accounting principles and are not disclosed on the latest
balance sheet or notes thereto included in the Offering Memorandum.
Since the date hereof and since the dates as of which information is
given in the Offering Memorandum, there shall not have occurred any
material adverse change in the business, prospects, financial
condition or results of operation of the Issuer, the Guarantor and
their subsidiaries, taken as a whole.
(e) The Initial Purchasers shall have received a certificate,
dated the Closing Date, signed on behalf of the Issuer and the
Guarantor, in form and substance satisfactory to the Initial
Purchasers, confirming, as of the Closing Date, the matters set forth
in paragraphs (a), (b), (c) and (d) of this Section 8 and that, as of
the Closing Date, the obligations of the Issuer and the Guarantor to
be performed hereunder on or prior thereto have been duly performed in
all material respects.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers, of Kramer, Levin, Naftalis & Frankel, counsel for the
Issuer and the Guarantor, to the effect set forth in Exhibit B hereto.
(g) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers and counsel for the
22
Initial Purchasers, of Anthony R. Pierno, Esq., General Counsel of the
Issuer and the Guarantor, to the effect set forth in Exhibit C hereto.
(h) The Initial Purchasers shall have received on the Closing
Date an opinion with respect to compliance by the Issuer and the
Guarantor with Regulation G of the Federal Reserve Board, dated the
Closing Date, in form and substance satisfactory to the Initial
Purchasers and counsel for the Initial Purchasers, of Shearman &
Sterling, special counsel for the Issuer and the Guarantor, to the
effect set forth in Exhibit D hereto.
(i) At the time this Agreement is executed and at the Closing
Date, the Initial Purchasers shall have received from Arthur Andersen
& Co., LLP, independent public accountants, dated as of the date of
this Agreement and as of the Closing Date, customary comfort letters
addressed to the Initial Purchasers and in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers with respect to the financial statements and certain
financial information of the Issuer, the Guarantor and their
respective subsidiaries contained in the Offering Memorandum. The
comfort letter delivered on the Closing Date shall recite that such
accountants have reviewed the financial statements for the Issuer, the
Guarantor, MGI and Kaiser for November 1996. On or prior to the
Closing Date, Arthur Andersen & Co., LLP shall have delivered to the
Initial Purchasers a signed audit opinion in the form set forth in the
Offering Memorandum pertaining to the Issuer and its consolidated
subsidiaries, without the legend appearing at the top of page F-3 of
the Preliminary Offering Memorandum.
(j) The Initial Purchasers shall have received an opinion,
dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchasers, of Latham & Watkins, counsel for the
Initial Purchasers, covering such matters as are customarily covered
in such opinions.
(k) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Section 8 and in order to
evidence the accuracy, completeness or satisfaction in all material
respects of any of the representations, warranties or conditions
herein contained.
(l) Prior to the Closing Date, the Issuer and the Guarantor
shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may
reasonably request.
(m) The Issuer, the Guarantor and the Trustee shall have
entered into the Indenture and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(n) The Issuer and the Guarantor shall have entered into the
Registration Rights Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by the Issuer and the Guarantor will
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers. The Issuer and
the Guarantor will furnish the Initial Purchasers with such conformed copies of
such opinions, certificates, letters and other documents as they shall
reasonably request.
