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EXHIBIT 4.2
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ZALE CORPORATION
(a Delaware corporation)
ZALE DELAWARE, INC.
(a Delaware corporation)
$100,000,000
8 1/2% Senior Notes due 2007
PURCHASE AGREEMENT
Dated: September 23, 1997
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TABLE OF CONTENTS
PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 3
(a) Representations and Warranties by the Company and the Guarantor . . . . . . 3
(i) Similar Offerings . . . . . . . . . . . . . . . . . . . . . . . . 3
(ii) Offering Memorandum . . . . . . . . . . . . . . . . . . . . . . . 3
(iii) Independent Accountants . . . . . . . . . . . . . . . . . . . . . 4
(iv) Financial Statements . . . . . . . . . . . . . . . . . . . . . . 4
(v) No Material Adverse Change in Business . . . . . . . . . . . . . .4
(vi) Good Standing of the Company . . . . . . . . . . . . . . . . . . 4
(vii) Good Standing of Subsidiaries . . . . . . . . . . . . . . . . . . 5
(viii) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 5
(ix) Authorization of Agreements . . . . . . . . . . . . . . . . . . . 6
(x) Authorization of the Indenture . . . . . . . . . . . . . . . . . 6
(xi) Authorization of the Securities and the Guarantees . . . . . . . 6
(xii) Description of the Securities, the Guarantees and the Indenture . 7
(xiii) Absence of Defaults and Conflicts . . . . . . . . . . . . . . . . 7
(xiv) Absence of Labor Disputes . . . . . . . . . . . . . . . . . . . . 8
(xv) Absence of Proceedings . . . . . . . . . . . . . . . . . . . . . 9
(xvi) Possession of Intellectual Property . . . . . . . . . . . . . . . 9
(xvii) Absence of Further Requirements . . . . . . . . . . . . . . . . . 9
(xviii) Possession of Licenses and Permits . . . . . . . . . . . . . . . 10
(xix) Title to Property . . . . . . . . . . . . . . . . . . . . . . . . 10
(xx) Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxi) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(xxii) Stabilization or Manipulation . . . . . . . . . . . . . . . . . . 11
(xxiii) Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(xxiv) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . 12
(xxv) Registration Rights . . . . . . . . . . . . . . . . . . . . . . . 13
(xxvi) Accounting Controls . . . . . . . . . . . . . . . . . . . . . . . 13
(xxvii) Investment Company Act . . . . . . . . . . . . . . . . . . . . . 13
(xxviii) Rule 144A Eligibility . . . . . . . . . . . . . . . . . . . . . . 13
(xxix) No General Solicitation . . . . . . . . . . . . . . . . . . . . . 13
(xxx) No Registration Required . . . . . . . . . . . . . . . . . . . . 14
(xxxi) No Directed Selling Efforts . . . . . . . . . . . . . . . . . . . 14
(xxxii) PORTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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(b) Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2. Sale and Delivery to Initial Purchasers; Closing . . . . . . . . . . . . . 15
(a) Securities and Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Qualified Institutional Buyer . . . . . . . . . . . . . . . . . . . . . . . 15
(d) Denominations; Registration . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3. Covenants of the Company and the Guarantor . . . . . . . . . . . . . . . . 16
(a) Offering Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Notice and Effect of Material Events . . . . . . . . . . . . . . . . . . . 16
(c) Amendment to Offering Memorandum and Supplements . . . . . . . . . . . . . 17
(d) Qualification of Securities and Guarantees for
Offer and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Rating of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) Rule 144A Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(h) Restriction on Resales . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(j) Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . 18
(k) DTC Clearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(l) Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(m) Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 19
(n) Periodic Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5. Conditions of Initial Purchasers' Obligations . . . . . . . . . . . . . . 20
(a) Opinion of Counsel for the Company and the Guarantor . . . . . . . . . . . 20
(b) Opinion of Counsel for the Initial Purchasers . . . . . . . . . . . . . . 20
(c) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Accountant's Comfort Letter and Consent . . . . . . . . . . . . . . . . . 21
(e) Bring-down Comfort Letter . . . . . . . . . . . . . . . . . . . . . . . . 22
(f) Maintenance of Rating . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) PORTAL 22
(h) Chief Financial Officer's Certificate . . . . . . . . . . . . . . . . . . 22
(i) Registration Rights Agreement and Indenture . . . . . . . . . . . . . . . 22
(j) Bank Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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(k) Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . 22
(l) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Indemnification of Initial Purchasers . . . . . . . . . . . . . . . . 23
(b) Indemnification of Company, Guarantor and Directors . . . . . . . . . 24
(c) Actions against Parties; Notification . . . . . . . . . . . . . . . . 24
(d) Settlement without Consent if Failure to Reimburse . . . . . . . . . . 25
SECTION 7. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 9. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Termination; General . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 10. Default by One or More of the Initial Purchasers . . . . . . . . . . . 28
SECTION 11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 13. Governing Law and Time . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 14. Effect of Headings . . . . . . . . . . . . . . . . . . . . . . . . . 30
Schedule A--Initial Purchasers
Schedule B--Subsidiaries
Schedule C--Securities
Exhibit A--Form of Opinion
Exhibit B--Form of Comfort Letter
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$100,000,000
ZALE CORPORATION
(a Delaware corporation)
ZALE DELAWARE, INC.
(a Delaware corporation)
PURCHASE AGREEMENT
September 23, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
BancBoston Securities Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Zale Corporation, a Delaware corporation (the "Company"), and Zale
Delaware, Inc., a Delaware corporation (the "Guarantor"), confirm their
respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and each of the other Initial Purchasers
named in Schedule A hereto (collectively, the "Initial Purchasers", which term
shall also include any initial purchaser substituted as hereinafter provided in
Section 10 hereof), for whom Merrill Lynch is acting as representative (in such
capacity, the "Representative"), with respect to the issue and sale by the
Company and the purchase by the Initial Purchasers, acting severally and not
jointly, of the respective principal amounts set forth in said Schedule A of
$100,000,000 aggregate principal amount of the Company's 8 1/2% Senior Notes
due 2007 (the "Securities"). The Company's obligations under the Securities
will be guaranteed (the "Guarantees") by the Guarantor. The Securities and the
Guarantees are to be issued pursuant to an indenture dated as of September 30,
1997 (the "Indenture") among the
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Company, the Guarantor and Bank One, N.A., as trustee (the "Trustee").
Securities issued in book-entry form will be issued to Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to a letter agreement, to be
dated as of the Closing Time (as defined in Section 2(b)) (the "DTC
Agreement"), among the Company, the Guarantor, the Trustee and DTC.
The Company and the Guarantor understand that the Initial Purchasers
propose to make an offering of the Securities and the Guarantees on the terms
and in the manner set forth herein and agree that the Initial Purchasers may
resell, subject to the conditions set forth herein, all or a portion of the
Securities and the Guarantees to purchasers ("Subsequent Purchasers") at any
time after the date of this Agreement. The Securities and the Guarantees are to
be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities, the Guarantees
and the Indenture, investors that acquire Securities and Guarantees may only
resell or otherwise transfer such Securities and Guarantees if such Securities
and Guarantees are hereafter registered under the 1933 Act or if an exemption
from the registration requirements of the 1933 Act is available (including the
exemption afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S")
of the rules and regulations promulgated under the 1933 Act by the Securities
and Exchange Commission (the "Commission")).
The Company and the Guarantor have prepared and delivered to each
Initial Purchaser copies of a preliminary offering memorandum dated September
9, 1997 (the "Preliminary Offering Memorandum") and have prepared and will
deliver to each Initial Purchaser, on the date hereof or the next succeeding
day, copies of a final offering memorandum dated September 23, 1997 (the "Final
Offering Memorandum"), each to be used by such Initial Purchaser in connection
with its solicitation of, purchases of, or offering of, the Securities and the
Guarantees. "Offering Memorandum" means, with respect to any date or time
referred to in this Agreement, the most recent offering memorandum (whether the
Preliminary Offering Memorandum or the Final Offering Memorandum, or any
amendment or supplement to either such document), including any documents
incorporated therein by reference, which has been prepared and delivered by the
Company and the Guarantor to the Initial Purchasers in connection with their
solicitation of purchases of, or offering of, the Securities and the
Guarantees.
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Offering Memorandum (or other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which is incorporated by reference in the Offering Memorandum; and
all references in this Agreement to amendments or supplements to the Offering
Memorandum shall be deemed to mean and include the filing
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of any document under the Securities Exchange Act of 1934 (the "1934 Act")
which is incorporated by reference in the Offering Memorandum.
