EXHIBIT 1.1
EXECUTION COPY
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AKI HOLDING CORP.
$50,000,000
13 1/2% SENIOR DISCOUNT DEBENTURES DUE 2009
PURCHASE AGREEMENT
JUNE 22, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
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$50,000,000
13 1/2% Senior Debentures due 2009
AKI HOLDING CORP.
PURCHASE AGREEMENT
June 22, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
AKI Holding Corp., a Delaware corporation (the "Company"), proposes to
issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser") an aggregate of $50,000,000 in principal amount at
maturity of its 13 1/2% Senior Discount Debentures due 2009 (the "Series A
Debentures"), subject to the terms and conditions set forth herein. The Series
A Debentures are to be issued pursuant to the provisions of an indenture (the
"Indenture"), to be dated as of the Closing Date (as defined below), between
Holding and State Street Bank and Trust Company, as trustee (the "Trustee").
The Series A Debentures and the Series B Debentures (as defined below) issuable
in exchange therefor are collectively referred to herein as the "Debentures".
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
Holding intends to use the gross proceeds from the sale to the Initial
Purchaser of the Series A Debentures to fund an equity contribution to AKI,
Inc., a Delaware corporation (the "Company"), to (i) repay the outstanding
principal of and accrued interest on $123.5 million in Senior Increasing Rate
Notes and (ii) fund working capital requirements and general corporate purposes
of the Company, including funding the purchase price of the acquisition of the
fragrance sampling business of the Consumer Products Division of Minnesota
Mining and Manufacturing Company.
1. OFFERING MEMORANDUM. The Series A Debentures will be offered and
sold to the Initial Purchaser pursuant to one or more exemptions from the
registration
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requirements under the Securities Act of 1933, as amended (the "Act"). Holding
has prepared a preliminary offering memorandum, dated June 5, 1998 (the
"Preliminary Offering Memorandum"), and a final offering memorandum, dated
June 22, 1998 (the "Offering Memorandum"), relating to the Series A Debentures.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Debentures (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER
OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR
REGULATION S THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF THE SECURITIES ACT
(AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF
AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN $250,000,
AN OPINION OF COUNSEL THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2)
TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED
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STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, Holding agrees to issue
and sell to the Initial Purchaser, and the Initial Purchaser agrees to purchase
from Holding, an aggregate principal amount at maturity of $50.0 million of
Series A Debentures at a purchase price equal to 49.847% of the principal
amount at maturity thereof (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchaser has advised Holding that
the Initial Purchaser will make offers (the "Exempt Resales") of the Series A
Debentures purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchaser reasonably believes to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs") and (ii) to persons permitted to purchase
the Series A Debentures in offshore transactions in reliance upon Regulation S
under the Act (each, a "Regulation S Purchaser") (such persons specified in
clauses (i) and (ii) being referred to herein as the "Eligible Purchasers").
The Initial Purchaser will offer the Series A Debentures to Eligible Purchasers
initially at a price equal to 51.924% of the principal amount at maturity
thereof. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Debentures
will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be executed on and dated
the Closing Date, in substantially the form of Exhibit A hereto, for so long as
such Series A Debentures constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, Holding will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to Holding's new 13 1/2% Senior Discount Debentures due
2009 (the "Series B Debentures"), identical in all material respects to the
Series A Debentures (except that the Series B Debentures shall have been
registered pursuant to such Exchange Offer Registration Statement), to be
offered in exchange for the Series A Debentures (such offer to exchange being
referred to as the "Exchange Offer") and (ii) a shelf registration statement
pursuant to Rule 415 under the Act (the "Shelf Registration Statement" and,
together with the Exchange Offer Registration Statement, the "Registration
Statements") relating to the resale by certain holders of the Series A
Debentures, and to use their reasonable best efforts to cause such Registration
Statements to be declared and remain effective and usable for the periods
specified in the Registration Rights Agreement and to consummate the Exchange
Offer.
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This Agreement, the Indenture, the Series A Debentures and the
Registration Rights Agreement are hereinafter sometimes referred to
collectively as the "Operative Documents."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the Series A
Debentures shall be made at the offices of Latham & Watkins, 885 Third Avenue,
Suite 1000, New York, New York 10022, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 9:00 a.m. New York City
time, on June 25, 1998 or at such other time on the same date or such other
date as shall be agreed upon by the Initial Purchaser and Holding in writing.
The time and date of such delivery and the payment for the Series A Debentures
are herein called the "Closing Date."
(b) One or more of the Series A Debentures in definitive global form,
registered in the name of Cede & Co., as nominee of The Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Debentures (collectively, the
"Global Debenture"), shall be delivered by Holding to the Initial Purchaser (or
as the Initial Purchaser directs) in each case with any transfer taxes thereon
duly paid by Holding against payment by the Initial Purchaser of the Purchase
Price thereof by wire transfer in same day funds to the order of Holding. The
Global Debenture shall be made available to the Initial Purchaser for
inspection not later than 9:30 a.m., New York City time, on the business day
immediately preceding the Closing Date.
5. AGREEMENTS OF HOLDING. As of the date hereof, Holding hereby agrees
with the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly (and, if requested by the
Initial Purchaser, confirm such advice in writing) (i) of the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Debentures for offering or sale in
any jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Offering Memorandum
untrue or that requires any additions to or changes in the Offering Memorandum
in order to make the statements therein not misleading. Holding shall use its
reasonable best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Series A Debentures under any
state securities or Blue Sky laws and, if at any time any state securities
commission or other federal or state regulatory authority shall issue an order
suspending the qualification or exemption of any Series A Debentures under any
state securities or Blue Sky laws, Holding shall use its reasonable best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time; provided, however, that Holding shall not be required in
connection therewith to qualify as a
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foreign entity in any jurisdiction in which it is not now so qualified or to
take any action that would subject it to general consent to service of process
or taxation, other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales, in
any jurisdiction in which it is not now so subject.