23
9. Initial Purchasers' Information. The Issuer and the Initial
Purchasers acknowledge that the statements with respect to the offering of the
Series A Notes set forth in the last paragraph of the cover page and the third
paragraph of text and the fifth and sixth sentences of the fourth paragraph of
text under the caption "Plan of Distribution" in such Offering Memorandum
constitute the only information furnished in writing by the Initial Purchasers
expressly for use in the Offering Memorandum.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the Initial
Purchasers, the Issuer and the Guarantor contained in this Agreement, including
the agreements contained in Sections 4(f) and 11(d), the indemnity agreements
contained in Section 6 and the contribution agreements contained in Section 7,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Initial Purchasers any controlling
person thereof or by or on behalf of the Issuer, the Guarantor or any
controlling person thereof, and shall survive delivery of and payment for the
Series A Notes to and by the Initial Purchasers. The representations contained
in Section 5 and the agreements contained in Sections 4(f), 6, 7 and 11(d)
shall survive the termination of this Agreement, including any termination
pursuant to Section 11.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to the
Issuer from the Initial Purchasers, without liability (other than with
respect to Sections 6 and 7) on the Initial Purchasers' part to the
Issuer or the Guarantor if, on or prior to such date (i) the Issuer or
the Guarantor shall have failed, refused or been unable to perform in
any material respect any agreement on their part to be performed
hereunder, (ii) any other condition to the obligations of the Initial
Purchasers hereunder as provided in Section 8 is not fulfilled when
and as required in any material respect, (iii) in the reasonable
judgment of the Initial Purchasers, any material adverse change shall
have occurred since the respective dates as of which information is
given in the Offering Memorandum in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects, net
worth, results of operations or cash flows of the Issuer, the
Guarantor and their respective subsidiaries, taken as a whole, other
than as set forth in the Offering Memorandum, or (iv)(A) any domestic
or international event or act or occurrence has materially disrupted,
or in the reasonable opinion of the Initial Purchasers will in the
immediate future materially disrupt, the market for the Issuer's
securities or for securities in general; or (B) trading in securities
generally on the New York or American Stock Exchanges shall have been
suspended or materially limited, or minimum or maximum prices for
trading shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange, or by such
exchange or other regulatory body or governmental authority having
jurisdiction; or (C) a banking moratorium shall have been declared by
federal or state authorities, or a moratorium in foreign exchange
trading by major international banks or persons shall have been
declared; or (D) there is an outbreak or escalation of armed
hostilities involving the United States on or after the date hereof,
or if there has been a declaration by the United States of a national
emergency or war, the effect of which shall be, in the Initial
Purchasers' judgment, to make it inadvisable or impracticable to
proceed with the offering or delivery of the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum; or
(E) there shall have been such a material adverse change in general
economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States
shall be such as, in the Initial Purchasers' reasonable
24
judgment, makes it inadvisable or impracticable to proceed with the
delivery of the Series A Notes as contemplated hereby.
(c) Any notice of termination pursuant to this Section 10
shall be by telephone, telex, telephonic facsimile, or telegraph,
confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to clause (iv) of
Section 10(b), in which case each party will be responsible for its
own expenses), or if the sale of the Series A Notes provided for
herein is not consummated because any condition to the obligations of
the Initial Purchasers set forth herein is not satisfied or because of
any refusal, inability or failure on the part of the Issuer and the
Guarantor to perform any agreement herein or comply with any provision
hereof, the Issuer and the Guarantor will reimburse the Initial
Purchasers for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of Initial Purchasers' counsel), incurred
by the Initial Purchasers in connection herewith.
12. Notice. All notices and other communications hereunder,
except as may be otherwise specifically provided herein, shall be in writing
and, if sent to the Initial Purchasers shall be mailed, delivered, or telexed,
telegraphed or telecopied and confirmed in writing to Bear, Stearns & Co. Inc.,
245 Park Avenue, New York, New York 10167, Attention: Corporate Finance
Department, telecopy number: (212) 272-3092, and to Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Corporate Finance Department, telecopy number (212) 892-7272, with a
copy to Latham & Watkins, 233 S. Wacker Drive, Suite 5800, Chicago, Illinois
60606, Attention: Mark A. Stegemoeller, Esq., telecopy number (312) 993-9767;
and if sent to the Issuer, shall be mailed, delivered or telexed, telegraphed
or telecopied and confirmed in writing to the Issuer at 5847 San Felipe, Suite
2600, Houston, Texas 77057, attention of Anthony R. Pierno, General Counsel,
telecopy number (713) 267-3702, with a copy to Kramer, Levin, Naftalis &
Frankel, 919 Third Avenue, New York, New York 10022, attention of Howard A.
Sobel, Esq., telecopy number (212) 715-8000.
13. Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Initial Purchasers, the Issuer, the Guarantor
and the controlling persons and agents referred to in Sections 6 and 7, and
their respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its
capacity as such, of Notes from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance
with the internal laws of the State of New York, without giving effect to
principles of conflict of laws. TIME IS OF THE ESSENCE IN THIS AGREEMENT.
15. Captions. The captions included in this Agreement are
included solely for convenience of reference and are not to be considered a
part of this Agreement.
16. Counterparts. This Agreement may be executed in various
counterparts which together shall constitute one and the same instrument.
[Signature page to follow]
25
If the foregoing correctly sets forth the understanding among
the Initial Purchasers, the Issuer and the Guarantor please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
MAXXAM GROUP HOLDINGS INC.
By: /s/ RONALD L. REMAN
-----------------------------------
Name: Ronald L. Reman
Title: Vice President - Taxes
MAXXAM INC.
By: /s/ RONALD L. REMAN
-----------------------------------
Name: Ronald L. Reman
Title: Vice President - Taxes
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By: [Signature illegible]
------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: /s/ JAMES T. SINGTON
------------------------------------
Name: James T. Sington
Title: Managing Director
S-1
26
SCHEDULE A
Initial Purchasers Principal Amount
Bear, Stearns & Co. Inc. $ 78,000,000
Donaldson, Lufkin & Jenrette Securities Corporation $ 52,000,000
------------
Total $130,000,000
27
EXHIBIT A
LIST OF SIGNIFICANT SUBSIDIARIES
MAXXAM Group Inc.
The Pacific Lumber Company
Scotia Pacific Holding Company
Salmon Creek Corporation
Britt Lumber Co., Inc.
Kaiser Aluminum Corporation
Kaiser Aluminum & Chemical Corporation
MCO Properties, Inc.
28
EXHIBIT B
FORM OF OPINION OF KRAMER, LEVIN, NAFTALIS & FRANKEL
(i) Each of the Issuer and the Guarantor is a corporation validly
organized and existing and in good standing under the laws of Delaware.
(ii) Each of the Issuer and the Guarantor has the requisite
corporate power and authority to (A) own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum and (B) to
perform its respective obligations under the Indenture, the Purchase Agreement
and the Registration Rights Agreement.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by each of the Issuer and the Guarantor.
(iv) The Indenture, the Registration Rights Agreement and the
Intercompany Note have each been duly authorized, executed and delivered by the
Issuer and the Guarantor, as applicable, and each constitutes a legal, valid
and binding agreement of the Issuer and the Guarantor, as applicable,
enforceable against the Issuer and the Guarantor in accordance with its
respective terms.
(v) The Series A Notes and Series B Notes have been duly
authorized by all necessary corporate action on the part of the Issuer and,
when executed and authenticated in accordance with the terms of the Indenture
and the Registration Rights Agreement and delivered against payment pursuant to
the Purchase Agreement and the Registration Rights Agreement (and the other
documents relating to the Exchange Offer), as applicable, will constitute
legal, valid and binding obligations of the Issuer, enforceable against the
Issuer in accordance with their respective terms and entitled to the benefits
of the Indenture.
(vi) The Intercompany Note has been duly and validly authorized by
the Guarantor and, when issued and delivered against payment therefor in
accordance with the terms thereof, will be the legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms.
(vii) The Indenture constitutes a valid and legally binding
obligation of the Issuer and the Guarantor, enforceable against the Issuer and
the Guarantor, in accordance with its terms.