The holders of the Securities and the Guarantees will be entitled to
the benefits of the registration rights agreement to be dated as of the Closing
Time (the "Registration Rights Agreement"), among the Company, the Guarantor
and the Initial Purchasers, pursuant to which the Company will agree to file,
within 35 days of the Closing Time, a registration statement with the
Commission registering the Exchange Securities (as defined in the Registration
Rights Agreement) under the 1933 Act.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company and the
Guarantor. The Company and the Guarantor, jointly and severally, represent and
warrant to each Initial Purchaser as of the date hereof and as of the Closing
Time referred to in Section 2(b) hereof, and agree with each Initial Purchaser
as follows:
(i) Similar Offerings. The Company and the Guarantor and
their respective affiliates (as such term is defined in Rule 501(b)
under the 1933 Act) have not, directly or indirectly, solicited any
offer to buy or offered to sell, and will not, directly or indirectly,
solicit any offer to buy or offer to sell, in the United States or to
any United States citizen or resident, any security which is or would
be integrated with the sale of the Securities and the Guarantees in a
manner that would require the Securities or the Guarantees to be
registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does
not, and at the Closing Time will not, include an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, that this
representation, warranty and agreement shall not apply to statements
in or omissions from the Offering Memorandum made in reliance upon and
in conformity with information furnished to the Company and the
Guarantor in writing by any Initial Purchaser through Merrill Lynch
expressly for use in the Offering Memorandum. The documents
incorporated by reference or deemed to be incorporated by reference in
the Offering Memorandum at the time they were or hereafter are filed
with the Commission complied or will comply in all material respects
with the applicable requirements of the 1934 Act and the applicable
rules and regulations of the Commission thereunder and, when read
together with the other information in the Offering Memorandum, at the
date of the Offering Memorandum and at the Closing Time, did not and
will not include an untrue statement of a material fact or omit to
state 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.
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(iii) Independent Accountants. The accountants who
certified the financial statements and supporting schedules included
or incorporated by reference in the Offering Memorandum are
independent certified public accountants with respect to the Company,
the Guarantor and their respective subsidiaries within the meaning of
Regulation S-X under the 1933 Act.
(iv) Financial Statements. The financial statements,
together with the related schedules and notes, included in the
Offering Memorandum and the documents incorporated by reference
therein present fairly the financial position of the Company and its
consolidated Subsidiaries at the dates indicated and the statements of
income, stockholders' investment and cash flows of the Company and its
consolidated Subsidiaries for the periods specified; except as
otherwise disclosed therein, said financial statements have been
prepared in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The selected financial data and the
summary financial information included in the Offering Memorandum and
the documents incorporated by reference therein present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited financial statements included in the Offering
Memorandum and the documents incorporated by reference therein.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Offering
Memorandum, except as otherwise stated therein or contemplated
thereby, (A) there has been no material adverse change in the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Company or any of its Subsidiaries,
other than those in the ordinary course of business, which are
material with respect to the Company and its Subsidiaries considered
as one enterprise, and (C) there has been no dividend or distribution
of any kind declared, paid or made by the Company on any class of its
capital stock.
(vi) Good Standing of the Company. The Company has been
duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Offering Memorandum and to
enter into and perform its obligations under this Agreement, the
Registration Rights Agreement, the Indenture, the Securities, the
Exchange Securities, and the DTC Agreement and to enter into and
consummate all the transactions in connection therewith as
contemplated in the Offering Memorandum; and the Company is duly
qualified as a foreign corporation to
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transact business and is in good standing in each other jurisdiction
in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each subsidiary of the
Company (each a "Subsidiary" and collectively the "Subsidiaries") has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Offering Memorandum
and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; all of the issued and outstanding capital
stock of each Subsidiary has been duly authorized and validly issued,
is fully paid and non-assessable and is owned by the Company, directly
or through the Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of the Subsidiaries was issued in
violation of any preemptive or similar rights arising by operation of
law, or under the charter or by- laws of any Subsidiary or under any
agreement to which the Company or any Subsidiary is a party. All of
the Subsidiaries of the Company are listed on Schedule B attached
hereto.
(viii) Capitalization. The authorized, issued and
outstanding capital stock of the Company was at the date indicated in
the Offering Memorandum in the table at page F-6 entitled "Zale
Corporation and Subsidiaries-Consolidated Statements of Stockholders'
Investment" under the column labeled "Number of Common Shares
Outstanding" (except for subsequent issuances, if any, pursuant to
employee benefit plans referred to in the Offering Memorandum or
pursuant to the exercise of convertible securities or options referred
to in the Offering Memorandum). The shares of issued and outstanding
capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company arising by operation of law, under the
charter or by-laws of the Company or under any agreement to which the
Company or any of the Subsidiaries is a party.
(ix) Authorization of Agreements. This Agreement has been
duly authorized, executed and delivered by the Company and the
Guarantor. The Registration Rights Agreement has been duly authorized
by the Company and the Guarantor and as of the Closing Time will have
been duly executed and delivered
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by the Company and the Guarantor and will constitute valid and binding
obligations of the Company and the Guarantor, enforceable against the
Company and the Guarantor in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law). The DTC Agreement has
been duly authorized by the Company and as of the Closing Time will
have been duly executed and delivered by the Company and will
constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(x) Authorization of the Indenture. The Indenture has
been duly authorized by the Company and the Guarantor and, at the
Closing Time, will have been duly executed and delivered by the
Company and the Guarantor and will constitute a valid and binding
agreement of the Company and the Guarantor, enforceable against the
Company and the Guarantor in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xi) Authorization of the Securities and the Guarantees.
The Securities have been duly authorized by the Company and, at the
Closing Time, will have been duly executed by the Company and, when
authenticated in the manner provided for in the Indenture and
delivered against payment of the purchase price therefor, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, and will be in the
form contemplated by, and entitled to the benefits of, the Indenture,
except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other similar
laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law). The
Guarantees have been duly authorized by the Guarantor and, at the
Closing Time, will have been duly
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executed by the Guarantor and will constitute valid and binding
obligations of the Guarantor, enforceable against the Guarantor in
accordance with their terms, and will be in the form contemplated by,
and entitled to the benefits of, the Indenture. The Exchange
Securities have been duly authorized by the Company and the Guarantor
and, when executed and authenticated and issued and delivered by the
Company and the Guarantor in exchange for the Securities and the
Guarantees pursuant to the Exchange Offer (as defined in the
Registration Rights Agreement), will constitute valid and binding
obligations of the Company and the Guarantor, enforceable against the
Company and the Guarantor in accordance with their terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws relating
to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xii) Description of the Securities, the Guarantees and the
Indenture. The Securities, the Guarantees, the Indenture and the
Registration Rights Agreement will conform in all material respects to
the respective statements relating thereto contained in the Offering
Memorandum and will be in substantially the respective forms
previously delivered to the Initial Purchasers. The Exchange
Securities will conform in all material respects to the statements
relating thereto contained in the Offering Memorandum and the
Registration Statement (as defined in the Registration Rights
Agreement) at the time it becomes effective. There are no contracts or
documents which are required to be described in a registration
statement on Form S-1 under the 1933 Act which have not been described
in the Offering Memorandum.
(xiii) Absence of Defaults and Conflicts. Neither the
Company nor any of the Subsidiaries is in violation of its charter or
by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of them
may be bound, or to which any of the property or assets of the Company
or any of the Subsidiaries is subject (collectively, "Agreements and
Instruments") or has violated or is in violation of any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any of the Subsidiaries or any
of their assets or properties, except in each case for such defaults
or violations that would not result in a Material Adverse Effect; and
the execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Indenture, the DTC Agreement, the
Securities, the Guarantees, the Exchange Securities and
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any other agreement or instrument entered into or issued or to be
entered into or issued by the Company or the Guarantor in connection
with the transactions contemplated hereby or thereby or in connection
with the consummation of the transactions contemplated herein
(including the issuance and sale of the Securities and the Guarantees
and the use of the proceeds from the sale of the Securities and the
Guarantees as described in the Offering Memorandum under the caption
"Use of Proceeds") and compliance by the Company and the Guarantor
with their respective obligations hereunder have been duly authorized
by all necessary corporate action and do not and will not, whether
with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or a Repayment
Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to, the
Agreements and Instruments, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company
or any of the Subsidiaries or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of the Subsidiaries or any of
their assets or properties. As used herein, a "Repayment Event" means
any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or
any of the Subsidiaries.