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to Holding as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or supplements
thereto, as the Initial Purchaser may reasonably request for the time period
specified in Section 5(c). Subject to the Initial Purchaser's compliance with
its representations and warranties and agreements set forth in Section 7
hereof, Holding consents to the use of the Preliminary Offering Memorandum and
the Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchaser in connection with Exempt Resales.
(c) During such period, as in the opinion of counsel for the Initial
Purchaser, an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser for so long as any Series A
Debentures are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchaser shall not previously have
been advised or to which the Initial Purchaser shall reasonably object in
writing after being so advised and (ii) to prepare promptly upon the Initial
Purchaser's reasonable request, any amendment or supplement to the Offering
Memorandum that may be necessary or advisable in connection with such Exempt
Resales or such market-making activities; provided, however, that Holding shall
have the right to determine the form and substance of such amendment or
supplement to the Offering Memorandum, in consultation with the Initial
Purchaser.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchaser, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light
of the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchaser, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment
or supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances existing
when it is so delivered, be misleading, or so that such Offering Memorandum
will comply with applicable law, and to furnish to the Initial Purchaser and
such other persons as the Initial Purchaser may designate such number of copies
thereof as the Initial Purchaser may reasonably request.
(e) Prior to the sale of all Series A Debentures pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchaser and
counsel to the Initial Purchaser in connection with the registration or
qualification of the Series A Debentures for offer
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and sale to the Initial Purchaser and pursuant to Exempt Resales under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchaser may
reasonably request and to continue such registration or qualification in effect
so long as required for Exempt Resales and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification; provided, however, that Holding shall not be
required in connection therewith to register or qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation other than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Debentures are outstanding and the Indenture so
requires, (i) to mail and make generally available as soon as practicable after
the end of each fiscal year to the record holders of the Debentures a financial
report of Holding and its subsidiaries on a consolidated basis, all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and for the
preceding year, certified by Holding's independent public accountants and (ii)
to mail and make generally available as soon as practicable after the end of
each quarterly period (except for the last quarterly period of each fiscal
year) to such holders, a consolidated balance sheet, a consolidated statement
of operations and a consolidated statement of cash flows (and similar financial
reports of all unconsolidated subsidiaries, if any) as of the end of and for
such period, and for the period from the beginning of such year to the close of
such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(g) So long as the Debentures are outstanding, to furnish to the
Initial Purchaser as soon as available copies of all reports or other
communications furnished by Holding to its security holders generally or
furnished to or filed with the Commission or any national securities exchange
on which any class of securities of Holding is listed and such other publicly
available information concerning Holding and/or its subsidiaries as the Initial
Purchaser may reasonably request.
(h) So long as any of the Series A Debentures remain outstanding and
during any period in which Holding is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any holder of Series A Debentures in connection with any sale
thereof and any prospective purchaser of such Series A Debentures from such
holder, the information ("Rule 144A Information") required by Rule 144A(d)(4)
under the Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of Holding under this
Agreement, including: (i)
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the fees, disbursements and expenses of counsel to Holding and accountants of
Holding in connection with the sale and delivery of the Series A Debentures to
the Initial Purchaser and pursuant to Exempt Resales, and all other fees and
expenses in connection with the preparation, printing, filing and distribution
of the Preliminary Offering Memorandum, the Offering Memorandum and all
amendments and supplements to any of the foregoing (including financial
statements), including the mailing and delivering of copies thereof to the
Initial Purchaser and persons designated by it in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of the
Series A Debentures to the Initial Purchaser and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale
or delivery of the Series A Debentures (other than the fees of counsel for the
Initial Purchaser, except as provided by Section 5(i)(iv) below), (iv) all
expenses in connection with the registration or qualification of the Series A
Debentures for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and the reasonable fees and disbursements of counsel for the Initial
Purchaser in connection with such registration or qualification and memoranda
relating thereto), (v) the cost of printing certificates representing the
Debentures, (vi) all expenses and listing fees in connection with the
application for quotation of the Series A Debentures in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System-
PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee in connection
with the Indenture and the Debentures, (viii) the costs and charges of any
transfer agent, registrar and/or depositary (including DTC), (ix) any fees
charged by rating agencies for the rating of the Debentures, (x) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreement and (xi) and all other costs and expenses
incident to the performance of the obligations of Holding hereunder for which
provision is not otherwise made in this Section (5)(i).
(j) To use its reasonable best efforts to effect the inclusion of the
Series A Debentures in PORTAL and to maintain the listing of the Series A
Debentures on PORTAL for so long as the Series A Debentures are outstanding.
(k) To use its reasonable best efforts to obtain the approval of DTC
for "book-entry" transfer of the Debentures, and to comply with all of its
agreements set forth in the representation letters of Holding to DTC relating
to the approval of the Debentures by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of Holding or any
warrants, rights or options to purchase or otherwise acquire debt securities of
Holding substantially similar to the Debentures (other than (i) the
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Debentures and (ii) commercial paper issued in the ordinary course of business),
without the prior written consent of the Initial Purchaser, which will not be
unreasonably held.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Debentures to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Debentures under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Debentures.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Debentures registered pursuant to the Act to be offered in
exchange for the Series A Debentures and to comply with all applicable federal
and state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in the Registration
Rights Agreement.