(viii) Upon (1) authentication and execution of the Series A Notes in
accordance with the terms of the Indenture, (2) delivery of the Series A Notes
against payment therefor in accordance with the terms of the Purchase Agreement
and (3) delivery to the Trustee in New York of the certificates representing
the Pledged MGI Shares listed on Exhibit D to the Indenture, registered in the
name of the Issuer, accompanied by stock powers duly endorsed in blank, the
Indenture will create a valid security interest in all of the Issuer's right,
title and interest in and to such Pledged MGI Shares in favor of the Trustee
under the Uniform Commercial Code as in effect on the date of the Indenture in
the State of New York (the "UCC"). Such security interest will be a perfected
security interest, free of any adverse claim (within the meaning of Section
8-302 of the UCC), in all of the Issuer's right, title and interest in and to
such Pledged MGI Shares that have been delivered to the Trustee (accompanied by
stock powers duly endorsed in blank) and are in the physical possession of the
Trustee in the State of New York for the benefit of the holders of the Series A
Notes under the Indenture. The opinion expressed in this paragraph (viii) is
based on the assumption, with your permission and without independent
investigation, (a) that
29
the Trustee will have received such Pledged MGI Shares and that the purchasers
of Series A Notes on the date of execution of the Indenture are purchasing the
Series A Notes in good faith and without notice (as such term is used in
subsections (1), (3) and (4) of Section 8-304 of the UCC) of an adverse claim
within the meaning of Section 8-302 of the UCC with respect to such Pledged MGI
Shares, (b) that such Pledged MGI Shares will at all relevant times be in the
actual physical possession of the Trustee in the State of New York and (c) that
the Issuer is the record and beneficial owner of, and has all rights in and
title to, such Pledged MGI Shares.
(ix) Upon (1) authentication and execution of the Series A Notes in
accordance with the terms of the Indenture, (2) delivery of the Series A Notes
against payment therefor in accordance with the terms of the Purchase Agreement
and (3) delivery to the Trustee in New York of the Intercompany Note duly
endorsed in blank, the Indenture will create a valid security interest in all
of the Issuer's right, title and interest in and to the Intercompany Note in
favor of the Trustee under the UCC. Such security interest will be a perfected
security interest in the Intercompany Note that has been delivered to the
Trustee (duly endorsed in blank) and is in the physical possession of the
Trustee in the State of New York for the benefit of the holders of the Series A
Notes under the Indenture. The opinion expressed in this paragraph (ix) is
based on the assumption, with your permission and without independent
investigation, (a) that the Trustee will have received the Intercompany Note
and that the purchasers of Series A Notes on the date of execution of the
Indenture are purchasing the Series A Notes in good faith and without notice
(as such term is used in subsections (1), (3) and (4) of the Section 8-304 of
the UCC) of an adverse claim within the meaning of Section 8-302 of the UCC
with respect to such Intercompany Note, (b) that such Intercompany Note will at
all relevant times be in the actual physical possession of the Trustee in the
State of New York and (c) that the Issuer is the record and beneficial owner
of, and has all rights in and title to, such Intercompany Note.
(x) The Series A Notes, the Registration Rights Agreement, the
Indenture and the Intercompany Note conform, and the Series B Notes (when
issued in accordance with the terms of the Indenture and the Registration
Rights Agreement) will conform, in all material respects to the statements
relating thereto contained in the Offering Memorandum under the captions
"Description of Notes" and "Exchange Offer; Registration Rights."
(xi) Neither the Issuer nor the Guarantor is required to be
registered as an "investment company" under the Investment Company Act of 1940,
as amended.
(xii) To the best knowledge of such counsel, without any independent
inquiry, there are no legal or governmental proceedings pending or threatened
against the Issuer or the Guarantor or their respective subsidiaries, other
than legal or governmental proceedings referred to in the Offering Memorandum
and other claims, lawsuits and other proceedings which in the opinion of the
Issuer or the Guarantor should not have a material adverse effect on the
Issuer's or the Guarantor's consolidated financial position, results of
operations or liquidity.
(xiii) The terms of the Issuer's indebtedness described in the
Offering Memorandum under the caption "Description of Principal Indebtedness --
The Company -- MGI Notes" (other than financial, numerical, statistical or
accounting data included therein or omitted therefrom, as to which no opinion
is expressed) conform in all material respects to the statements relating
thereto under such caption.