(xiv) Absence of Labor Disputes. No labor dispute with the
employees of the Company or any of the Subsidiaries exists or, to the
knowledge of the Company and the Guarantor, is imminent, and the
Company and the Guarantor are not aware of any existing or imminent
labor disturbance by the employees of any of their or any of the
Subsidiaries' principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xv) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation, in each case before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company or the Guarantor,
threatened, against or affecting the Company or any Subsidiary thereof
which, singly or in the aggregate, might reasonably be expected to
result in a Material Adverse Effect, or which, singly or in the
aggregate, might reasonably be expected to materially and adversely
affect the properties or assets of the Company or any of the
Subsidiaries or the consummation of this Agreement or the performance
by the Company and the Guarantor of their respective obligations
hereunder or under the Securities, the Guarantees or the Exchange
Securities. The aggregate of all pending legal or governmental
proceedings to which the Company or any Subsidiary thereof is a party
or of which any of their
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13
respective property or assets is the subject which are not described
in the Offering Memorandum, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result
in a Material Adverse Effect.
(xvi) Possession of Intellectual Property. The Company and
the Subsidiaries own, possess or license, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and neither
the Company nor any of the Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property (including
Intellectual Property which is licensed) or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of the
Subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect.
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company or
the Guarantor of their respective obligations hereunder, in connection
with the offering, issuance or sale of the Securities and the
Guarantees hereunder or the consummation of the transactions
contemplated by or for the due execution, delivery or performance of
this Agreement, the Registration Rights Agreement, the Indenture, the
DTC Agreement, the Securities, the Guarantees, the Exchange Securities
or any other agreement or instrument entered into or issued or to be
entered into or issued by the Company or any of the Subsidiaries in
connection with the consummation of the transactions contemplated
herein (including the issuance and sale of the Securities and the
Guarantees and the use of the proceeds from the sale of the Securities
and the Guarantees as described in the Offering Memorandum under the
caption "Use of Proceeds").
(xviii) Possession of Licenses and Permits. The Company and
the Subsidiaries possess all governmental permits, licenses,
approvals, consents, certificates and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them respectively;
the Company and the Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect
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14
thereto, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses, nor are
there, to the knowledge of the Company or the Guarantor, pending or
threatened actions, suits, claims or proceedings against the Company
or any Subsidiary before any court, governmental agency or body or
otherwise that, if successful, would limit, revoke, cancel, suspend or
cause not to be renewed any Governmental License, in each case, which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xix) Title to Property. The Company and the Subsidiaries
have good and marketable title to all real property owned by the
Company and the Subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Offering Memorandum or
(b) do not, singly or in the aggregate, materially affect the value of
such property and do not materially interfere with the use made and
proposed to be made of such property by the Company or any of the
Subsidiaries; and all of the leases and subleases material to the
business of the Company and the Subsidiaries, considered as one
enterprise, and under which the Company or any of the Subsidiaries
holds properties described in the Offering Memorandum, are in full
force and effect, and neither the Company nor any of the Subsidiaries
has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any of the
Subsidiaries under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or any Subsidiary
to the continued possession of the leased or subleased premises under
any such lease or sublease.
(xx) Tax Returns. All United States federal income tax
returns of the Company and the Subsidiaries required by law to be
filed have been filed and all taxes shown by such returns or otherwise
assessed, which are due and payable, have been paid, except
assessments against which appeals have been or will be promptly taken
and as to which adequate reserves have been provided. The Company and
the Subsidiaries have filed all other tax returns that are required to
have been filed by them pursuant to applicable foreign, federal,
state, local or other law except insofar as the failure to file such
returns would not result in a Material Adverse Effect, and have paid
all taxes due pursuant to such returns or pursuant to any assessment
received by the Company and the Subsidiaries, except for such taxes,
if any, as are being contested in good faith and by appropriate
proceedings
- 10 -
15
and as to which adequate reserves have been provided. The charges,
accruals and reserves on the books of the Company in respect of all
federal, state, local and foreign tax liabilities of the Company and
each Subsidiary for any years not finally determined are adequate to
meet any assessments or re-assessments for additional income tax for
any years not finally determined, except to the extent of any
inadequacy that would not result in a Material Adverse Effect.
(xxi) Solvency. The Company and the Guarantor are, and
immediately after the Closing will be, Solvent. As used herein, the
term "Solvent" means, with respect to the Company and the Guarantor,
as the case may be, on a particular date, that on such date (A) the
fair market value of the assets of the Company or the Guarantor is
greater than the total amount of liabilities (including contingent
liabilities) of the Company or the Guarantor, (B) the present fair
salable value of the assets of the Company or the Guarantor is greater
than the amount that will be required to pay the probable liabilities
of the Company or the Guarantor on its debts as they become absolute
and mature, (C) the Company or the Guarantor is able to realize upon
its assets and pay its debts and other liabilities, including
contingent obligations, as they mature, and (D) the Company or the
Guarantor does not have unreasonably small capital.
(xxii) Stabilization or Manipulation. Neither the Company
nor the Guarantor nor any of their respective officers, directors or
controlling persons has taken, directly or indirectly, any action
designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company or the
Guarantor in order to facilitate the sale or resale of the Securities
or the Guarantees. The Company and the Guarantor have not distributed
and, prior to the later to occur of (i) the Closing Time and (ii)
completion of the distribution of the Securities and the Guarantees,
will not distribute any offering material in connection with the
offering and sale of the Securities and the Guarantees other than the
Offering Memorandum or other materials, if any, permitted by the 1933
Act and approved by the Representative.
(xxiii) Suppliers. No supplier of merchandise to the Company
or any of the Subsidiaries has ceased shipments of merchandise to the
Company or any of the Subsidiaries, other than in the normal and
ordinary course of business consistent with past practices, which
cessation would not result in a Material Adverse Effect.
(xxiv) Environmental Laws. Except as described in the
Offering Memorandum and except such matters as would not, singly or in
the aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of the Subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule,
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16
regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, petroleum or petroleum
products or nuclear or radioactive material (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company and
the Subsidiaries have all permits, licenses, authorizations and
approvals currently required for their respective businesses under any
applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings relating to any Environmental Law against the Company or
any of the Subsidiaries and (D) there are no events, facts or
circumstances that might reasonably be expected to form the basis of
any liability or obligation of the Company or any of the Subsidiaries,
including, without limitation, any order, decree, plan or agreement
requiring clean-up or remediation, or any action, suit or proceeding
by any private party or governmental body or agency, against or
affecting the Company or any of the Subsidiaries relating to any
Hazardous Materials or Environmental Laws.
(xxv) Registration Rights. There are no holders of
securities (debt or equity) of the Company or the Guarantor, or
holders of rights (including, without limitation, preemptive rights),
warrants or options to obtain securities of the Company or the
Guarantor, who in connection with the issuance, sale and delivery of
the Securities, the Guarantees and the Exchange Securities, if any,
and the execution, delivery and performance of this Agreement and the
Registration Rights Agreement, have the right to request the Company
or the Guarantor to register securities held by them under the 1933
Act.
(xxvi) Accounting Controls. The Company and its consolidated
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific
authorization; (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared
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17
with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xxvii) Investment Company Act. Neither the Company nor the
Guarantor is, and upon the issuance and sale of the Securities and the
Guarantees as herein contemplated and the application of the net
proceeds therefrom as described in the Offering Memorandum will be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(xxviii) Rule 144A Eligibility. The Securities and the
Guarantees are eligible for resale pursuant to Rule 144A and will not
be, at the Closing Time, of the same class as securities listed on a
national securities exchange registered under Section 6 of the 1934
Act, or quoted in a U.S. automated interdealer quotation system.
(xxix) No General Solicitation. None of the Company, the
Guarantor, any of their respective affiliates, as such term is defined
in Rule 501(b) under the 1933 Act ("Affiliates"), or any person acting
on any of their behalf (other than the Initial Purchasers, as to whom
the Company and the Guarantor make no representation) has engaged or
will engage, in connection with the offering of the Securities and the
Guarantees, in any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the 1933 Act.
(xxx) No Registration Required. Subject to compliance by
the Initial Purchasers with the representations and warranties set
forth in Section 2, it is not necessary in connection with the offer,
sale and delivery of the Securities and the Guarantees to the Initial
Purchasers and to each Subsequent Purchaser in the manner contemplated
by this Agreement and the Offering Memorandum to register the
Securities and the Guarantees under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "1939
Act").
(xxxi) No Directed Selling Efforts. With respect to those
Securities and Guarantees sold in reliance on Regulation S, (A) none
of the Company, the Guarantor, any of their respective Affiliates or
any person acting on their behalf (other than the Initial Purchasers,
as to whom the Company and the Guarantor make no representation) has
engaged or will engage in any directed selling efforts within the
meaning of Regulation S and (B) each of the Company, the Guarantor,
any of their respective Affiliates and any person acting on their
behalf (other than the Initial Purchasers, as to whom the Company and
the Guarantor make no representation) has complied and will comply
with the offering restrictions requirement of Regulation S.