(q) To use its reasonable best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy or obtain the waiver of all conditions
precedent to the delivery of the Series A Debentures.
(r) Not to use any form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) in connection with the offer
and sale of the Series A Debentures pursuant hereto, including, but not limited
to, articles, notices or other communications published in any newspaper,
magazine or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF HOLDING. As of the
date hereof, Holding represents and warrants to, and agrees with, the Initial
Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do
not, and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchaser furnished to Holding in writing
by the Initial Purchaser expressly for use therein. No stop order preventing
the use of the Preliminary Offering Memorandum or the Offering Memorandum, or
any amendment or supplement thereto, or any order asserting that any
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of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of Holding and its subsidiaries has been duly incorporated,
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to
carry on its business as described in the Preliminary Offering Memorandum and
the Offering Memorandum and to own, lease and operate its properties, and each
is duly qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of Holding
and its subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of Holding have been duly
authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights.
(d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of Holding. All of the outstanding shares of
capital stock of each of Holding's subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable, and are owned by Holding,
directly or indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any nature
(each, a "Lien").
(e) This Agreement has been duly authorized, executed and delivered by
Holding.
(f) The Indenture has been duly authorized by Holding and, on the
Closing Date, will have been validly executed and delivered by Holding. When
the Indenture has been duly executed and delivered by Holding, and assuming the
due authorization, execution and delivery thereof by the Trustee, the Indenture
will be a valid and binding agreement of Holding, enforceable against Holding
in accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or
"Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) The Series A Debentures have been duly authorized by Holding for
issuance and sale to the Initial Purchaser pursuant to this Agreement and, on
the Closing Date, will have been validly executed and delivered by Holding.
When the Series A Debentures have been issued, executed and authenticated in
accordance with the provisions of the Indenture and
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delivered to and paid for by the Initial Purchaser in accordance with the terms
of this Agreement, the Series A Debentures will be entitled to the benefits of
the Indenture and will be the valid and binding obligations of Holding,
enforceable in accordance with their terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Series A Debentures will
conform in all material respects as to legal matters to the description thereof
contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Debentures will have been duly
authorized by Holding. When the Series B Debentures are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Debentures will be entitled to the benefits of the
Indenture and will be the valid and binding obligations of Holding, enforceable
against Holding in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(i) The Registration Rights Agreement has been duly authorized by
Holding and, on the Closing Date, will have been duly executed and delivered by
Holding. When the Registration Rights Agreement has been duly executed and
delivered by Holding and the Initial Purchaser, the Registration Rights
Agreement will be the valid and binding agreement of Holding, enforceable
against Holding in accordance with its terms, except as (i) the enforcement
thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability. On the Closing Date, the Registration Rights
Agreement will conform in all material respects as to legal matters to the
description thereof contained in the Offering Memorandum.
(j) Neither Holding nor any of its subsidiaries is in violation of its
respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which Holding or
any of its subsidiaries is a party or by which Holding or any of its
subsidiaries or their respective property is bound, except as would not, singly
or in the aggregate, result in a Material Adverse Effect.
(k) The execution, delivery and performance of this Agreement and the
other Operative Documents by Holding, compliance by Holding with all provisions
hereof and thereof and the consummation of the transactions contemplated hereby
and thereby will not (i) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or agency
(except (i) in regards to the Registration Rights Agreement and the
transactions contemplated thereby, and (ii) such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms
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or provisions of, or a default under, the charter or by-laws of Holding or any
of its subsidiaries or any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to Holding and its subsidiaries, taken
as a whole, to which Holding or any of its subsidiaries is a party or by which
Holding or any of its subsidiaries or their respective property is bound,
(iii) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency
having jurisdiction over Holding, any of its subsidiaries or their respective
property, (iv) result in the imposition or creation of (or the obligation to
create or impose) a Lien under, any agreement or instrument to which Holding
or any of its subsidiaries is a party or by which Holding or any of its
subsidiaries or their respective property is bound, or (v) result in the
termination, suspension or revocation of any Authorization (as defined below)
of Holding or any of its subsidiaries or result in any other impairment of the
rights of the holder of any such Authorization; except as would not, singly or
in the aggregate, result in a Material Adverse Effect.
(l) There are no legal or governmental proceedings pending or
threatened to which Holding or any of its subsidiaries is a party or to which
any of their respective property is reasonably expected to be subject, which
might, singly or in the aggregate, result in a Material Adverse Effect.
(m) Neither Holding nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection
of human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), any provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any provisions of the Foreign Corrupt Practices Act or the rules and
regulations promulgated thereunder, except for such violations which would not,
singly or in the aggregate, result in a Material Adverse Effect.
(n) Except as set forth in the Offering Memorandum, there are no costs
or liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any
potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect.
(o) Each of Holding and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and
all courts and other tribunals, including without limitation, under any
applicable Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except where the
failure to have any such Authorization or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each
such Authorization is valid and in full force and effect and each of Holding
and its respective subsidiaries is in compliance with all the terms and
conditions thereof
11
and with the rules and regulations of the authorities and governing bodies
having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both, would
allow, revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such Authorization; and such
Authorizations contain no restrictions that are burdensome to Holding or any of
its subsidiaries; except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the presence
of any such restriction would not, singly or in the aggregate, result in a
Material Adverse Effect.