(xiv) No authorization, approval, consent or order of any court or
governmental authority or agency is legally required to be obtained by the
Issuer or the Guarantor in connection with the issuance and sale by the Issuer
of the Series A Notes to you under the Purchase Agreement, except such as may
be required in connection with (A) the registration under the Act of the Series
A Notes or the Series B
30
Notes pursuant to the Registration Rights Agreement, (B) the qualification of
the Indenture under the Trust Indenture Act in connection with the registration
of the Series A Notes or the Series B Notes pursuant to the Registration Rights
Agreement and (C) qualifications, authorizations, registrations or other
actions under state securities or Blue Sky laws or regulations or foreign laws
or regulations, as to which no opinion is expressed. The execution and
delivery by the Issuer and the Guarantor of the Operative Documents and the
consummation of the transactions contemplated therein by each of the Issuer and
the Guarantor do not violate the provisions of the Certificate of Incorporation
or By-laws of the Issuer or the Guarantor as in effect on the date of this
opinion, or, to the best of our knowledge, any applicable law or administrative
regulation (other than state securities or Blue Sky laws or regulations or
foreign laws or regulations, as to which no opinion is expressed) or
administrative or court decree (other than foreign administrative or court
decrees, as to which no opinion is expressed) entered against the Issuer or the
Guarantor, in each case as in effect on the date of this opinion. It is
understood in rendering the opinion expressed in this Paragraph (xiv) with
respect to any law or administrative regulation, we have assumed that none of
the Purchase Agreement, the Indenture, the Registration Rights Agreement, the
Preliminary Offering Memorandum (and any amendment or supplement thereto), the
Offering Memorandum (and any amendment or supplement thereto) or any other
information provided to the Initial Purchasers or any other person by or on
behalf of the Issuer or the Guarantor pursuant thereto or in connection
therewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(xv) Assuming that the only purchasers to whom the Initial
Purchasers initially resell the Series A Notes are (i) Qualified Institutional
Buyers and (ii) a limited number of Accredited Investors, and assuming the
accuracy of the representations and warranties of the Issuer and the Guarantor
contained in Section 5(a)(xxxiii) of the Purchase Agreement and compliance by
the Issuer and the Guarantor with the covenants in Sections 4(k) and 4(j) of
the Purchase Agreement, and assuming the accuracy of the Initial Purchasers'
covenants contained in Section 2 of the Purchase Agreement, and assuming that
the representations and warranties of the Accredited Investors or non-U.S
persons to whom the Initial Purchasers initially resell the Series A Notes as
specified in the Offering Memorandum under "Notice to Investors" and as set
forth in the certificates of such Accredited Investors or non-U.S. persons in
the form set forth in Annex A of the Offering Memorandum are true and correct
in all material respects as of the Closing Time, and assuming compliance in all
material respects by such Accredited Investors or non-U.S. persons, as the case
may be, with the agreements in such certificates, and assuming that the
certificates representing the Series A Notes bear the legends contemplated by
the Indenture and receipt by the purchasers to whom the Initial Purchasers
initially resell the Series A Notes of a copy of the Offering Memorandum at or
prior to the delivery of confirmation of sale, it is not necessary in
connection with the offer, sale and delivery of the Series A Notes to the
Initial Purchasers under, or in connection with the initial resale of such
Series A Notes by the Initial Purchasers as contemplated by, the Purchase
Agreement, to register the Series A Notes under the Act or to qualify the
Indenture under the 1939 Act.
(xvi) When the Series A Notes are issued and delivered pursuant to
the Purchase Agreement, such Series A Notes will not be of the same class
(within the meaning of Rule 144A of the Act) as securities of the Issuer or the
Guarantor which are listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system.
(xvii) The Issuer is required to deliver the information relating to
the Issuer specified in Rule 144A(d)(4) in connection with any resale of the
Series A Notes.