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(xxxii) PORTAL. There are no securities of the Company or the
Guarantor which are of the same class as the Securities or the
Guarantees that are listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a United
States automated interdealer quotation system. The Company and the
Guarantor have been advised by the National Association of Securities
Dealers, Inc. PORTAL Market that the Securities and the Guarantees
will be designated PORTAL eligible securities in accordance with the
rules and regulations of the National Association of Securities
Dealers, Inc.
(b) Officer's Certificates. Any certificate signed by any officer
of the Company or any of the Subsidiaries delivered to the Initial Purchasers
or to counsel for the Initial Purchasers shall be deemed a representation and
warranty by the Company or any of the Subsidiaries to each Initial Purchaser as
to the matters covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
(a) Securities and Guarantees. On the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company and the Guarantor agree to sell to each Initial
Purchaser, severally and not jointly, and each Initial Purchaser, severally and
not jointly, agrees to purchase from the Company and the Guarantor, at the
price set forth in Schedule C, the aggregate principal amount of Securities
(including the Guarantees) set forth in Schedule A opposite the name of such
Initial Purchaser, plus any additional principal amount of Securities
(including the Guarantees) which such Initial Purchaser may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities and the Guarantees shall be made at the office
of Fried, Frank, Harris, Shriver & Jacobson, or at such other place as shall be
agreed upon by the Representative, the Company and the Guarantor at 9:00 A.M.
(New York Time) on the fifth business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representative, the Company and the Guarantor (such time and date of payment
and delivery being herein called the "Closing Time").
Payment shall be made to the Company and the Guarantor by wire
transfer of immediately available funds to a bank account designated by the
Company and the Guarantor, against delivery to the respective accounts of the
Initial Purchasers of certificates for the Securities and the Guarantees to be
purchased by them. It is understood that each Initial Purchaser has authorized
the Representative, for its account,
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to accept delivery of, receipt for, and make payment of the purchase price for,
the Securities and the Guarantees which it has agreed to purchase. Merrill
Lynch, individually and not as representative of the Initial Purchasers, may
(but shall not be obligated to) make payment of the purchase price for the
Securities and the Guarantees to be purchased by any Initial Purchaser whose
funds have not been received by the Closing Time, but such payment shall not
relieve such Initial Purchaser from its obligations hereunder. A certificate or
certificates representing the Securities and the Guarantees shall be registered
in the name of Cede & Co. pursuant to the DTC Agreement, or physical
certificates representing the Securities and the Guarantees shall be registered
in the names and denominations requested by the Initial Purchasers, and in
either case shall be made available for examination and packaging by the
Initial Purchasers in The City of New York not later than 9:00 A.M. on the last
business day prior to the Closing Time.
(c) Qualified Institutional Buyer. Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees with, the
Company and the Guarantor that it (i) is a "qualified institutional buyer"
within the meaning of Rule 144A under the 1933 Act (a "Qualified Institutional
Buyer") and an "accredited investor" within the meaning of Rule 501(a) under
the 1933 Act (an "Accredited Investor"); (ii) has not and will not solicit
offers for, or offer or sell, Securities or Guarantees by means of any general
solicitation or general advertising within the meaning of Rule 502(c) under
Regulation D under the 1933 Act; (iii) will offer and sell the Securities and
Guarantees only to (A) institutional investors that are reasonably believed by
it to qualify as Qualified Institutional Buyers or (B) non-U.S. persons in
offshore transactions in reliance upon Regulation S under the 1933 Act; and
(iv) will otherwise act in accordance with the terms and conditions set forth
in this Agreement and in the Offering Memorandum in connection with the
placement of the Securities contemplated hereby.
(d) Denominations; Registration. Certificates for the Securities
(including the Guarantees) shall be in such denominations ($1,000 or integral
multiples thereof) and registered in such names as the Representative may
request in writing at least one full business day before the Closing Time.
SECTION 3. Covenants of the Company and the Guarantor. The
Company and the Guarantor, jointly and severally, covenant with each Initial
Purchaser as follows:
(a) Offering Memorandum. The Company and the Guarantor, as
promptly as possible, will furnish to each Initial Purchaser, without charge,
such number of copies of the Preliminary Offering Memorandum, the Final
Offering Memorandum and any amendments and supplements thereto and documents
incorporated by reference therein as such Initial Purchaser may reasonably
request.
(b) Notice and Effect of Material Events. The Company and the
Guarantor will promptly notify each Initial Purchaser, and confirm such notice
in writing, of (x) any
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filing made by the Company or the Guarantor of information relating to the
offering of the Securities and the Guarantees with any securities exchange or
any other regulatory body in the United States or any other jurisdiction, and
(y) prior to the completion of the placement of the Securities and the
Guarantees by the Initial Purchasers as evidenced by a notice in writing from
the Initial Purchasers to the Company, any material changes in or affecting the
earnings, business affairs or business prospects of the Company and the
Subsidiaries which (i) make any statement in the Offering Memorandum or any
document incorporated by reference in the Offering Memorandum false or
misleading or (ii) are not disclosed in the Offering Memorandum. In such event
or if during such time any event shall occur or condition shall exist as a
result of which it is necessary, in the opinion of the Company and the
Guarantor, their counsel, the Initial Purchasers or counsel for the Initial
Purchasers, to amend or supplement the Final Offering Memorandum in order that
the Final Offering Memorandum not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances then existing, the
Company and the Guarantor will forthwith amend or supplement the Final Offering
Memorandum by preparing and furnishing to each Initial Purchaser an amendment
or amendments of, or a supplement or supplements to, the Final Offering
Memorandum (in form and substance satisfactory in the reasonable opinion of
counsel for the Initial Purchasers) so that, as so amended or supplemented, the
Final Offering Memorandum will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company
and the Guarantor will advise each Initial Purchaser promptly of any proposal
to amend or supplement the Offering Memorandum and will not effect such
amendment or supplement without the consent of the Representative on behalf of
the Initial Purchasers. Neither the consent of the Representative to, nor the
Initial Purchasers' delivery of, any such amendment or supplement, shall
constitute a waiver of any of the conditions set forth in Section 5 hereof.
(d) Qualification of Securities and Guarantees for Offer and Sale.
The Company and the Guarantor will use their reasonable efforts to register or
qualify the Securities and the Guarantees for offering and sale under the
applicable securities laws of such jurisdictions as the Representative may
reasonably designate and will maintain such qualifications in effect as long as
required for the sale of the Securities and the Guarantees; provided, however,
that the Company and the Guarantor shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
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21
(e) Integration. The Company and the Guarantor agree that they
will not and will cause their affiliates not to make any offer or sale of
securities of the Company or the Guarantor of any class if, as a result of the
doctrine of "integration" referred to in Rule 502 under the 1933 Act, such
offer or sale could be deemed to render invalid (for the purpose of (i) the
sale of the Securities and the Guarantees by the Company and the Guarantor to
the Initial Purchasers, (ii) the resale of the Securities and the Guarantees by
the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the
Securities and the Guarantees by such Subsequent Purchasers to others) the
exemption from the registration requirements of the 1933 Act provided by
Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or
otherwise.
(f) Rating of Securities. The Company and the Guarantor shall take
all reasonable action necessary to enable Standard & Poor's Rating Group
("S&P"), and Moody's Investors Service, Inc. ("Moody's"), to provide their
respective credit ratings of the Securities and the Guarantees.
(g) Rule 144A Information. The Company and the Guarantor agree
that, in order to render the Securities and the Guarantees eligible for resale
pursuant to Rule 144A under the 1933 Act, while any of the Securities and the
Guarantees remain outstanding, they will make available, upon request, to any
holder of Securities and Guarantees or prospective purchasers of Securities and
Guarantees the information specified in Rule 144A(d)(4), unless the Company and
the Guarantor furnish information to the Commission pursuant to Section 13 or
15(d) of the 1934 Act (such information, whether made available to holders or
prospective purchasers or furnished to the Commission, is hereinafter referred
to as "Additional Information").
(h) Restriction on Resales. Until the expiration of two years
after the original issuance of the Securities and the Guarantees, the Company
and the Guarantor will not, and will cause their "affiliates" (as such term is
defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities and
Guarantees which are "restricted securities" (as such term is defined under
Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of them and
shall immediately upon any purchase of any such Securities and Guarantees
submit such Securities and Guarantees to the Trustee for cancellation.