(p) Holding and its subsidiaries own or possess, or can acquire on
reasonable terms, all 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 and trade names ("intellectual property") currently employed by
them in connection with the business now operated by them; except where the
failure to own or possess or otherwise be able to acquire such intellectual
property would not, singly or in the aggregate, have a Material Adverse Effect;
and, to the best knowledge of Holding after due inquiry, neither Holding nor
any of its subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of such intellectual
property which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.
(q) Holding and its subsidiaries maintain reasonably adequate
insurance.
(r) Since the respective dates as of which information is given in the
Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
Holding and its subsidiaries, taken as a whole, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of Holding or any
of its subsidiaries and (iii) neither Holding nor any of its subsidiaries have
incurred any material liability or obligation, direct or contingent.
(s) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against Holding or
any of its subsidiaries before the National Labor Relations Board or any state
or local labor relations board, and no significant grievance or more
significant arbitration proceeding arising out of or under any collective
bargaining agreement is pending against Holding or any of its subsidiaries or,
to the best knowledge of Holding, threatened against them, (ii) strike, labor
dispute, slowdown or stoppage pending or threatened against Holding or any of
its subsidiaries or (iii) union representation
12
question existing with respect to the employees of Holding or any of its
subsidiaries; except for such actions which, singly or in the aggregate, would
not result in a Material Adverse Effect.
(t) All tax returns required to be filed by Holding and its
subsidiaries in any jurisdiction have been filed, other than those filings
being contested in good faith, and all taxes, including withholding taxes,
penalties and interest, assessments, fees and other charges due pursuant to
such returns or pursuant to any assessment received by Holding or any of its
subsidiaries have been paid, other than those being contested in good faith and
for which adequate reserves have been provided, except for such tax returns the
failure to file, and such taxes the failure to pay, as would not, singly or in
the aggregate, result in a Material Adverse Effect.
(u) Holding and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) All indebtedness of Holding that will be repaid with the proceeds
of the issuance and sale of the Series A Debentures was incurred, and the
indebtedness represented by the Series A Debentures is being incurred, for
proper purposes and in good faith. At the time of the incurrence of such
indebtedness that will be repaid with the proceeds of the issuance and sale of
the Series A Debentures, and on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Series A Debentures), (a)
the fair value and present fair saleable value of Holding's assets exceeds and
would exceed its stated liabilities and identified contingent liabilities, (b)
Holding should be able to pay its debts as they become absolute and matured and
(c) the capital of Holding is not and would not be unreasonably small for the
business in which it is engaged.
(w) The accountants, Price Waterhouse L.L.P., that have certified the
financial statements included in the Preliminary Offering Memorandum and the
Offering Memorandum are independent public accountants with respect to Holding,
as required by the Act and the Exchange Act.
(x) The historical financial statements, together with related notes
forming part of the Offering Memorandum (and any amendment or supplement
thereto), present fairly in all material respects the consolidated financial
position, results of operations and changes in financial position of the
Company and its subsidiaries on the basis stated in the Offering Memorandum at
the respective dates or for the respective periods to which they apply. Such
statements and related notes have been prepared in all material respects
accordance with generally accepted accounting principles consistently applied
throughout the periods involved,
13
except as disclosed in the Offering Memorandum. The other financial and
statistical information and data set forth in the Offering Memorandum (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of Holding.
(y) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of Holding and its
subsidiaries and give effect to assumptions used in the preparation thereof on
a reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Preliminary Offering Memorandum and
the Offering Memorandum The pro forma financial and statistical information and
data included in the Offering Memorandum are, in all material respects,
accurately presented and prepared on a basis consistent with the pro forma
financial statements.
(z) In Holding's opinion, the assumptions used in the preparation of
the pro forma financial statements included in the Offering Memorandum are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein.
(aa) Holding is not and, after giving effect to the offering and sale
of the Series A Debentures and the application of the net proceeds thereof as
described in the Offering Memorandum will not be, an "investment company," as
such term is defined in the Investment Company Act of 1940, as amended.
(bb) Other than the Registration Rights Agreement, there are no
contracts, agreements or understandings between Holding and any person granting
such person the right to require Holding to file a registration statement under
the Act with respect to any securities of Holding or to require Holding to
include such securities with the Debentures registered pursuant to any
Registration Statement.
(cc) Neither Holding nor any of its subsidiaries nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Series A
Debentures to violate Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors
of the Federal Reserve System.
(dd) Except as described in the Offering Memorandum, there are no
outstanding subscriptions, rights, warrants, options, calls, convertible
securities, commitments of sale or liens related to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of, or other
ownership interest in, Holding or any of its subsidiaries.
14
(ee) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(ff) When the Series A Debentures are issued and delivered pursuant to
this Agreement, the Series A Debentures will not be of the same class (within
the meaning of Rule 144A under the Act) as any security of Holding that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
(gg) No form of general solicitation or general advertising (within
the meaning of Regulation D under the Act) was used by Holding or any of its
representatives (other than the Initial Purchaser, as to whom Holding makes no
representation) in connection with the offer and sale of the Series A
Debentures contemplated hereby, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Debentures have
been issued and sold by Holding within the six-month period immediately prior
to the date hereof.
(hh) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(ii) None of Holding nor any of its affiliates or any person acting on
its or their behalf (other than the Initial Purchaser, as to whom Holding makes
no representation) has engaged or will engage in any "directed selling efforts"
within the meaning of Regulation S under the Act ("Regulation S") with respect
to the Series A Debentures.
