EXECUTION COPY
AKI, INC.
$115,000,000
10 1/2% SENIOR NOTES DUE 2008
PURCHASE AGREEMENT
JUNE 22, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
$115,000,000
10 1/2% Senior Notes due 2008
AKI, INC.
PURCHASE AGREEMENT
June 22, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
AKI, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser") an aggregate of $115,000,000 in principal amount of its 10
1/2% Senior Notes due 2008 (the "Series A Notes"), subject to the terms and
conditions set forth herein. The Series A Notes 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 the Company and IBJ Schroder Bank & Trust
Company, as trustee (the "Trustee"). The Series A Notes and the Series B Notes
(as defined below) issuable in exchange therefor are collectively referred to
herein as the "Notes". Capitalized terms used but not defined herein shall have
the meanings given to such terms in the Indenture.
The Company intends to use the gross proceeds from the sale
to the Initial Purchaser of the Series A Notes 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, 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 Notes will be offered
and sold to the Initial Purchaser pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company has prepared a preliminary offering memorandum, dated June
5, 1998 (the "Preliminary Offering
1
Memorandum"), and a final offering memorandum, dated June 22, 1998 (the
"Offering Memorandum"), relating to the Series A Notes.
Upon original issuance thereof, and until such time as the
same is no longer required pursuant to the Indenture, the Series A Notes (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 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, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, an aggregate principal amount of $115.0 million of
Series A Notes at a purchase price equal to 97.0% of the principal amount
thereof (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchaser has advised the
Company that the Initial Purchaser will make offers (the "Exempt Resales") of
the Series A Notes 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 Notes 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 Notes to Eligible Purchasers
initially at a price equal to 100% of the principal amount thereof. Such price
may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A
Notes 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 Notes constitute "Transfer Restricted Securities" (as defined in
the Registration Rights Agreement). Pursuant to the Registration Rights
Agreement, the Company will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Act (the "Exchange Offer Registration
Statement") relating to the Company's new 10 1/2% Senior Notes due 2008 (the
"Series B Notes"), identical in all material respects to the Series A Notes
(except that the Series B Notes shall have been registered pursuant to such
Exchange Offer Registration Statement), to be offered in exchange for the
Series A Notes (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 Notes, 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.
This Agreement, the Indenture, the Series A Notes 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 Notes 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 the
Company in writing. The time and date of such delivery and the payment for the
Series A Notes are herein called the "Closing Date."
(b) One or more of the Series A Notes 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 Notes (collectively, the "Global
Note"), shall be delivered by the Company to the Initial Purchaser (or as the
Initial Purchaser directs) in each case with any transfer taxes thereon duly
paid by the Company against payment by the Initial Purchaser of the Purchase
Price thereof by wire transfer in same day funds to the order of the Company.
The Global Note 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 THE COMPANY. As of the date hereof, the
Company 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 Notes 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. The Company 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 Notes 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 Notes under any state securities or Blue Sky laws, the Company shall
use its reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time; provided, however, that the Company shall
not be required in connection therewith to qualify as a 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 the Company 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, the Company 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 Notes 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 the
Company 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 Notes 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 Notes for offer 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 the Company 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 Notes 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 Notes a
financial report of the Company 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 the Company'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 Notes are outstanding, to furnish to
the Initial Purchaser as soon as available copies of all reports or other
communications furnished by the Company 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 the Company is listed and such other
publicly available information concerning the Company and/or its subsidiaries
as the Initial Purchaser may reasonably request.
(h) So long as any of the Series A Notes remain
outstanding and during any period in which the Company 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 Notes in
connection with any sale thereof and any prospective purchaser of such Series A
Notes 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 the
Company under this Agreement, including: (i) the fees, disbursements and
expenses of counsel to the Company and accountants of the Company in connection
with the sale and delivery of the Series A Notes 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 Notes 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 Notes (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 Notes 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 Notes, (vi) all expenses and listing fees in connection with
the application for quotation of the Series A Notes in the National Association
of Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
("PORTAL"), (vii) the fees and expenses of the Trustee in connection with the
Indenture and the Notes, (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 Notes, (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 the Company 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 Notes in PORTAL and to maintain the listing of the
Series A Notes on PORTAL for so long as the Series A Notes are outstanding.
(k) To use its reasonable best efforts to obtain the
approval of DTC for "book-entry" transfer of the Notes, and to comply with all
of its agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Notes 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 the Company or
any warrants, rights or options to purchase or otherwise acquire debt
securities of the Company substantially similar to the Notes (other than (i)
the Notes 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 Notes 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 Notes 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
Notes.
(o) To cause the Exchange Offer to be made in the
appropriate form to permit Series B Notes registered pursuant to the Act to be
offered in exchange for the Series A Notes 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 Notes.
(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 Notes 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 THE COMPANY.
As of the date hereof, the Company 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 the
Company 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 of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company 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 the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company
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 the Company. All of the outstanding shares
of capital stock of each of the Company's subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable, and are
owned by the Company, 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 the Company.