(i) Use of Proceeds. The Company and the Guarantor will use the
net proceeds received by them from the sale of the Securities and the
Guarantees in the manner specified in the Offering Memorandum under "Use of
Proceeds."
(j) Restriction on Sale of Securities. During a period of 120 days
from the date of the Offering Memorandum, the Company and the Guarantor will
not, without the prior written consent of Merrill Lynch, directly or
indirectly, issue, sell, offer to sell, grant any option for the sale of, or
otherwise dispose of, any debt securities or guarantees of debt securities of
the Company, or file a registration statement under the 1933 Act with respect
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to the foregoing (other than borrowings under the Company's revolving bank
credit agreement, the Securities, the Guarantees and the Exchange Securities
and other than the filing of an Exchange Offer Registration Statement or a
Shelf Registration Statement pursuant to the Registration Rights Agreement).
Notwithstanding the foregoing, the Company may issue pursuant to the Indenture
and sell up to $25,000,000 of additional Notes (and related Guarantees) to the
Initial Purchasers, if the Company, the Guarantor and the Initial Purchasers so
agree at such time in their individual sole discretion, which will have the
same terms (including interest rate) and shall be of the same series as the
Notes originally issued and sold hereunder, during the period from the date
hereof until the 30th day after the date hereof, pursuant to a separate
Purchase Agreement containing substantially the same terms as this Agreement
(including the same allocation among Initial Purchasers and Initial Purchaser
discount), at a purchase price per Note to be determined at the time of sale;
provided, however, that the Company may not sell such additional Notes unless
the Company's Revolving Bank Credit Agreement has been amended to permit the
incurrence of such additional indebtedness represented by such additional
Notes.
(k) DTC Clearance. The Company and the Guarantor will use all
reasonable efforts in cooperation with the Initial Purchasers to permit the
Securities and the Guarantees to be eligible for clearance and settlement
through DTC.
(l) Legends. Each certificate for a Security (including the
Guarantee) will bear the legend contained in "Notices to Investors" in the
Offering Memorandum for the time period and upon the other terms stated in the
Offering Memorandum.
(m) Interim Financial Statements. Prior to the Closing Time, the
Company shall furnish to the Initial Purchasers copies of any unaudited interim
financial statements of the Company, promptly after they have been completed,
for any periods subsequent to the periods covered by the financial statements
appearing in the Offering Memorandum.
(n) Periodic Reports. For a period of three years after the
Closing Time, the Company and the Guarantor will furnish to the Initial
Purchasers copies of all annual reports, quarterly reports and current reports
filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other similar
forms as may be designated by the Commission, and such other documents, reports
and information as shall be furnished by the Company and the Guarantor
generally to the holders of the Securities and the Guarantees or to security
holders of its publicly issued securities generally.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company and the Guarantor, jointly and
severally, will pay all expenses incident to the performance of their
respective obligations under this Agreement, including (i) the preparation,
printing and any filing of the Offering
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Memorandum and the Registration Statement (including financial statements and
any schedules or exhibits) and of each amendment or supplement thereto,
including the preliminary prospectuses and the prospectus to be contained in
the Registration Statement, (ii) the preparation, printing and delivery to the
Initial Purchasers of this Agreement, the Registration Rights Agreement, the
Indenture and such other documents as may be required in connection with the
offering, purchase, sale and delivery of the Securities and the Guarantees,
(iii) the preparation, issuance and delivery of the certificates for the
Securities and the Guarantees to the Initial Purchasers, including any charges
of DTC in connection therewith, (iv) the fees and disbursements of the
Company's and the Guarantor's counsel, accountants and other advisors, (v) the
qualification of the Securities and the Guarantees under securities laws in
accordance with the provisions of Section 3(d) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Initial Purchasers
in connection therewith and in connection with the preparation of the Blue Sky
Survey, any supplement thereto and any Legal Investment Survey, (vi) the fees
and expenses of the Trustee, including the fees and disbursements of counsel
for the Trustee in connection with the Indenture, the Securities and the
Guarantees, (vii) any fees payable in connection with the rating of the
Securities and the Guarantees and the listing of the Securities and the
Guarantees with the Private Offerings, Resales and Trading Through Automated
Linkages ("PORTAL") market, and (viii) any filing fees incident to, and any
reasonable fees and disbursements of counsel to the Initial Purchasers in
connection with, the review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Securities and the Guarantees.
(b) Termination of Agreement. If this Agreement is terminated by
the Representative in accordance with the provisions of Section 5 or Section
9(a)(i) or 9(a)(ii) hereof, the Company and the Guarantor, jointly and
severally, shall reimburse the Initial Purchasers for all of their out-of-
pocket expenses, including the reasonable fees and disbursements of counsel for
the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations. The
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company and the Guarantor
contained in Section 1 hereof or in certificates of any officer of the Company
or any of the Subsidiaries delivered pursuant to the provisions hereof, to the
performance by the Company and the Guarantor of their covenants and other
obligations hereunder, and to the following further conditions:
(a) Opinion of Counsel for the Company and the Guarantor. At the
Closing Time, the Initial Purchasers shall have received the favorable opinion,
dated as of the Closing Time, of Troutman Sanders LLP, counsel for the Company
and the Guarantor, in form and substance satisfactory to counsel for the
Initial Purchasers, together with signed or reproduced copies of such letters
for each of the other Initial Purchasers to the effect set forth in Exhibit A
hereto and to such further effect as counsel to the Initial Purchasers
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24
may reasonably request. Troutman Sanders LLP will rely on Fried, Frank, Harris,
Shriver & Jacobson with respect to matters governed by New York law.
(b) Opinion of Counsel for the Initial Purchasers. At the Closing
Time, the Initial Purchasers shall have received the favorable opinion, dated
as of the Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel
for the Initial Purchasers, together with signed or reproduced copies of such
letter for each of the other Initial Purchasers, with respect to certain
matters set forth in paragraphs (i), (ii), (vi) through (x), inclusive, (xiv)
(solely as to the information in the Offering Memorandum under "Description of
the Notes") and the third from the last paragraph of Exhibit A hereto. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York and the
federal law of the United States and the General Corporation Law of the State
of Delaware, upon the opinions of counsel satisfactory to the Representative.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company, the Guarantor and the Subsidiaries and certificates of
public officials.
(c) Officers' Certificate. At the Closing Time, (i) the Offering
Memorandum, as it may then be amended or supplemented, including the documents
incorporated by reference therein, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) there shall not
have been, since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company and
of the Subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business, except to the extent expressly disclosed in
the Preliminary Offering Memorandum; (iii) the Company and the Guarantor shall
have complied with all agreements and satisfied all conditions on their part to
be performed or satisfied at or prior to the Closing Time; and (iv) the
representations and warranties of the Company and the Guarantor in Section 1
shall be accurate and true and correct as though expressly made at and as of
the Closing Time. At the Closing Time, the Initial Purchasers shall have
received a certificate of the Chief Executive Officer of the Company and the
Chief Financial Officer of the Company, dated as of the Closing Time, to such
effect.
(d) Accountant's Comfort Letter and Consent. At the time of the
execution of this Agreement, the Initial Purchasers shall have received from
Arthur Andersen LLP a letter dated such date, in form and substance
satisfactory to the Representative or to counsel for the Initial Purchasers,
together with signed or reproduced copies of such letter for each of the other
Initial Purchasers, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to Initial Purchasers
with respect to the financial statements and certain financial information
contained in the Offering Memorandum and in the form of Exhibit B attached
hereto. Arthur Andersen LLP shall
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25
include either in such letter or in a separate writing a consent to the
inclusion of its report in the Offering Memorandum and to the reference to it
under the caption "Independent Public Accountants" in the Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received from Arthur Andersen LLP a letter, dated as of
the Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (d) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities and
the Guarantees shall be rated at least Ba3 by Moody's and BB by S&P, and the
Company and the Guarantor shall have delivered to the Representative a letter
dated the Closing Time, from each such rating agency, or other evidence
satisfactory to the Representative, confirming that the Securities and the
Guarantees have such ratings; and since the date of this Agreement, there shall
not have occurred a downgrading in the rating assigned to the Securities and
the Guarantees or any of the Company's and the Guarantor's other debt
securities by any nationally recognized securities rating agency, and no such
securities rating agency shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of the
Securities and the Guarantees or any of the Company's and the Guarantor's other
debt securities.
(g) PORTAL. At the Closing Time, the Securities and the Guarantees
shall have been designated for trading on PORTAL.
(h) Chief Financial Officer's Certificate. At the Closing Time,
the Initial Purchasers shall have received a certificate of the principal
financial officer of the Company and the Guarantor as to certain agreed upon
accounting matters.