(jj) Holding has not, and will not, offer or sell the Series A
Debentures as part of a plan or scheme to evade the registration provisions of
the Act.
(kk) Holding and its affiliates and all persons acting on their behalf
(other than the Initial Purchaser, as to whom Holding makes no representation)
have complied with and will comply with the offering restrictions requirements
of Regulation S in connection with the offering of the Series A Debentures
outside the United States and, in connection therewith, the Offering Memorandum
will contain the disclosure required by Rule 902(g)(2).
(ll) The Series A Debentures sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the "distribution
compliance period" referred to in Rule 903(b)(2) of the Act and only upon
certification of beneficial ownership of such Series A Debentures by non-U.S.
persons or U.S. persons who purchased such Series A Debentures in transactions
that were exempt from the registration requirements of the Act.
15
(mm) No registration under the Act of the Series A Debentures is
required for the sale of the Series A Debentures to the Initial Purchaser as
contemplated hereby or for the Exempt Resales, assuming the accuracy of the
Initial Purchaser's representations and warranties and agreements set forth in
Section 7 hereof.
(nn) No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed Holding that it is considering imposing) any condition
(financial or otherwise) on Holding's retaining any rating assigned as of the
date hereof to Holding or any securities of Holding or (ii) has indicated to
Holding that it is considering (a) the downgrading, suspension or withdrawal
of, or any review for a possible change that does not indicate the direction of
the possible change in, any rating so assigned or (b) any change in the outlook
for any rating of Holding or any securities of Holding.
(oo) Each certificate signed by any officer of Holding and delivered
to the Initial Purchaser or counsel for the Initial Purchaser shall be deemed
to be a representation and warranty by Holding to the Initial Purchaser as to
the matters covered thereby.
Holding acknowledges that the Initial Purchaser and, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to Holding and counsel to the Initial Purchaser, will rely upon
the accuracy and truth of the foregoing representations and hereby consents to
such reliance.
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Initial
Purchaser represents and warrants to Holding that:
(a) The Initial Purchaser is either a QIB or an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act (an "Accredited Institution"), in either case, with such
knowledge and experience in financial and business matters as is necessary in
order to evaluate the merits and risks of an investment in the Series A
Debentures.
(b) The Initial Purchaser (A) is not acquiring the Series A Debentures
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Debentures in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the
Series A Debentures only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) The Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act) has
been or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the
16
Series A Debentures pursuant hereto, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
(d) The Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A
Debentures only from, and will offer to sell the Series A Debentures only to,
Eligible Purchasers. Each Initial Purchaser further agrees that it will offer
to sell the Series A Debentures only to, and will solicit offers to buy the
Series A Debentures only from (A) Eligible Purchasers that the Initial
Purchaser reasonably believes are QIBs and (B) Regulation S Purchasers, in each
case, that agree that (x) the Series A Debentures purchased by them may be
resold, pledged or otherwise transferred within the time period referred to
under Rule 144(k) (taking into account the provisions of Rule 144(d) under the
Act, if applicable) under the Act, as in effect on the date of the transfer of
such Series A Debentures, only (I) to Holding or any of its subsidiaries, (II)
to a person whom the seller reasonably believes is a QIB purchasing for its own
account or for the account of a QIB in a transaction meeting the requirements
of Rule 144A under the Act, (III) in an offshore transaction (as defined in
Rule 902 under the Act) meeting the requirements of Rule 904 of the Act, (IV)
in a transaction meeting the requirements of Rule 144 under the Act, (V) to an
Accredited Institution that, prior to such transfer, furnishes the Trustee a
signed letter containing certain representations and agreements relating to the
registration of transfer of such Series A Debenture (the form of which is
substantially the same as Exhibit D to the Indenture) and, if such transfer is
in respect of an aggregate principal amount of Series A Debentures less than
$250,000, an opinion of counsel acceptable to Holding that such transfer is in
compliance with the Act, (VI) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel
acceptable to Holding) or (VII) pursuant to an effective registration statement
and, in each case, in accordance with the applicable securities laws of any
state of the United States or any other applicable jurisdiction and (y) they
will deliver to each person to whom such Series A Debentures or an interest
therein is transferred a notice substantially to the effect of the foregoing.
(e) The Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any "directed
selling efforts" within the meaning of Regulation S with respect to the Series
A Debentures.
(f) The Series A Debentures offered and sold by the Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(g) The sale of the Series A Debentures offered and sold by the
Initial Purchaser pursuant hereto in reliance on Regulation S is not part of a
plan or scheme to evade the registration provisions of the Act.
17
(h) The Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Series A Debentures in the United States or to, or
for the benefit or account of, a U.S. Person (other than a distributor), in
each case, as defined in Rule 902 under the Act (i) as part of its distribution
at any time and (ii) otherwise until 40 days after the later of the
commencement of the offering of the Series A Debentures pursuant hereto and the
Closing Date, other than in accordance with Regulation S of the Act or another
exemption from the registration requirements of the Act. Such Initial Purchaser
agrees that, during such 40-day "distribution compliance period", it will not
cause any advertisement with respect to the Series A Debentures (including any
"tombstone" advertisement) to be published in any newspaper or periodical or
posted in any public place and will not issue any circular relating to the
Series A Debentures, except such advertisements as permitted by and including
the statements required by Regulation S.