Although such counsel has not undertaken to determine
independently the accuracy and completeness of the statements contained in the
Offering Memorandum, such counsel have obtained information as a result of
discussions and meetings with officers and other representatives of the Issuer
31
and the Guarantor, as a result of discussions with representatives of the
independent public accountants for the Issuer and the Guarantor in connection
with the preparation of the Offering Memorandum, responses to various questions
raised by such counsel regarding the business of the Issuer and the Guarantor,
and the examination of other information and documents requested by such
counsel. Such counsel did not, however, undertake to determine independently,
and therefore, no responsibility, explicitly or implicitly, is assumed for the
accuracy and completeness or fairness of the statements contained in the
Offering Memorandum, and no assurance can be given that such counsel's
procedures described in the first sentence of this paragraph would necessarily
reveal matters of significance with respect to the following comments. Nothing
has come to the attention of such counsel during the course of the above
described procedures or otherwise that has caused such counsel to believe that
(A) the Offering Memorandum as of the date thereof and as of the date hereof
contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
32
EXHIBIT C
FORM OF OPINION OF ANTHONY R. PIERNO, ESQ.,
GENERAL COUNSEL OF THE ISSUER AND THE GUARANTOR
(i) To the knowledge of such counsel, each of the Issuer and the
Guarantor is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction in which such qualification is
required, except where the failure to so qualify or be in good standing could
not reasonably be expected to have a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of the Issuer, the Guarantor and their respective subsidiaries considered as
one enterprise.
(ii) The Series A Notes and the Series B Notes have been duly
authorized by all necessary corporate action and, when executed and
authenticated in accordance with the terms of the Indenture and the
Registration Rights Agreement and delivered against payment pursuant to the
Purchase Agreement and the Registration Rights Agreement (and the other
documents relating to the Exchange Offer), as applicable, will constitute
legal, valid and binding obligations of the Issuer, enforceable against the
Issuer in accordance with their terms and entitled to the benefits of the
Indenture, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance and similar laws
and court decisions relating to or affecting creditors' rights and remedies
generally and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law).
(iii) To the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Issuer or the
Guarantor, other than legal or governmental proceedings referred to in the
Offering Memorandum and other claims, lawsuits and other proceedings which, in
the opinion of the Issuer, should not have a material adverse effect on the
Issuer's consolidated financial position, results of operations, or liquidity.
(iv) Each Significant Subsidiary has been duly organized and is
validly existing and is in good standing under the laws of the jurisdiction of
its organization, has the requisite corporate, partnership or other
organizational power and authority to own, lease and operate its respective
properties and to conduct its business as described in the Offering Memorandum
and, to the knowledge of such counsel, is duly qualified as a foreign
corporation, partnership or other entity to transact business and, if
applicable, is in good standing in each jurisdiction in which such
qualification is required, except where the failure to so qualify and be in
good standing could not reasonably be expected to have, singly or in the
aggregate, a material adverse effect on the condition, financial or otherwise,
or the earnings, business affairs or business prospects of the Issuer and its
subsidiaries or the Guarantor and its subsidiaries, in each case taken as a
whole. To the knowledge of such counsel, all of the issued and outstanding
capital stock of each such Significant Subsidiary that is a corporation has
been duly authorized and validly issued, is fully paid and non-assessable and,
to the knowledge of such counsel, the shares of capital stock of each such
Significant Subsidiary owned by the Issuer or the Guarantor, as the case may
be, directly or through subsidiaries, are owned free and clear of any Lien,
except (i) as disclosed in the Offering Memorandum and (ii) for the pledge of
all or a portion of the capital stock of Kaiser Aluminum & Chemical Corporation
to BankAmerica Business Credit, Inc., as Agent under a credit agreement.
(v) To the knowledge of such counsel, all of the Kaiser Shares (a)
have been duly authorized, validly issued, and are fully paid and
nonassessable, (b) were not issued in violation of any preemptive
33
or similar rights and (c) except as disclosed in the Offering Memorandum, are
owned by the Issuer free and clear of any security interest, claim, mortgage,
lien, limitation on voting rights or encumbrance.
(vi) To the knowledge of such counsel, (A) there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments to
which the Issuer or any Significant Subsidiary is a party or by which any of
them may be bound that would be required to be described in a Registration
Statement on Form S-1 under the Act that is not described in the Offering
Memorandum, and (B) no default exists in the due performance or observance of
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
so described, except for defaults which could not reasonably be expected to
have a material adverse effect on the condition, financial or otherwise, or on
the earnings, business affairs or business prospects of the Issuer and its
subsidiaries considered as one enterprise.