(i) Registration Rights Agreement and Indenture. The Company and
the Guarantor shall have duly authorized, executed and delivered the
Registration Rights Agreement and the Indenture in a form and substance
satisfactory to the Representative and counsel to the Initial Purchasers.
(j) Bank Consent. The Company and the Guarantor shall have
obtained a valid consent and amendment from the lenders under the Company's and
the Guarantor's Revolving Credit Agreement, dated as of March 31, 1997, in form
and substance satisfactory to the Initial Purchasers.
(k) Additional Documents. At the Closing Time, counsel for the
Initial Purchasers shall have been furnished with such documents and opinions
as they may require for the purpose of enabling them to pass upon the issuance
and sale of the Securities and the Guarantees as herein contemplated, or in
order to evidence the
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26
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company
and the Guarantor in connection with the issuance and sale of the Securities
and the Guarantees as herein contemplated shall be satisfactory in form and
substance to the Initial Purchasers and counsel for the Initial Purchasers.
(l) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the Representative by notice to the Company
at any time at or prior to the Closing Time, and such termination shall be
without liability of any party to any other party except as provided in Section
4 and except that Sections 1, 6 and 7 shall survive any such termination and
remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Initial Purchasers. The Company and the
Guarantor, jointly and severally, agree to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Preliminary Offering Memorandum or the Final Offering Memorandum
(or any amendment or supplement thereto (including any document
incorporated by reference into the Preliminary Offering Memorandum or
Final Offering Memorandum)), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
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27
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company or the
Guarantor by any Initial Purchaser through Merrill Lynch expressly for use in
the Offering Memorandum (or any amendment or supplement thereto); provided,
further, however, that the Company and the Guarantor will not be liable to any
Initial Purchasers or any person controlling such Initial Purchasers with
respect to any such untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Memorandum to the extent that
the Company and the Guarantor shall sustain the burden of proving that any such
loss, liability, claim, damage or expense resulted solely from the fact that
such Initial Purchaser sold Securities to a person to whom such Initial
Purchaser failed to send or give, at or prior to the written confirmation of
the sale of such Securities, a copy of the Final Offering Memorandum (as
amended or supplemented) if the Company has previously furnished copies thereof
(sufficiently in advance of the Closing Time to allow for distribution of the
Final Offering Memorandum in a timely manner) to the Initial Purchaser and the
loss, liability, claim, damage or expense of such Initial Purchaser resulted
solely from an untrue statement or omission or alleged untrue statement or
omission of a material fact contained in or omitted from such Preliminary
Offering Memorandum which was corrected in the Final Offering Memorandum..
(b) Indemnification of Company, Guarantor, and Directors. Each
Initial Purchaser severally agrees to indemnify and hold harmless the Company,
the Guarantor and their directors, any executive officer of the Company and the
Guarantor who would be required to sign the Offering Memorandum if it were a
registration statement on Form S-1, and each person, if any, who controls the
Company or the Guarantor within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Offering Memorandum or
any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company or the Guarantor by such Initial
Purchaser through Merrill Lynch expressly for use in the Offering Memorandum or
any amendment or supplement thereto.
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in
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28
any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, an indemnifying party shall not be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with
such request to the extent it considers such request to be reasonable and (ii)
provides written notice to the indemnified party substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein,
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29
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantor on the one hand and
the Initial Purchasers on the other hand from the offering of the Securities
and the Guarantees pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the Guarantor
on the one hand and of the Initial Purchasers on the other hand in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations.
The relative benefits received by the Company and the Guarantor on the
one hand and the Initial Purchasers on the other hand in connection with the
offering of the Securities and the Guarantees pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities and the Guarantees pursuant to this
Agreement (before deducting expenses) received by the Company and the Guarantor
and the total underwriting discount received by the Initial Purchasers, bear to
the aggregate initial offering price of the Securities and the Guarantees.
The relative fault of the Company and the Guarantor on the one hand
and the Initial Purchasers on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Guarantor, or by the
Initial Purchasers, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, 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 (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at
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30
which the Securities (including the Guarantees) sold by it were distributed to
the subsequent purchasers thereof exceeds the amount of any damages which such
Initial Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company and the Guarantor, any executive
officer of the Company and the Guarantor who would be required to sign the
Offering Memorandum if it were a registration statement on Form S-1, and each
person, if any, who controls the Company and the Guarantor within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company and the Guarantor. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 7 are
several in proportion to the principal amount of Securities (including the
Guarantees) set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of the
Subsidiaries submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Initial Purchaser or controlling person, or by or on behalf of the Company or
the Guarantor, and shall survive delivery of the Securities (including the
Guarantees) to the Initial Purchasers.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Company and the Guarantor, at any time at or prior
to the Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company and
the Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, except to the extent expressly disclosed in the
Preliminary Offering Memorandum, or (ii) if there shall have occurred a
downgrading in the rating assigned to the Securities or the Guarantees or any
of the Company's or the Guarantor's other debt securities by any nationally
recognized securities rating agency, or if such securities rating agency shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of the
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31
Securities, the Guarantees or any of the Company's or Guarantor's other debt
securities or guarantees of debt securities, or (iii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or
economic conditions, in each case the effect of which is such as to make it, in
the judgment of the Representative, impracticable to market the Securities or
the Guarantees or to enforce contracts for the sale of the Securities or the
Guarantees, or (iv) if trading in any securities of the Company or the
Guarantor has been suspended or limited by the Commission or the NASDAQ
National Market System, or if trading generally on the American Stock Exchange
or the New York Stock Exchange or in the NASDAQ National Market System has been
suspended or limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (v) if a
banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that
Sections 1, 6 and 7 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Initial Purchasers. If
one or more of the Initial Purchasers shall fail at Closing Time to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representative shall have the right, but not
the obligation, within 24 hours thereafter, to make arrangements for the non-
defaulting Initial Purchasers, or any other initial purchasers, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then this Agreement shall terminate without liability on the part of
any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representative, the Company or the
Guarantor shall have the right to postpone the Closing Time for a period not
exceeding seven days in order to effect any required changes in the Offering
Memorandum or in any other documents or arrangements. As used herein, the term
"Initial Purchaser" includes any person substituted for an Initial Purchaser
under this Section 10.
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32
SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Initial Purchasers shall be directed to the Representative at North Tower,
World Financial Center, New York, New York 10281-1201, attention of Amy Lane,
with a copy to Fried, Frank, Harris, Shriver & Jacobson, 1 New York Plaza, New
York, New York 10004, attention of Valerie Ford Jacob, Esq.; notices to the
Company or the Guarantor shall be directed to them at 901 West Walnut Hill
Lane, Irving, Texas 75038-1003, attention of Alan P. Shor, Esq., with a copy to
Troutman Sanders LLP, 600 Peachtree Street, N.E., Suite 5200, Atlanta, Georgia
30308-2216, attention of James L. Smith, III, Esq.
SECTION 12. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Initial Purchasers, the Company and the
Guarantor and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers, the Company and the Guarantor
and their respective successors and the controlling persons and officers and
directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers, the Company and the Guarantor and
their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities and Guarantees
from any Initial Purchaser shall be deemed to be a successor by reason merely
of such purchase.
SECTION 13. Governing Law And Time. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY HEREIN REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
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33
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Guarantor a
counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement among the Initial Purchasers, the Company and
the Guarantor in accordance with its terms.
Very truly yours,
ZALE CORPORATION
By /s/ STEPHEN C. MASSANELLI
------------------------------------
Name: Stephen C. Massanelli
Title: Senior Vice President and
Treasurer
ZALE DELAWARE, INC.
By /s/ STEPHEN C. MASSANELLI
------------------------------------
Name: Stephen C. Massanelli
Title: Senior Vice President and
Treasurer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
BANCBOSTON SECURITIES INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ LANI MARTIN
---------------------------------------
Authorized Signatory
For itself and the other Initial Purchasers
named in Schedule A hereto.
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34
SCHEDULE A
Principal
Amount of
Securities
----------
Name of Initial Purchaser
-------------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . $60,000,000
Goldman, Sachs & Co.... . . . . . . . . . . . . . . . . . . . . . $30,000,000
BancBoston Securities Inc.... . . . . . . . . . . . . . . . . . . $10,000,000
Total . . . . . . . . . . . . . . . . . .. . . . . . . $100,000,000
============
35
SCHEDULE B
Subsidiaries
Zale Delaware, Inc.
Diamond Funding Corp.
Zale Acquisition Corporation
Jewel Recovery, Inc.
Jewel Recovery, L.P.