(i) The Initial Purchaser agrees that, at or prior to confirmation of
a sale of Series A Debentures by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the 40-day
"distribution compliance period" referred to in Rule 902(g)(2) under the Act,
it will send to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to substantially
the following effect:
"The Series A Debentures covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities Act"),
and may not be offered and sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of your
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the Offering and the Closing Date, except
in either case in accordance with Regulation S under the Securities
Act (or Rule 144A or to Accredited Institutions in transactions that
are exempt from the registration requirements of the Securities Act),
and in connection with any subsequent sale by you of the Series A
Debentures covered hereby in reliance on Regulation S during the
period referred to above to any distributor, dealer or person
receiving a selling concession, fee or other remuneration, you must
deliver a notice to substantially the foregoing effect. Terms used
above have the meanings assigned to them in Regulation S."
(j) The Initial Purchaser agrees that the Series A Debentures offered
and sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities until the
expiration of the 40-day "distribution compliance period" referred to in Rule
902(g)(2) of the Act and only upon certification of beneficial ownership of
such Series A Debentures by non-U.S. persons or U.S. persons who purchased such
Series A Debentures in transactions that were exempt from the registration
requirements of the Act.
The Initial Purchaser acknowledges that Holding and, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to Holding and
18
counsel to the Initial Purchaser will rely upon the accuracy and truth of
the foregoing representations and the Initial Purchaser hereby consents to such
reliance.
8. INDEMNIFICATION.
(a) Holding agrees to indemnify and hold harmless the Initial
Purchaser, its directors, its officers and each person, if any, who controls
the Initial Purchaser within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or other
expenses reasonably incurred in connection with investigating or defending any
matter, including any action, that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Offering Memorandum (or
any amendment or supplement thereto), the Preliminary Offering Memorandum or
any Rule 144A Information provided by Holding to any holder or prospective
purchaser of Series A Debentures pursuant to Section 5(h) or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchaser furnished in
writing to Holding by the Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of the Initial Purchaser if the
Initial Purchaser should fail to deliver an Offering Memorandum as then amended
or supplemented (so long as the Offering Memorandum and any amendment or
supplement thereto was provided by Holding to the Initial Purchaser in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages,
liabilities or judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Offering Memorandum, as so amended or
supplemented.
(b) The Initial Purchaser agrees to indemnify and hold harmless
Holding and its respective directors and officers and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) Holding, to the same extent as the foregoing indemnity from
Holding to the Initial Purchaser but only with reference to information
relating to the Initial Purchaser furnished in writing to Holding by the
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity
19
may be sought (the "indemnifying party") in writing and the indemnifying party
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of all fees
and expenses of such counsel, as incurred (except that in the case of any
action in respect of which indemnity may be sought pursuant to both Sections
8(a) and 8(b), the Initial Purchaser shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Initial
Purchaser). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and a conflict or potential conflict exists
based on advice of counsel to the indemnified party between the indemnified
party and the indemnifying party (in which case the indemnifying party shall
not have the right to direct or assume the defense of such action on behalf of
the indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation, in the case of the parties indemnified
pursuant to Section 8(a), and by Holding, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action
(i) effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days after
the indemnifying party shall have received a request from the indemnified party
for reimbursement for the fees and expenses of counsel (in any case where such
fees and expenses are at the expense of the indemnifying party) and, prior to
the date of such settlement, the indemnifying party shall have failed to comply
with such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability on claims that are or could have been the subject matter of such
action 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 the indemnified party.
(d) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages,
20
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by Holding, on the one hand, and the
Initial Purchaser on the other hand from the offering of the Series A
Debentures or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of Holding, on the one hand, and the Initial Purchaser, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by Holding,
on the one hand and the Initial Purchaser, on the other hand, shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Series A Debentures (after underwriting discounts and commissions, but before
deducting expenses) received by Holding, and the total discounts and
commissions received by the Initial Purchaser bear to the total price to
investors of the Series A Debentures, in each case as set forth in the table on
the cover page of the Offering Memorandum. The relative fault of Holding, on
the one hand, and the Initial Purchaser, on the other hand, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Holding, on the one hand, or
the Initial Purchaser, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Holding and the Initial Purchaser agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received
by the Initial Purchaser exceeds the amount of any damages which the 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
21
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligation of
the Initial Purchaser to purchase the Series A Debentures under this Agreement
is subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of Holding contained in
this Agreement and the other Operative Documents shall be true and correct in
all material respects, except where otherwise qualified, on the Closing Date
with the same force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of
any review (or of any potential or intended review) for a possible change that
does not indicate the direction of the possible change in, any rating of
Holding or any securities of Holding (including, without limitation, the
placing of any of the foregoing ratings on credit watch with negative or
developing implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have
occurred any change, nor shall notice have been given of any potential or
intended change, in the outlook for any rating of Holding by any such rating
organization and (iii) no such rating organization shall have given notice that
it has assigned (or is considering assigning) a lower rating to the Debentures
than that on which the Debentures were marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum other than as contemplated by the Offering Memorandum, (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of Holding and its subsidiaries, taken as a
whole, (ii) there shall not have been any change or any development involving a
prospective change in the capital stock or in the long-term debt of Holding or
any of its subsidiaries and (iii) neither Holding nor any of its subsidiaries
shall have incurred any liability or obligation, direct or contingent, the
effect of which, in any such case described in clause 9(c)(i), 9(c)(ii) or
9(c)(iii), in your reasonable judgment, is material and adverse and, in your
reasonable judgment, makes it impracticable to market the Series A Debentures
on the terms and in the manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by each of the President and the Chief Financial
Officer of Holding, confirming the matters set forth in Sections 9(a), 9(b) and
9(c) and stating that Holding, to such Officer's reasonable belief and
knowledge, has complied with all agreements and satisfied all of the conditions
herein contained and required to be complied with or satisfied on or prior to
the Closing Date.
22
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchaser), dated the Closing
Date, of Weil, Gotshal & Manges LLP, counsel for Holding, to the effect that:
(i) Holding is a corporation duly incorporated, validly
existing and in good standing under the laws of its states of
incorporation and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as
now being conducted;
(ii) Holding has all requisite corporate power and authority
to execute and deliver the Series A Debentures delivered on the
Closing Date, the Indenture, the Registration Rights Agreement and
this Agreement (collectively, the "Debenture Documents") and to
perform its obligations thereunder. The execution, delivery and
performance of the Debenture Documents by Holding and the
consummation by Holding of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of
Holding. The Debenture Documents have been duly and validly executed
and delivered by Holding;
(iii) the issuance of the Series A Debentures delivered on
the Closing Date has been duly authorized by all necessary corporate
action on the part of Holding. The Series A Debentures delivered on
the Closing Date, when duly executed by Holding and authenticated by
the Trustee in accordance with the terms of the Indenture and duly
delivered against receipt of payment therefor in accordance with the
terms of this Agreement, will be entitled to the benefits of the
Indenture and will constitute the legal, valid and binding
obligations of Holding, enforceable against Holding in accordance
with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in
equity);
(iv) assuming the due authorization, execution and delivery
thereof by the Trustee (in the case of the Indenture) and the Initial
Purchaser (in the case of the Registration Rights Agreement), each of
the Indenture and the Registration Rights Agreement constitutes the
legal, valid and binding obligation of Holding, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws
23
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity)
and subject to the qualification that rights to indemnification and
contribution under the Registration Rights Agreement may be limited
by federal or state securities laws or public policy relating
thereto;
(v) the issuance of the Series B Debentures to be delivered
in connection with the consummation of the Exchange Offer has been
duly authorized by all necessary corporate action on the part of
Holding;
(vi) the execution and delivery of the Debenture Documents,
the consummation of the transactions contemplated thereby and
compliance by Holding with the provisions thereof will not conflict
with, constitute a default under or violate (i) any of the terms,
conditions or provisions of the certificate of incorporation or
bylaws of Holding, (ii) any of the terms, conditions or provisions of
any material document, agreement or other instrument to which Holding
is a party or by which it is bound of which we are aware, (iii) any
New York, Delaware corporate or federal law or regulation (other than
federal and state securities or blue sky laws, as to which such
counsel need not express any opinion in this paragraph), or (iv) any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on Holding of which we are aware;
(vii) no consent, approval, waiver, license or authorization
or other action by or filing with any New York, Delaware corporate or
federal governmental authority is required in connection with the
execution and delivery by the Issuers, to the extent a party thereto,
of the Debenture Documents or the consummation by Holding of the
transactions contemplated thereby, except for (i) the applicable
requirements of federal and state securities or blue sky laws, as to
which such counsel need not express any opinion in this paragraph)
and (ii) those already obtained and which are in full force and
effect;
(viii) to such counsel's knowledge, there is no litigation,
proceeding or governmental investigation pending or overtly
threatened against Holding that relates to the any of the
transactions contemplated by this Agreement;
(ix) to such counsel's knowledge, there is no material
document, agreement or other instrument to which Holding is a party
24
(other than the Registration Rights Agreement) granting any person
the right to require Holding to file a registration statement under
the Securities Act with respect to any securities of Holding or to
require Holding to include such securities with the Series A
Debentures registered pursuant to any Registration Statement;
(x) Holding is not, and after giving effect to the offering
and sale of the Series A Debentures in accordance with the terms of
this Agreement and the application of the net proceeds thereof as
described in the Offering Memorandum under the caption "Use of
Proceeds," will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(xi) the Indenture and the Series A Debentures delivered on
the Closing Date conform in all material respects as to legal matters
to the description thereof contained in the Offering Memorandum under
the caption "Description of Debentures";
(xii) assuming that the representations and warranties of
the Initial Purchaser contained in this Agreement are true, correct
and complete and assuming compliance by the Initial Purchaser with
its covenants contained in this Agreement, it is not necessary in
connection with the offer, sale and delivery of the Series A
Debentures delivered on the Closing Date to the Initial Purchaser
pursuant to this Agreement or the resales of such Series A Debentures
by the Initial Purchaser in the manner contemplated by this Agreement
to register such Series A Debentures under the Securities Act or to
qualify the Indenture under the TIA;
(xiii) all of the outstanding shares of Holding's capital
stock are duly authorized, validly issued, fully paid and
non-assessable, and have not been issued in violation of any
preemptive rights pursuant to law or in Holding's certificate of
incorporation; and
(xiv) based on the assumptions and subject to the
qualifications set forth therein, the discussion set forth under the
heading "Certain U.S. Federal Income Tax Considerations" in the
Offering Memorandum, as it relates to legal conclusions and matters
of law, accurately describes the material United States federal
income tax consequences of the acquisition, ownership and disposition
of Debentures as well as the exchange of such Debentures for New
Debentures pursuant to the Exchange Offer.