(vii) To the knowledge of such counsel, no authorization, approval,
consent or order of any court or governmental authority or agency is legally
required to be obtained by the Issuer or the Guarantor in connection with the
issuance and sale of the Series A Notes to the Initial Purchasers under the
Purchase Agreement, except such as may be required in connection with (A) the
registration under the Act of the Series A Notes or the Series B Notes pursuant
to the Registration Rights Agreement, (B) the qualification of the Indenture
under the Trust Indenture Act in connection with the registration of the Series
A Notes or the Series B Notes pursuant to the Registration Rights Agreement,
and (C) qualifications, authorizations, registrations or other actions under
state securities or Blue Sky laws or regulations or foreign laws or
regulations, as to which no opinion is expressed. The execution and delivery
by the Issuer and the Guarantor, as applicable, of the Operative Documents and
the consummation by the Issuer and the Guarantor, as applicable, of the
transactions contemplated therein do not, to the knowledge of such counsel,
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any Lien, charge or encumbrance upon any property or
assets of the Issuer, the Guarantor or any of the Significant Subsidiaries
pursuant to any contract, indenture, mortgage, loan agreement, note, lease or
other instrument referred to in the Offering Memorandum to which the Issuer,
the Guarantor or any of the Significant Subsidiaries is a party or by which any
of them may be bound, nor does such action conflict with or constitute a breach
of, or default under, or result in any violation of the provisions of the
charter or by-laws, or partnership agreement, or other organizational
documents, as the case may be, of the Issuer, the Guarantor or any of the
Significant Subsidiaries, as in effect on the date of this opinion, or, to the
knowledge of such counsel, any applicable law or administrative regulation
(other than state securities or Blue Sky laws or regulations or foreign laws or
regulations, as to which no opinion is expressed) or administrative or court
decree entered against or applicable to the Issuer, the Guarantor or any of the
Significant Subsidiaries as of the date of this opinion. It is understood that
in rendering the opinion expressed in this paragraph with respect to any law or
administrative regulation, the assumption has been made that none of the
Purchase Agreement, the Registration Rights Agreement, the Preliminary Offering
Memorandum (and any amendment or supplement thereto), the Offering Memorandum
(and any amendment or supplement thereto) or any other information provided to
the Initial Purchasers or any other person by the Issuer or the Guarantor
pursuant thereto or in connection therewith contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(viii) To the knowledge of such counsel, all of the issued and
outstanding shares of capital stock of the Issuer have been duly authorized and
validly issued and are fully paid and non-assessable.
(ix) To the knowledge of such counsel, the descriptions of
documents and legal proceedings contained in the Offering Memorandum under
"Business - Pacific Lumber Operations - Regulatory and
34
Environmental Matters," "Legal Proceedings" and "Description of Principal
Indebtedness" (other than financial, numerical, statistical or accounting data
included therein or omitted therefrom, and other than the description under the
caption "Description of Principal Indebtedness -- The Company -- MGI Notes," as
to which no opinion is expressed) conform in all material respects to the terms
of the applicable documents or the relevant legal proceedings, as the case may
be.
(x) Except for Kaiser's PRIDES and the Guarantor's Class A
Non-Cumulative Participating Convertible Preferred Stock, and except as
disclosed or referred to in the Offering Memorandum or pursuant to existing
option or employee or director benefit plans, to the knowledge of such counsel,
there are no outstanding subscriptions, rights, warrants, options, calls,
convertible securities, commitments of sale or Liens related to or entitling
any person to purchase or otherwise to acquire any shares of the capital stock
of, or other ownership interest in the Issuer, the Guarantor or any Significant
Subsidiary.