JHC Holding Corporation
Zale Holding Corporation
ZHCL Corporation
Zale Puerto Rico, Inc.
Dobbins Jewelers, Inc.
Jewelers Financial Services, Inc.
Zale Life Insurance Company
Zale Indemnity Company
Diamond Guaranty Insurance Company
Jewel Re-Insurance Company
Jewel Re-Insurance Ltd.
Zale Employees Child Care Association, Inc.
Karten's Jewelers, Inc.
Zale Funding Trust
Jewelers National Bank
36
SCHEDULE C
ZALE CORPORATION
$100,000,000 8 1/2% Senior Notes due 2007
1. The initial offering price of the Securities (including the
Guarantees) shall be 99.53% of the principal amount thereof, plus accrued
interest, if any, from the date of issuance.
2. The purchase price to be paid by the Initial Purchasers for
the Securities and the Guarantees shall be 97.53% of the principal amount
thereof.
3. The interest rate on the Securities shall be 8 1/2% per annum.
4. The interest payment dates of the Securities shall be April 1
and October 1 of each year, commencing April 1, 1998.
5. The Securities will be subject to redemption at any time on or
after October 1, 2002, at the option of the Company, at the following
redemption prices (expressed as percentages of the principal amount), if
redeemed during the 12-month period beginning October 1 of the years indicated
below:
Redemption
Year Price
---- -------
2002 104.250%
2003 102.833%
2004 101.417%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
6. At any time or from time to time on or prior to October 1,
2000, the Company may, at its option, use all or a portion of the net proceeds
of one or more Public Equity Offerings (as defined in the Indenture) to redeem
up to an aggregate of 30% of the aggregate principal amount of Securities
originally issued under the Indenture at a redemption price equal to 108.5% of
the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date; provided that at least 70% of the
aggregate principal amount of the Securities (including any Additional Notes
(as defined in the Offering Memorandum)) originally issued under the Indenture
remains outstanding immediately after the occurrence of such redemption.
37
Exhibit A
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
BancBoston Securities Inc.
As the Initial Purchasers
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
250 Vesey Street
New York, New York 10128
Re: Zale Corporation
Ladies and Gentlemen:
We have acted as counsel to Zale Corporation, a Delaware corporation
(the "Company"), and Zale Delaware, Inc., a Delaware corporation (the
"Guarantor"), in connection with: (i) the issuance by the Company of
$100,000,000 aggregate principal amount of its Senior Notes due 2007 (the
"Securities"), pursuant to an Indenture dated as of September 30, 1997 among
the Company, the Guarantor and Bank One, N.A., as trustee (the "Indenture");
(ii) the sale of the Securities pursuant to the Purchase Agreement dated
September 23, 1997 (the "Purchase Agreement") among the Company, the Guarantor
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co.,
and BancBoston Securities Inc. (the "Initial Purchasers"); (iii) the
Registration Rights Agreement dated as of September 30, 1997 among the Company,
the Guarantor and the Initial Purchasers (the "Registration Rights Agreement");
and (iv) the issuance of a guarantee (the "Guarantee") of the Company's
obligations under the Securities by the Guarantor pursuant to the terms of the
Indenture.
This opinion is being rendered pursuant to the requirements of Section
5(a) of the Purchase Agreement. Capitalized terms used herein and not othewise
defined shall have the meanings ascribed to them in the Purchase Agreement
unless the context otherwise requires.
In arriving at the opinions set forth below, we have examined and
relied upon, among other things, the offering memorandum pertaining to the
Securities and the Guarantees dated September 23, 1997 (the "Offering
Memorandum"), copies of the above-referenced documents and the exhibits and the
other documents referred to therein, such certificates of public officials and
officers of the Company and such originals or copies, certified or otherwise
identified to our satisfaction, of corporate documents and
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records of the Company and its subsidiaries, and such other information as we
have deemed necessary or appropriate for the purposes hereof. In giving this
opinion, we are assuming (1) that all documents and instruments examined by us,
including the Purchase Agreement, have been duly authorized by all requisite
action by each party thereto other than the Company and the Guarantor, and that
each such document has been duly executed and delivered by, and is a legal,
valid and binding obligation of, said parties and is enforceable against said
parties in accordance with its respective terms; (2) that the representations
and warranties of the Company and the Guarantor, as set forth in the Purchase
Agreement and the Registration Rights Agreement, are true and correct as to all
factual matters included therein; and (3) the authenticity of all instruments
presented to us as originals, the legal competency of natural persons, the
conformity to the originals of all instruments presented to us as copies and
the genuineness of all signatures.
On the basis of the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion, relying as to matters of New
York law for purposes of clauses (vii), (viii), (ix) and (x) upon the opinion
dated the date hereof rendered to you by Fried, Frank, Harris, Shriver &
Jacobson, that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations under the
Purchase Agreement, the Registration Rights Agreement, the Indenture, the
Securities, the Exchange Securities and the DTC Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Offering Memorandum in the table at page F-6
entitled "Zale Corporation and Subsidiaries-Consolidated Statements of
Stockholders' Investment" under the column labeled "Number of Common Shares
Outstanding" (except for subsequent issuances, if any, pursuant to
reservations, agreements, employee benefit plans or the exercise of convertible
securities or options referred to in the Offering Memorandum); the shares of
issued and outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable [(except as to
[611,642] shares delivered to the Disbursing Agent pursuant to the Company's
Plan of Reorganization under Chapter 11 of the Bankruptcy Code, but not yet
delivered to former creditors of the Company who have not yet provided required
documentation or whose claims are
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disputed, as to which we express no opinion or belief]; and none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company.
(v) Each subsidiary of the Company (including the Guarantor) has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; all of the issued and outstanding capital stock of each
subsidiary has been duly authorized and validly issued, is fully paid and non-
assessable and, to the best of our knowledge, is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance or claim [(except that, with respect to Dobbins
Jewelers, Inc. ("Dobbins"), a Guam corporation, for which Title 18, Section
2206 of the Guam Code requires each director of a corporation to own in his own
right at least one share of the capital stock of such corporation, [five]
shares of common stock of Dobbins are held by directors and former directors of
Dobbins)].
(vi) The Purchase Agreement has been duly authorized, executed and
delivered by the Company and by the Guarantor.
(vii) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and the Guarantor and (assuming the due
authorization, execution and delivery thereof by the Initial Purchasers)
constitutes the valid and binding obligation of the Company and the Guarantor,
enforceable against the Company and the Guarantor in accordance with its terms,
except as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law). We express no opinion as to the validity or binding effect or
enforceability of any provision of the Registration Rights Agreement relating
to indemnification or contribution.
(viii) The Indenture has been duly authorized, executed and delivered
by the Company and the Guarantor and (assuming the due authorization, execution
and delivery thereof by the Trustee) constitutes a valid and binding agreement
of the Company and the Guarantor, enforceable against the Company and the
Guarantor in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other similar
laws relating to or affecting enforcement of creditors' rights
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generally, or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(ix) The Securities and the Guarantees are in the form contemplated
by the Indenture, have been duly authorized by the Company and the Guarantor
and, when executed by the Company and the Guarantor and authenticated by the
Trustee in the manner provided in the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee) and
delivered against payment of the purchase price therefor, will constitute valid
and binding obligations of the Company and the Guarantor, enforceable against
the Company and the Guarantor in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium, or other similar laws relating to or affecting enforcement of
creditor's rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and
will be entitled to the benefits of the Indenture.
(x) The Exchange Securities have been duly authorized by the
Company and the Guarantor and, when executed by the Company and the Guarantor
and authenticated by the Trustee in the manner provided in the Indenture
(assuming the due authorization, execution and delivery of the Indenture by the
Trustee) and issued and delivered in exchange for the Securities and the
Guarantees pursuant to the Exchange Offer, will constitute valid and binding
obligations of the Company and the Guarantor, enforceable against the Company
and the Guarantor in accordance with their terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium, or other similar laws relating to or affecting enforcement of
creditor's rights generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), and
will be entitled to the benefits of the Indenture.
(xi) The Securities, the Guarantees and the Indenture conform in
all material respects to the descriptions thereof contained in the Offering
Memorandum.
(xii) The documents incorporated by reference in the Offering
Memorandum (other than the financial statements, notes or schedules thereto and
other financial data and supplemental schedules therein, as to which we express
no opinion), when they were filed with the Commission, complied as to form in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder.
(xiii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation to which the
Company, the Guarantor or any subsidiary is a party, or to which the property
of the Company, the Guarantor or any subsidiary is subject, before or brought
by any court or governmental agency or body, which might reasonably be expected
to result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets
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thereof or the consummation of the transactions contemplated in the Purchase
Agreement or the performance by the Company or the Guarantor of their
respective obligations under the Purchase Agreement, the Securities, the
Guarantees or the Exchange Securities.