25
In addition, such counsel shall state that it has participated in
conferences with directors, officers and other representatives of Holding,
representatives of the independent public accountants for Holding,
representatives of the Initial Purchaser and representatives of counsel for the
Initial Purchaser, at which conferences the contents of the final Offering
Memorandum and related matters were discussed, and, although such counsel has
not independently verified and is not passing upon and assumes no
responsibility for the accuracy, completeness or fairness of the statements
contained in the final Offering Memorandum (except to the extent specified in
clause (xi) above), no facts have come to such counsel's attention which lead
such counsel to believe that the final Offering Memorandum, as of the date of
the final Offering Memorandum and the Closing Date, contained or contains an
untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary to make the statement contained
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel expresses no view with
respect to the financial statements and related notes, the financial statement
schedules, the assumptions and the other financial and accounting data included
in the final Offering Memorandum).
The opinion of Weil, Gotshal & Manges LLP described in Section 9(e)
above shall be rendered to you at the request of Holding and shall so state
therein. In giving such opinion with respect to the matters covered by Section
9(e)(xxiii), Weil, Gotshal & Manges LLP may state that their opinion and belief
are based upon their participation in the preparation of the Offering
Memorandum and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
(f) The Initial Purchaser shall have received on the Closing Date an
opinion, dated the Closing Date, of Latham & Watkins, counsel for the Initial
Purchaser, in form and substance reasonably satisfactory to the Initial
Purchaser.
(g) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof
and the Closing Date, as the case may be, in form and substance satisfactory to
the Initial Purchaser from Price Waterhouse L.L.P., independent public
accountants for Holding and, in each case containing the information and
statements of the type ordinarily included in accountants' "comfort letters" to
the Initial Purchaser with respect to the financial statements and certain
financial information contained in the Offering Memorandum.
(h) The Series A Debentures shall have been approved by the NASD for
trading, and duly listed in, PORTAL.
(i) The Initial Purchaser shall have received a counterpart, conformed
as executed, of the Indenture which shall have been entered into by Holding and
the Trustee.
26
(j) Holding shall have executed the Registration Rights Agreement and
the Initial Purchaser shall have received an original copy thereof, duly
executed by Holding.
(k) Holding shall have executed this Agreement and the Initial
Purchaser shall have received an original copy thereof, duly executed by
Holding.
(l) Latham & Watkins shall have been furnished with such documents, in
addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in this
Section 9 and in order to evidence the accuracy, completeness or satisfaction
in all material respects of any of the representations, warranties or
conditions herein contained.
(m) Prior to the Closing Date, Holding shall have furnished to the
Initial Purchaser such further information, certificates and documents as the
Initial Purchaser may reasonably request.
(n) Holding shall not have failed at or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to
be performed or complied with by Holding at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time prior to the Closing Date
by the Initial Purchaser by written notice to Holding if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national
or international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchaser's reasonable judgment, is material and adverse and, in the Initial
Purchaser's reasonable judgment, makes it impracticable to market the Series A
Debentures on the terms and in the manner contemplated in the Offering
Memorandum, (ii) the suspension or material limitation of trading in securities
or other instruments on the New York Stock Exchange, the American Stock
Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade or the Nasdaq National Market or
limitation on prices for securities or other instruments on any such exchange
or the Nasdaq National Market, (iii) the suspension of trading of any
securities of Holding on any exchange or in the over-the-counter market, (iv)
the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of any court or other governmental
authority that in the Initial Purchaser's opinion materially and adversely
affects, or will materially and adversely affect, the business, prospects,
financial condition or results of operations of Holding and its subsidiaries,
taken as a whole, (v) the declaration of a banking moratorium by either federal
or New York State authorities or (vi) the taking of any action by any federal,
state or local government or
27
agency in respect of its monetary or fiscal affairs which in the Initial
Purchaser's opinion has a material adverse effect on the financial markets in
the United States.
11. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to Holding, to 1815 East Main
Street, Chattanooga, Tennessee 37404, Attention: Chief Financial Officer and to
120 East 56th Street, New York, NY 10022, Attention: President, and (ii) if to
the Initial Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in
any case to such other address as the person to be notified may have requested
in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of Holding and the Initial Purchaser set forth
in or made pursuant to this Agreement shall remain operative and in full force
and effect, and will survive delivery of and payment for the Series A
Debentures, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Initial Purchaser, the officers or
directors of the Initial Purchaser, any person controlling the Initial
Purchaser, Holding, the officers or directors of Holding, or any person
controlling Holding, (ii) acceptance of the Series A Debentures and payment for
them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Debentures are not delivered by or on
behalf of Holding as provided herein (other than as a result of any termination
of this Agreement pursuant to Section 10), Holding agrees to reimburse the
Initial Purchaser for all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) incurred by it. Notwithstanding
any termination of this Agreement, Holding shall be liable for all reasonable
expenses which it has agreed to pay pursuant to Section 5(i) hereof. Holding
also agrees to reimburse the Initial Purchaser and its officers, directors and
each person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act for any and all
reasonable fees and expenses (including without limitation the reasonable fees
and expenses of counsel) incurred by them in connection with enforcing their
rights under this Agreement (including without limitation its rights under
Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon Holding, the Initial
Purchaser, the Initial Purchaser's directors and officers, any controlling
persons referred to herein, the directors of Holding and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Debentures from the Initial Purchaser merely because of
such purchase.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York.
28
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
* * * *
29
Please confirm that the foregoing correctly sets forth the agreement
among Holding and the Initial Purchaser as of the date first above written.
Very truly yours,
AKI HOLDING CORP.
By:_______________________________
Name:
Title:
30
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written
by Donaldson, Lufkin & Jenrette
Securities Corporation, as the Initial
Purchaser.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_______________________________
Name:
Title:
31
SCHEDULE A
SUBSIDIARIES
AKI, Inc.
Arcade Europe SARL
Scent Seal, Inc.
32
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
33