(xi) The authorized capital stock of Kaiser, a Delaware
corporation, consists of 20,000,000 shares of preferred stock and 100,000,000
shares of common stock (8,673,850 shares of preferred stock (all of which are
PRIDES convertible preferred stock) and 71,646,789 shares of common stock being
issued and outstanding as of December 17, 1996); the authorized capital stock
of the Issuer consists of 3,000 shares of common stock (1,000 shares of which
being currently issued and outstanding); the Guarantor, a Delaware
corporation, owns of record and beneficially 100% of the issued and outstanding
shares of capital stock of the Issuer and beneficially owns 62% of the issued
and outstanding shares of common stock of Kaiser (after giving pro forma effect
to the conversion of each share of Kaiser's outstanding PRIDES convertible
preferred stock into one share of common stock of Kaiser); Kaiser owns of
record and beneficially 100% of the issued and outstanding shares of common
stock of Kaiser Aluminum & Chemical Corporation, a Delaware corporation; the
Guarantor owns of record and beneficially 100% of the issued and outstanding
common stock of MCO Properties Inc., a Delaware corporation; the Issuer owns of
record and beneficially 100% of the issued and outstanding common stock of
MAXXAM Group Inc. and upon transfer thereof from the Guarantor on or before the
Closing Date, will own of record 27,938,250 shares, or approximately 34.7%
(after giving pro forma effect to the conversion of each share of Kaiser's
outstanding PRIDES convertible preferred stock into one share of common stock
of Kaiser) of common stock of Kaiser; MAXXAM Group Inc. owns of record and
beneficially 100% of the issued and outstanding shares of The Pacific Lumber
Company, a Delaware corporation ("Pacific Lumber"), and of Britt Lumber Co.,
Inc., a California corporation; Pacific Lumber owns of record and beneficially
100% of the issued and outstanding shares of each of Salmon Creek Corporation,
a Delaware corporation, and Scotia Pacific Holding Company, a special purpose
Delaware corporation. With respect to the foregoing, such counsel notes that
on November 15, 1996, Kaiser filed a shelf registration statement on Form S-3
relating to preferred stock, depository shares, common stock and warrants.
Although neither such counsel nor the attorneys under such
counsel's supervision (the "Legal Staff") have undertaken to determine
independently the accuracy or completeness of the statements contained in the
Offering Memorandum, such counsel and the Legal Staff have obtained information
as a result of discussions and meetings with officers and other representatives
of the Issuer and the Guarantor, as a result of discussions with
representatives of the independent public accountants for the Issuer and the
Guarantor in connection with the preparation of the Offering Memorandum,
responses to various questions raised by such counsel and the Legal Staff
regarding the business of the Issuer and the Guarantor, and the examination of
other information and documents requested by such counsel and the Legal Staff.
Such counsel did not, however, undertake to determine independently, and
therefore, no responsibility, explicitly or implicitly, is assumed for the
accuracy and completeness or fairness of the statements contained in the
Offering Memorandum, and no assurance can be given that such counsel's
procedures described in the first sentence of this paragraph would necessarily
reveal matters of
35
significance with respect to the following comments. Nothing has come to the
attention of such counsel or the Legal Staff during the course of the above
described procedures or otherwise that has caused such counsel or any member of
the Legal Staff to believe that the Offering Memorandum as of the date thereof
and as of the date hereof contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
36
EXHIBIT D
FORM OF OPINION OF SHEARMAN & STERLING
(i) The Series A Notes will not constitute purpose credit under
Regulations G and U.
(ii) Purchasers of the Series A Notes that are not registered
lenders pursuant to Regulation G at the time of purchase of the Series A Notes
will not be required to register as such lenders with the Board of Governors of
the Federal Reserve System.
(iii) Upon the exchange of any Series A Notes for Series B Notes,
the Series B Notes will not constitute an "extension of credit" under
Regulations G, T, U and X (12 C.F.R. Parts 207, 220, 221, 224, respectively
(1996)) (the "Margin Regulations"), and, on and after such exchange, the
proceeds of the Series A Notes so exchanged may be used to buy and carry margin
stock without complying with the maximum loan value requirements of the Margin
Regulations. In addition, upon any transfer of the Series A Notes in a
transaction registered under the Securities Act, such Series A Notes will not
constitute an "extension of credit" and, from and after such transfer, the
proceeds of such Series A Notes may be used to buy and carry margin stock
without complying with the maximum loan value requirements of the Margin
Regulations.