(xiv) The information in the Offering Memorandum under "Business--
Litigation," "Risk Factors--Regulation," "Exchange Offer; Registration Rights,"
"Description of the Notes" and "Description of Certain Indebtedness," to the
extent that it constitutes matters of law, summaries of legal matters or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in
all material respects.
(xv) All descriptions in the Offering Memorandum and in the
documents incorporated by reference therein of contracts and other documents to
which the Company, the Guarantor or any of their subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments that would be required to be described in the Offering
Memorandum (if such Offering Memorandum were a prospectus included in a
registration statement on Form S-1) and in the documents incorporated by
reference therein that are not described or referred to in the Offering
Memorandum or in the documents incorporated by reference therein other than
those described or referred to therein, and the descriptions thereof or
references thereto are correct in all material respects.
(xvi) To the best of our knowledge, none of the Company, the
Guarantor, or any of their respective subsidiaries is in violation of its
charter or by-laws and no default by the Company, the Guarantor or any of their
respective subsidiaries exists in the due performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Offering Memorandum or filed
or incorporated by reference as an exhibit to any document incorporated by
reference therein and which violation or default might reasonably be expected
to result in a Material Adverse Effect.
(xvii) No authorization, approval, consent, license, order,
registration, qualification or decree of any court or governmental authority or
agency, domestic or foreign (other than with respect to the obligation imposed
by the Registration Rights Agreement to have a registration statement declared
effective or under the applicable securities laws of the various state and
local jurisdictions in which the Securities and Guarantees will be offered or
sold, as to which we express no opinion) is necessary or required in connection
with the due authorization, execution and delivery of the Purchase Agreement or
the due execution, delivery or performance of the Indenture by the Company or
the Guarantor or for the offering, issuance, sale or delivery of the Securities
and the Guarantees to the Initial Purchasers or the resale by the Initial
Purchasers in accordance with the Purchase Agreement or for the performance by
the Company or the Guarantor of their respective obligations thereunder, in
connection with the offering,
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issuance or sale of the Securities and the Guarantees or the consummation of
the transactions contemplated by the Purchase Agreement, the Registration
Rights Agreement, the Indenture, the DTC Agreement, the Securities, the
Guarantees and the Exchange Securities (including the issuance and sale of the
Securities and the Guarantees and the use of the proceeds from the sale of the
Securities and the Guarantees as described in the Offering Memorandum under the
caption "Use of Proceeds").
(xviii) It is not necessary in connection with the offer,
sale and delivery of the Securities and Guarantees to the Initial Purchasers
and to each Subsequent Purchaser in the manner contemplated by the Purchase
Agreement and the Offering Memorandum to register the Securities and Guarantees
under the 1933 Act or to qualify the Indenture under the Trust Indenture Act.
(xix) The execution, delivery and performance by the Company and the
Guarantor of the Purchase Agreement, the Registration Rights Agreement, the
Indenture, the DTC Agreement, the Securities, the Guarantees and the Exchange
Securities, the consummation of the transactions contemplated in the Purchase
Agreement (including the issuance and sale of the Securities and the Guarantees
and the use of the proceeds from the sale of the Securities and the Guarantees
as described in the Offering Memorandum under the caption "Use of Proceeds"),
and compliance by the Company and the Guarantor with their respective
obligations under the Purchase Agreement, the Registration Rights Agreement,
the DTC Agreement, the Indenture, the Securities, the Guarantees and the
Exchange Securities have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or default or
a Repayment Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or the Guarantor or any of their respective subsidiaries pursuant
to, any agreement listed as an exhibit to the Company's Form 10-K for the year
ended July 31, 1997 or any other material contract, indenture, mortgage, deed
of trust, loan or credit agreement, note or lease, nor will such action result
in any violation of the provisions of the charter or by-laws or other
constituent documents of the Company or the Guarantor or any of their
respective subsidiaries or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government instrumentality
or court, domestic or foreign, having jurisdiction over the Company or the
Guarantor or any of their subsidiaries or any of their assets or properties. As
used herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Company, the
Guarantor or any of their subsidiaries.
(xx) Neither the Company nor the Guarantor is an "investment
company" or an entity "controlled" by an "investment company," as such terms
are defined in the 1940 Act.
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Nothing has come to our attention that would lead us to believe that
the Offering Memorandum or any amendment or supplement (except for the
financial statements, notes and schedules and other financial data and
supplemental schedules included or incorporated by reference therein, as to
which we express no belief), at the time the Offering Memorandum was issued, at
the time any such amended or supplemented Offering Memorandum was issued, or at
the Closing Time, included or includes an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
We are members of the State Bar of Georgia and we do not express any
opinion herein concerning any law other than the law of the State of Georgia,
the general corporate law of the State of Delaware, the federal law of the
United States and, to the extent set forth herein, the law of the State of New
York.
This opinion is rendered to you in connection with the above-described
transaction. This opinion may not be relied upon by you for any other purpose
or relied upon by or furnished to any other person without our prior written
consent. This opinion is based upon the state of facts and law as in existence
on the date hereof and we disclaim any obligation to provide notice of any
changes with respect thereto.
Very truly yours,
TROUTMAN SANDERS LLP
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Exhibit B
[FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(d)]
(1) We are independent public accountants with respect to the
Company and the Guarantor within the meaning of the Securities Act of 1933, as
amended (the "1933 Act") and the published rules and regulations thereunder.
(2) In our opinion, the audited financial statements and the
related financial statement schedules included or incorporated by reference in
the Offering Memorandum comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the published rules and
regulations thereunder.
(3) On the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of a reading
of the latest available interim consolidated financial statements of the
Company, a reading of the minutes of all meetings of the stockholders and board
of directors and committees of the board of directors of the Company and the
Guarantor and their subsidiaries since January 1, 1997, inquiries of certain
officials of the Company and the Guarantor and their subsidiaries responsible
for financial and accounting matters, and such other inquiries and procedures
as may be specified in such letter, nothing came to our attention that caused
us to believe that:
(A) at August 31, 1997 and a specified date not
more than three business days prior to the date of this
Agreement, there was any change in the capital stock of the
Company and its subsidiaries or any decrease in the total
assets, working capital or total stockholders' investment of
the Company and its subsidiaries on a consolidated basis or
any increase in the long term debt of the Company and its
subsidiaries on a consolidated basis, in each case as compared
with amounts shown in the latest consolidated balance sheet
included in the Offering Memorandum, except in each case for
changes, decreases or increases that the Offering Memorandum
discloses have occurred or may occur; or
(C) for the period from August 1, 1997 to August
31, 1997, and from August 1, 1997 to a specified date not more
than three business days prior to the date of this Agreement,
there was any decrease in net sales, operating earnings,
earnings before extraordinary item or net earnings, in each
case as compared with the comparable period in the preceding
year, except in each case for any decreases that the Offering
Memorandum discloses have occurred or may occur.
45
(4) Based upon the procedures set forth in clauses (2) and (3)
above and a reading of the Selected Financial Data included in the Offering
Memorandum and a reading of the financial statements from which such data were
derived, nothing came to our attention that caused us to believe that the
Selected Financial Data included in the Offering Memorandum do not comply as to
form in all material respects with the disclosure requirements of Item 301 of
Regulation S-K of the 1933 Act, that the amounts included in the Selected
Financial Data are not in agreement with the corresponding amounts in the
audited consolidated financial statements for the respective periods or that
the financial statements not included in the Offering Memorandum from which
certain of such data were derived are not in conformity with generally accepted
accounting principles.
(5) We have compared the information included or incorporated by
reference in the Offering Memorandum under selected captions with the
disclosure requirements of Regulation S-K of the 1933 Act and on the basis of
limited procedures specified herein, nothing came to our attention that caused
us to believe that this information does not comply as to form in all material
respects with the disclosure requirements of Items 302, 402 and 503(d),
respectively, of Regulation S-K.
(6) In addition to the procedures referred to in clause (2) above,
we have performed other procedures, not constituting an audit, with respect to
certain amounts, percentages, numerical data and financial information
appearing in the Offering Memorandum and in documents incorporated by reference
therein, which are specified herein, and have compared certain of such items
with, and have found such items to be in agreement with, the accounting and
financial records of the Company.
(7) We hereby consent to the use in the Offering Memorandum of our
report dated September 3, 1997 relating to the audited financial statements of
the Company which appear in such Offering Memorandum. We also consent to the
reference to us under the heading "Independent Auditors" in such Offering
Memorandum.
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