(f) The Indenture has been duly authorized by the Company
and, on the Closing Date, will have been validly executed and delivered by the
Company. When the Indenture has been duly executed and delivered by the Company
(and assuming the due authorization, execution and delivery thereof by the
Trustee), the Indenture will be a valid and binding agreement of the Company,
enforceable against the Company 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 Notes have been duly authorized by the
Company 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 the Company. When the Series A Notes have been issued, executed
and authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchaser in accordance with the terms
of this Agreement, the Series A Notes will be entitled to the benefits of the
Indenture and will be the valid and binding obligations of the Company,
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 Notes 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 Notes will have been
duly authorized by the Company. When the Series B Notes are issued, executed
and authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company 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 the Company and, on the Closing Date, will have been duly
executed and delivered by the Company. When the Registration Rights Agreement
has been duly executed and delivered by the Company and the Initial Purchaser,
the Registration Rights Agreement will be the valid and binding agreement of
the Company, enforceable against the Company 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 the Company 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 the
Company or any of its subsidiaries is a party or by which the Company 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 the Company, compliance by the
Company 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 or provisions of, or a
default under, the charter or by-laws of the Company or any of its subsidiaries
or any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company 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 the Company, 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 the Company or any of its subsidiaries is a party or by which the Company
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 the Company 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 the Company 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 the Company 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 the Company 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 the Company and its respective subsidiaries is in compliance with all the
terms and conditions thereof 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 the Company 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) The Company 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 the
Company after due inquiry, neither the Company 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) The Company 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 the Company 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 the Company or any of its subsidiaries and (iii)
neither the Company 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
the Company 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 the Company or any of its
subsidiaries or, to the best knowledge of the Company, threatened against them,
(ii) strike, labor dispute, slowdown or stoppage pending or threatened against
the Company or any of its subsidiaries or (iii) union representation question
existing with respect to the employees of the Company 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 the Company
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 the Company 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) The Company 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 the Company that will be repaid
with the proceeds of the issuance and sale of the Series A Notes was incurred,
and the indebtedness represented by the Series A Notes 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 Notes, and on the Closing Date (after giving effect to the
application of the proceeds from the issuance of the Series A Notes), (a) the
fair value and present fair saleable value of the Company's assets exceeds and
would exceed its stated liabilities and identified contingent liabilities, (b)
the Company should be able to pay its debts as they become absolute and matured
and (c) the capital of the Company 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 the Company, 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, 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 the Company.
(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 the Company
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 the Company'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) The Company is not and, after giving effect to the
offering and sale of the Series A Notes 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 the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company or to require the Company to include such securities with the Notes
registered pursuant to any Registration Statement.
(cc) Neither the Company 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 Notes 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, the Company or any of its subsidiaries.
(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 Notes are issued and delivered
pursuant to this Agreement, the Series A Notes will not be of the same class
(within the meaning of Rule 144A under the Act) as any security of the Company
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 the
Company or any of its representatives (other than the Initial Purchaser, as to
whom the Company makes no representation) in connection with the offer and sale
of the Series A Notes 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 Notes have
been issued and sold by the Company 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 the Company nor any of its affiliates or any
person acting on its or their behalf (other than the Initial Purchaser, as to
whom the Company 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 Notes.
(jj) The Company has not, and will not, offer or sell the
Series A Notes as part of a plan or scheme to evade the registration provisions
of the Act.
(kk) The Company and its affiliates and all persons acting
on their behalf (other than the Initial Purchaser, as to whom the Company 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 Notes 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 Notes 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
Notes by non-U.S. persons or U.S. persons who purchased such Series A Notes in
transactions that were exempt from the registration requirements of the Act.
(mm) No registration under the Act of the Series A Notes
is required for the sale of the Series A Notes 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 the Company that it is considering
imposing) any condition (financial or otherwise) on the Company's retaining any
rating assigned as of the date hereof to the Company or any securities of the
Company or (ii) has indicated to the Company that it is considering (a) the
downgrading, suspension or withdrawal of, or any review for a possible change
that does not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company or any
securities of the Company.
(oo) Each certificate signed by any officer of the Company
and delivered to the Initial Purchaser or counsel for the Initial Purchaser
shall be deemed to be a representation and warranty by the Company to the
Initial Purchaser as to the matters covered thereby.
The Company 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 the Company 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 the Company 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 Notes.
(b) The Initial Purchaser (A) is not acquiring the Series
A Notes with a view to any distribution thereof or with any present intention
of offering or selling any of the Series A Notes 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 Notes 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
Series A Notes 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
Notes only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell
the Series A Notes only to, and will solicit offers to buy the Series A Notes
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 Notes 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 Notes, only (I) to the Company 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 Note (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 Notes less than
$250,000, an opinion of counsel acceptable to the Company 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 the Company) 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 Notes 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 Notes.
(f) The Series A Notes 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 Notes 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.
(h) The Initial Purchaser agrees that it has not offered
or sold and will not offer or sell the Series A Notes 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 Notes 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 Notes (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 Notes, 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 Notes 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 Notes 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 Notes
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 Notes
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 Notes by non-U.S. persons or U.S. persons who purchased such
Series A Notes in transactions that were exempt from the registration
requirements of the Act.
The Initial Purchaser acknowledges that the Company and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and 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) The Company 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 the Company to any
holder or prospective purchaser of Series A Notes 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 the Company 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 the Company 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 the Company 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) the Company, to the same extent as the foregoing indemnity
from the Company to the Initial Purchaser but only with reference to
information relating to the Initial Purchaser furnished in writing to the
Company 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 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 the Company, 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, 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 the
Company, on the one hand, and the Initial Purchaser on the other hand from the
offering of the Series A Notes 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 the Company, 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 the Company, 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 Notes (after underwriting discounts
and commissions, but before deducting expenses) received by the Company, and
the total discounts and commissions received by the Initial Purchaser bear to
the total price to investors of the Series A Notes, in each case as set forth
in the
table on the cover page of the Offering Memorandum. The relative fault of the
Company, 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 the Company, 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.
The Company 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.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The
obligation of the Initial Purchaser to purchase the Series A Notes under this
Agreement is subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company
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 the Company or any securities of the Company (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 the Company 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 Notes than that on which the Notes 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 the Company 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 the Company or any of its subsidiaries and (iii) neither the
Company 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 Notes 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 the Company, confirming the matters set forth in
Sections 9(a), 9(b) and 9(c) and stating that, to such Officer's reasonable
knowledge and belief, the Company 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.
(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 the Company, to the effect
that:
(i) the Company 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) the Company has all requisite corporate power and
authority to execute and deliver the Series A Notes
delivered on the Closing Date, the Indenture, the
Registration Rights Agreement and this Agreement
(collectively, the "Note Documents") and to perform its
obligations thereunder. The execution, delivery and
performance of the Note Documents by the Company and the
consummation by the Company of the transactions
contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company. The
Note Documents have been duly and validly executed and
delivered by the Company;
(iii) the issuance of the Series A Notes delivered on
the Closing Date has been duly authorized by all necessary
corporate action on the part of the Company. The Series A
Notes delivered on the Closing Date, when duly executed by
the Company 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 the
Company, enforceable against the Company 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 the Company, enforceable
against it in accordance with its 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) 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 Notes 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 the Company;
(vi) the execution and delivery of the Note Documents,
the consummation of the transactions contemplated thereby
and compliance by the Company 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 the Company,
(ii) any of the terms, conditions or provisions of any
material document, agreement or other instrument to which
the Company 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 the Company 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 Note
Documents or the consummation by the Company 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 the Company 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 the
Company is a party (other than the Registration Rights
Agreement) granting any person the right to require the
Company to file a registration statement under the
Securities Act with respect to any securities of the
Company or to require the Company to include such
securities with the Series A Notes registered pursuant to
any Registration Statement;
(x) the Company is not, and after giving effect to the
offering and sale of the Series A Notes 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 Notes 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
Notes";
(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 Notes delivered
on the Closing Date to the Initial Purchaser pursuant to
this Agreement or the resales of such Series A Notes by
the Initial Purchaser in the manner contemplated by this
Agreement to register such Series A Notes under the
Securities Act or to qualify the Indenture under the TIA;
(xiii) all of the outstanding shares of the Company'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 the Company'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 Tax Considerations
for Non-U.S. Holders" 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 Notes by an initial beneficial owner of
Notes that, for U.S. federal income tax purposes, is not a
"U.S. person."
In addition, such counsel shall state that it has
participated in conferences with directors, officers and other representatives
of the Company, representatives of the independent public accountants for the
Company, 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 the Company 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 the Company 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 Notes 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 the Company and the Trustee.
(j) The Company shall have executed the Registration
Rights Agreement and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company.
(k) The Company shall have executed this Agreement and the
Initial Purchaser shall have received an original copy thereof, duly executed
by the Company.
(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, the Company shall have
furnished to the Initial Purchaser such further information, certificates and
documents as the Initial Purchaser may reasonably request.
(n) The Company 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 the Company 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 the Company 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 Notes 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 the Company 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 the Company 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 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 the Company, 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 the Company 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 Notes, 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, the Company, the officers or directors of
the Company, or any person controlling the Company, (ii) acceptance of the
Series A Notes and payment for them hereunder and (iii) termination of this
Agreement.
If for any reason the Series A Notes are not delivered by or
on behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company 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, the Company shall be liable
for all reasonable expenses which it has agreed to pay pursuant to Section 5(i)
hereof. The Company 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 the Company, the
Initial Purchaser, the Initial Purchaser's directors and officers, any
controlling persons referred to herein, the directors of the Company 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 Notes 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.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
* * * *
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the Initial Purchaser as of the date first
above written.
Very truly yours,
AKI, INC.
By:_____________________________
Name:
Title:
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:
SCHEDULE A
SUBSIDIARIES
Scent Seal, Inc.
Arcade Europe SARL
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT