Exhibit 1.1
July 15, 1997
85,000 Units
Discovery Zone, Inc.
13 1/2% Senior Secured Notes due 2002
with Warrants to Purchase Shares of Common Stock
XXXXXXXXX & COMPANY, INC.
00000 Xxxxx Xxxxxx Xxxx., 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Discovery Zone, Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement with you (the "Initial Purchaser"), as set forth below.
Capitalized terms defined in the Indenture and not otherwise defined herein
shall have the meanings assigned to such terms in the Indenture.
1. ISSUANCE OF SECURITIES. Subject to the terms and conditions herein
contained, the Company shall issue and sell to the Initial Purchaser 85,000
Units (each a "Unit" and collectively, the "Units"), each consisting of $1,000
principal amount of its 13 1/2% Senior Secured Notes due 2002 (collectively, the
"Notes") and one warrant (collectively, the "Warrants") to purchase 9.4724
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), at an exercise price of $0.01 per share, subject to adjustment. The
Notes are to be issued under an indenture (the "Indenture") to be dated as of
the Closing Date (as defined in Section 3 hereof) by and between the Company and
State Street Bank and Trust Company, as trustee (the "Trustee"). Pursuant to an
Escrow and Security Agreement (the "Escrow Agreement") to be entered into
effective as of the Closing Date among the Company and the Trustee for the
holders of the Notes, a portion of the proceeds from the sale of the Units will
be placed in an account (the "Escrowed Interest Account"), to be held and
invested by the Trustee in certain U.S. Government Obligations (the "Pledged
Securities") in accordance with the provisions of the Escrow Agreement.
Interest and other income, if any, earned on the Pledged Securities will be
added to and shall be deemed a part of the Escrowed Interest Account. Pursuant
to certain of the Collateral Agreements to be entered into by the Company and
the Trustee effective as of the Closing Date, the Company will grant and pledge
to the Trustee, for the equal and ratable benefit of the holders of the Notes, a
fully-perfected first priority security interest in certain collateral of the
Company, a pledge of all of the capital stock of the Company's current and
future Subsidiaries (the "Pledged
Subsidiaries Stock") and a second priority security interest in certain
Company-owned real estate parcels and improvements thereon, subject to certain
conditions and obtaining certain third party consents, in each case to secure
the payment and performance of the obligations of the Company under the
Indenture and the Notes.
Additionally, all current and future Subsidiaries, jointly and severally,
shall fully and unconditionally guarantee, on a senior secured basis, to each
holder of Notes and the Trustee, the payment and performance of the Company's
obligations under the Indenture and the Notes (each such Subsidiary being
referred to herein as a "Subsidiary Guarantor" and each such guarantee being
referred to herein as a "Guarantee"). The Warrants are to be issued under a
warrant agreement of the Company to be dated as of the Closing Date (the
"Warrant Agreement") for the benefit of the holders of the certificates
evidencing the Warrants. The shares of Common Stock issuable upon exercise of
the Warrants are herein referred to as the "Warrant Shares." The Notes, the
Guarantees, the Warrants, the Warrant Shares and the Units are collectively
referred to herein as the "Securities."
The Units are being offered and sold to the Initial Purchaser without being
registered under the Securities Act of 1933, as amended (the "Act"), in reliance
on certain exemptions therefrom.
In connection with the offer and sale of the Units, the Company has
prepared a preliminary offering memorandum dated June 23, 1997 (the "Preliminary
Memorandum"), and a final offering memorandum dated July 15, 1997 (the "Final
Memorandum"), setting forth a description of the terms of the Units and the
Collateral Agreements, the terms of the offering of the Units, and a description
of the business of the Company. "Memorandum" means, as of any date or time
referred to in this Agreement, the most recent offering memorandum (whether the
Preliminary Offering Memorandum or the Final Offering Memorandum, or any
amendment or supplement to either such document), including exhibits thereto.
The Company understands from the Initial Purchaser that the Initial
Purchaser proposes to make an offering of the securities on the terms and in the
manner set forth herein and in the Final Memorandum as soon as the Initial
Purchaser deems advisable after this Agreement has been executed and delivered.
The Company also understands from the Initial Purchaser that, at such time, the
Initial Purchaser intends to make an offering of the Securities (i) to persons
in the United States whom the Initial Purchaser reasonably believes to be
qualified institutional buyers ("QIBs") as defined in Rule 144A under the Act,
as such rule may be amended from time to time ("Rule 144A"), (ii) in
transactions under Rule 144A to a limited number of persons whom the Initial
Purchaser reasonably believes (based upon written representations made by such
persons to the Initial Purchaser) to be institutional "accredited investors"
("Accredited Investors") as
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defined in Rule 501(a)(1), (2), (3) or (7) under the Act and (iii) outside the
United States in compliance with Regulation S under the Act.
The Initial Purchaser and its direct and indirect transferees of the Units
will be entitled to the benefits of a registration rights agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
Agreement"), pursuant to which the Company shall agree, among other things, (i)
to file a registration statement (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") registering under the Act
the Notes, the Exchange Notes or the Private Exchange Notes (the Exchange Notes,
together with the Private Exchange Notes, shall sometimes be referred to
hereinafter as the "New Notes") and (ii) to grant certain registration rights to
the holders of the Warrant Shares.
2. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to and agrees with the Initial Purchaser that:
(a) Neither the Preliminary Memorandum, the Final Memorandum, nor any
amendment or supplement thereto, as of the date thereof and at all times
subsequent thereto up to the Closing Date, contained or contains any untrue
statement of a material fact, or omitted or omits to state a material fact
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 set forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with information relating to
the Initial Purchaser and furnished to the Company in writing by the Initial
Purchaser or its counsel expressly for use in the Preliminary Memorandum or the
Final Memorandum or any amendment or supplement thereto.
(b) As of the Closing Date (assuming that on or prior to the Closing
Date the Bankruptcy Court (as defined below) shall have entered a Confirmation
Order (as defined below) with respect to the Approved Plan (as defined below),
such order shall have become a Final Order (as defined below) and such Approved
Plan shall have become Effective (as defined below), the Company will have the
authorized capitalization set forth in the Final Memorandum (except for the
grant of options to purchase up to 10% of the Company's fully diluted Common
Stock which may be granted subsequent to the date of the Final Memorandum
pursuant to the Stock Incentive Plan (as defined in the Final Memorandum)); all
of the outstanding shares of capital stock of the Company and its Subsidiaries
as of the Closing Date (assuming that on or prior to the Closing Date the
Confirmation Order has become a Final Order and the Approved Plan has become
Effective) will be duly authorized and validly issued, fully paid and
nonassessable and will not have been issued in violation of any preemptive or
similar rights; all of the outstanding shares of capital stock of each of the
Subsidiaries as of the Closing Date will be owned,
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directly or indirectly, by the Company, free and clear of all liens,
encumbrances, security interests, mortgages, pledges, charges, equities, claims
or restrictions on transferability (collectively, "Encumbrances") (other than
those imposed by the Act and the securities or "Blue Sky" laws of certain
jurisdictions) or voting; except as set forth in the Final Memorandum, as of the
Closing Date (except for the grant of options to purchase up to 10% of the
Company's fully diluted Common Stock which may be granted subsequent to the date
of the Final Memorandum pursuant to the Stock Incentive Plan (as defined in the
Final Memorandum) there will be no outstanding (i) options, warrants or other
rights to purchase from the Company or any of its Subsidiaries, (ii) agreements
or other obligations of the Company or any of its Subsidiaries to issue or (iii)
other rights to convert any obligation into or exchange any securities for, in
the case of each of clauses (i) through (iii), shares of capital stock or any
other Equity Interests of the Company or any of its Subsidiaries. Except as set
forth in the Final Memorandum, the Company does not have any Subsidiaries and
does not own, directly or indirectly, any shares of capital stock or any other
equity or long-term debt securities or have, directly or indirectly, any Equity
Interest in any firm, partnership, joint venture or other entity. For the
purposes of this Agreement, "Bankruptcy Court" shall mean the bankruptcy court
having jurisdiction over the Chapter 11 reorganization proceedings of the
Company and its subsidiaries; "Confirmation Order" shall mean an order duly
entered by the clerk of the Bankruptcy Court confirming a Plan of Reorganization
with respect to the Company (the "Approved Plan"); "Effective" means, with
respect to the Approved Plan, that all conditions to the effectiveness of the
Approved Plan other than consummation of the Exit Financing (as defined in the
Proposed Plan) have been satisfied, and that, upon consummation of the Exit
Financing, the Approved Plan will become effective in accordance with its terms;
"Final Order" means an order or judgment of the Bankruptcy Court the operation
or effect of which has not been reversed, stayed, modified or amended and as to
which the time to appeal or petition for certiorari, review or rehearing has
expired and as to which no appeal or petition for certiorari, review or
rehearing is pending or as to which any right to appeal or seek certiorari,
review or rehearing has been waived in writing in a manner effective to waive
such right (and the Company has delivered to the Initial Purchaser a certificate
of a senior officer of the Company certifying to such effect) or, if an appeal,
reargument, petition for certiorari or rehearing thereof has been sought, the
order or judgment of the Bankruptcy Court has not been stayed or has been
affirmed by the highest court to which the order was appealed or from which the
reargument or rehearing was sought, or certiorari has been denied, and the time
to take any further appeal or to seek certiorari or further reargument or
rehearing has expired.
(c) On the Closing Date (assuming that on or prior to such date the
Confirmation Order has become a Final Order and the
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Approved Plan has become Effective), each of the Company and its Subsidiaries
will be duly incorporated, validly existing and in good standing as a
corporation under the laws of its jurisdiction of incorporation, with all
requisite corporate power and authority to own its properties and conduct its
business as now conducted, and as described in the Final Memorandum; and each of
the Company and its Subsidiaries is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, result in a Material Adverse Effect. For the
purposes of this Agreement, a "Material Adverse Effect" shall mean a material
adverse effect on (i) the management, business, condition (financial or
otherwise), prospects or results of operations of the Company and its
Subsidiaries, taken as a whole, or (ii) the Company's ability to perform any of
its material obligations under any of the agreements, documents or instruments
contemplated to be entered into by the Company hereby or by the Final
Memorandum.
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Notes. The Notes have
been duly and validly authorized by the Company and, when executed by the
Company and each Subsidiary Guarantor party thereto and authenticated by the
Trustee in accordance with the provisions of the Indenture, and, in the case of
the Notes, when delivered to and paid for by the Initial Purchaser in accordance
with the terms of this Agreement and the Indenture, will have been duly
executed, issued and delivered and will constitute valid and legally binding
obligations of the Company, entitled to the benefits of the Indenture, the
Collateral Agreements, the Intercreditor Agreement and the Registration Rights
Agreement (such agreements, together with all transactions and agreements
contemplated thereby, may sometimes hereinafter be referred to as the
"Transaction Documents"), and enforceable against the Company and its
Subsidiaries (including each Subsidiary Guarantor party thereto) in accordance
with their respective terms, except that the enforcement thereof may be subject
to (i) bankruptcy, insolvency, reorganization, receivership, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors' rights generally and (ii) general principles of equity (whether
applied by a court of law or equity) and the discretion of the court before
which any proceeding therefore may be brought.
(e) The Company and each of its Subsidiaries has all requisite
corporate power and authority to execute, deliver and perform each of its
obligations under the Indenture, the Intercreditor Agreement and the Collateral
Agreements. The Indenture meets the requirements for qualification under the
Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture, the
Intercreditor Agreement and the Collateral Agreements have been duly and validly
authorized by the Company
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and each Subsidiary Guarantor party thereto and, when executed and delivered by
the Company, each such Subsidiary Guarantor and each of the other parties
thereto, will each constitute a valid and legally binding agreement of the
Company and the Subsidiary Guarantors, enforceable against the Company and each
Subsidiary Guarantor in accordance with its respective terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, receivership, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally, (ii)
general principles of equity (whether applied by a court of law or equity) and
the discretion of the court before which any proceeding therefor may be brought
and (iii), in the case of the Collateral Agreements, federal or state securities
laws or principles of public policy affecting enforcement of rights to indemnity
or contribution.
(f) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration Rights
Agreement. The Registration Rights Agreement has been duly and validly
authorized by the Company and when executed and delivered by the Company, will
constitute a valid and legally binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, receivership, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally, and
(ii) general principles of equity (whether applied by a court of law or equity)
and the discretion of the court before which any proceeding therefor may be
brought and (B) any rights to indemnity or contribution thereunder may be
limited by federal or state securities laws or public policy considerations.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Warrant Agreement. The
Warrant Agreement has been duly and validly authorized by the Company and, when
executed and delivered by the Company, will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors rights generally, (ii) general principles of equity (whether applied
by a court of law or equity) and the discretion of the court before which any
proceeding therefor may be brought, and (iii) federal or state securities laws
or principles of public policy affecting enforcement of rights to indemnity or
contribution.
(h) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Warrants. The Warrants
have been duly and validly authorized by the Company and, when executed by the
Company and countersigned by the Warrant Agent in accordance with the
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provisions of the Warrant Agreement and when delivered to and paid for by the
Initial Purchaser in accordance with the terms of the Warrant Agreement and this
Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency, reorganization,
receivership, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally, (ii) general
principles of equity (whether applied by a court of law or equity) and the
discretion of the court before which any proceeding therefor may be brought and
(iii) federal or state securities laws or principles of public policy affecting
enforcement of rights to indemnity or contribution.
(i) The Warrant Shares, upon becoming available for issuance upon the
exercise of the Warrants in accordance with their terms, will have been duly and
validly authorized for issuance by the Company and, when issued in accordance
with the terms and conditions contained in the Warrants and the Warrant
Agreement, upon exercise of the Warrants the Warrant Shares will by duly
authorized, validly issued, fully paid and non-assessable, will conform to the
description thereof contained in the Final Memorandum, will not be subject to
any preemptive or similar rights and will be free of any Encumbrances. The
Warrant Shares, upon becoming available for issuance upon the exercise of the
Warrants in accordance with their terms, will have been duly reserved for
issuance in accordance with the terms of the Warrants and the Warrant Agreement,
as the case may be.
(j) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by the Company. Except as set
forth in the Final Memorandum, no consent, approval, authorization or order of
any court or governmental agency or body, or third party (in each case, a
"Consent") is required for the performance of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby, except
the entry of the Confirmation Order with respect to the Approved Plan, the
Approved Plan having become Effective, such other Consents as have been obtained
and other than such other Consents as may be required under the Act or state
securities or "Blue Sky" laws in connection with the purchase and resale of the
Securities by the Initial Purchaser. The Company is not (i) in violation of its
certificate of incorporation or bylaws, (ii) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to it or any of
its properties or assets, except for any such breach or violation which would
not, individually or in the aggregate, have a Material Adverse Effect or (iii)
assuming, as of the date hereof, that on or prior to the date hereof, a plan of
reorganization in the form of the
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Company's proposed Third Amended Joint Plan of Reorganization (the "Proposed
Plan") has become Effective and assuming, as of the Closing Date, that on or
prior to the Closing Date the Confirmation Order has become a Final Order and
the Approved Plan has become Effective, in breach of or default under (nor has
any event occurred which, with notice or passage of time or both, would
constitute a breach of or default under) or in violation of any of the terms or
provisions of any indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate, contract or other
agreement or instrument to which the Company is a party or to which the Company
or any of its properties or assets is subject, except for any such breach,
default, violation or event which would not, individually or in the aggregate,
have a Material Adverse Effect.
(k) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby, and the fulfillment of the terms hereof, will not conflict with or
constitute or result in a breach of or a default under (or an event which with
notice of passage of time or both would constitute a breach of or default under)
or violation of (i) any indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate, contract or
other agreement or instrument to which the Company is a party or to which the
Company or any of its properties or assets is subject other than any such
breaches, defaults, violations or events which would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) the certificate of incorporation
or bylaws of the Company, or (iii) assuming compliance with the Act and all
applicable state securities or "Blue Sky" laws, any statute, judgment, decree,
order, rule or regulation applicable to the Company or any of its properties or
assets other than any such breaches, defaults, violations or events which would
not, individually or in the aggregate, have a Material Adverse Effect.
(l) The audited consolidated financial statements and related notes
of the Company included in the Final Memorandum present fairly in all material
respects the consolidated financial position of the Company and its
Subsidiaries, the consolidated results of operations and cash flows as of the
dates and for the periods to which they relate and have been prepared in
conformity with generally accepted accounting principles, consistently applied,
except as otherwise stated therein, and the unaudited consolidated financial
statements and related notes and schedules of the Company and its subsidiaries
included in the Final Memorandum, present fairly the consolidated financial
position of the Company and its subsidiaries as of the dates and for the periods
indicated, and the results of their operations and their cash flows for the
periods to which they relate, subject to year-end audit adjustments, and have
been prepared in accordance with the audited consolidated financial statements
of the Company and its subsidiaries and with generally accepted accounting
principles, consistently applied. The summary and
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selected consolidated historical financial data in the Final Memorandum present
fairly in all material respects the financial information shown therein and have
been prepared and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein.
(m) The pro forma financial statements and other pro forma financial
information (including the notes thereto) included in the Final Memorandum (x)
have been prepared in accordance with applicable requirements of Regulation S-X
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (y) have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and (z) have been
properly computed on the bases described therein. The estimates and assumptions
used by the Company in the preparation of the pro forma financial statements and
other pro forma financial information (including the notes thereto) included in
the Final Memorandum are believed in good faith by the Company to be reasonable,
the adjustments used therein are appropriate to give effect to the transactions
or circumstances referred to therein, and the Company believes that such
financial projections are reasonable and attainable based on the facts and
circumstances existing on the Closing Date and the assumptions stated therein.
(n) Each of Ernst & Young LLP, Price Waterhouse LLP and Xxxxxx
Xxxxxxxx LLP, which firms have audited certain of such financial statements as
set forth in their reports included in the Final Memorandum, is an independent
public accounting firm within the meaning of the Act.
(o) Except as described in the Final Memorandum, as of the date
hereof (assuming that on or prior to the date hereof the Proposed Plan has
become Effective), and as of the Closing Date (assuming that on or prior to the
Closing Date, the Confirmation Order has become a Final Order and the Approved
Plan has become Effective), there is not pending or, to the knowledge of the
Company threatened, any action, suit, proceeding, inquiry or investigation to
which the Company or any Subsidiary is a party, or to which any of the property
or assets of the Company or any Subsidiary are subject, before or brought by any
court or governmental agency or body which, if determined adversely to the
Company or such Subsidiary, would have, individually or in the aggregate, a
Material Adverse Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Units to be
sold hereunder or the consummation of the other transactions described in the
Final Memorandum.
(p) The Company owns or possesses adequate licenses or other rights
to use all trademarks, service marks, trade names and know-how necessary to
conduct the businesses as now conducted or as proposed to be conducted as
described in the Final Memorandum, and the consummation of the transactions
contemplated
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hereby and by the Proposed Plan (and, as of the Closing Date, the Approved Plan)
will not alter or impair any of such rights. No claims have been asserted, and
the Company has not received any notice of conflict with (or knows of any such
conflict with) asserted rights of others with respect to the use, validity or
the effectiveness of any trademarks, service marks, trade names or know-how
which, if such claim or assertion of conflict were the subject of an unfavorable
decision, ruling or finding would, individually or in the aggregate, have a
Material Adverse Effect.
(q) The Company and each of its Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal, state, local
and foreign governmental authorities with jurisdiction, all self-regulatory
organizations and all courts and other tribunals, presently required or
necessary for the Company and each of its Subsidiaries to own or lease, as the
case may be, and to possess or operate its properties and to carry on its
business as now conducted or proposed to be conducted as set forth in the Final
Memorandum, except where the failure to obtain such licenses, permits,
certificates, consents, orders, approvals and other authorizations, or to make
all declarations and filings (collectively, "Permits"), would not, individually
or in the aggregate, have a Material Adverse Effect; and the Company has
fulfilled and performed all of its obligations with respect to such Permits
except obligations which the failure to fulfill or perform would not have a
Material Adverse Effect, and to the best of the Company's knowledge, no event
has occurred that allows, or after notice or lapse of time would allow,
revocation or termination thereof, or results in any material impairment of the
rights of the holder of any such Permit; and neither the Company nor any of its
Subsidiaries has received any notice of any proceeding relating to revocation or
modification of any such Permit, except as described in the Final Memorandum or
except where such revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect.
(r) Since the respective dates as of which information is given in
the Final Memorandum, except as described therein or contemplated thereby, (i)
neither the Company nor any Subsidiary has incurred any liabilities or
obligations, direct or contingent, or entered into or agreed to enter into any
transactions or contracts (written or oral) not in the ordinary course of
business and (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock or otherwise.
(s) Each of the Company and its Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns that are required to
be filed, except where the failure to so file such returns would not,
individually or in the aggregate, have a Material Adverse Effect, and, except as
set
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forth in the Final Memorandum, has paid all taxes, assessments, fees and other
charges (including, without limitation, withholding taxes, penalties and
interest) due or claimed to be due thereon that are due and payable; other than
tax deficiencies which (i) the Company or any Subsidiary is contesting in good
faith and for which the Company or such Subsidiary has provided adequate
reserves in accordance with generally accepted accounting principles or (ii) the
failure to pay would not have a Material Adverse Effect. As of the Closing Date
(assuming that on or prior to such date the Confirmation Order has become a
Final Order and the Approved Plan has become Effective), there is no tax
deficiency or actual or proposed tax assessment that has been asserted against
the Company or any Subsidiary that would have, individually or in the aggregate,
a Material Adverse Effect.
(t) None of the Company or any agent acting on its behalf has taken
or will take any action that could cause the transactions contemplated by this
Agreement (including, without limitation, any pledge of the capital stock of any
Subsidiary pursuant to the Pledge Agreement) or the sale of the Units to violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System,
in each case as in effect, or as the same may hereafter be in effect, on the
Closing Date.
(u) As of the date hereof (assuming that on or prior to the date
hereof, the Proposed Plan has become Effective) and as of the Closing Date
(assuming that on or prior to the Closing Date the Confirmation Order has become
a Final Order and the Approved Plan has become Effective), the Company and its
Subsidiaries have (a) good and marketable title to all real property and other
material assets (personal, tangible, intangible or mixed) described in the Final
Memorandum as owned by them, and, good and marketable title to all leasehold
estates in the real and personal property described in the Final Memorandum as
being leased by them, and such title will be free and clear of all Liens, with
such exceptions as are not material and do not interfere with the use made or
proposed to be made of such property and (b) peaceful and undisturbed possession
under all leases to which it is a party as lessee or sublessee, except for such
defects in title or lack of possession that, in the aggregate, would not have a
Material Adverse Effect. Each of the Company and its Subsidiaries operates all
real and personal property leased by it under valid and enforceable leases and
has performed in all material respects the obligations required to be performed
by it with respect to each such lease except for such leases and obligations
which, in the aggregate, would not have a Material Adverse Effect. As to leases
with respect to which the Company or any of its Subsidiaries is the lessor, the
lessees and other parties under such leases are in compliance with all material
terms and conditions thereunder and such leases are in full force and effect
except for such leases which, it not in full force and effect, would not, in the
aggregate, have Material Adverse Effect. All tangible assets and properties of
the
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Company and its Subsidiaries are in good working order (subject to ordinary wear
and tear) and are adequate for the uses to which they are being put or would be
put in the ordinary course of business except for such assets and properties as
are not material, individually or in the aggregate, to the business, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole.
(v) There are no legal or governmental proceedings involving or, to
the Company's knowledge, affecting the Company or any Subsidiary or any of their
respective properties or assets which would be required to be described in a
prospectus pursuant to the Act that are not described in the Final Memorandum,
nor are there any material contracts or other documents which would be required
to be described in a prospectus pursuant to the Act that are not described in
the Final Memorandum.
(w) Except as described in the Final Memorandum, there are no
consensual encumbrances or restrictions on the ability of any Subsidiary of the
Company (x) to pay dividends or make any other distributions on such
Subsidiary's capital stock or to pay any indebtedness owed to the Company or any
other Subsidiary of the Company, (y) to make any loans or advances to, or
investments in, the Company or any other Subsidiary of the Company or (z) to
transfer any of its property or assets to the Company or any other Subsidiary of
the Company.
(x) Except as stated in the Final Memorandum, there are no
outstanding claims for services, either in the nature of a finder's fee,
financial advisory fee, origination fee or similar fee, with respect to the
transactions contemplated hereby.
(y) Except as described in the Final Memorandum, each of the Company
and its Subsidiaries is in compliance in all respects with all existing and
applicable domestic and foreign laws, rules or regulations relating to pollution
or protection of public or employee health or the environment ("Environmental
Law") and with the terms and conditions of any Permit, issued to the Company or
its Subsidiaries thereunder in connection with the ownership, operation or use
of its business, property and assets, except where the failure to be in such
compliance would not, individually or in the aggregate, have a Material Adverse
Effect; except as disclosed in the Final Memorandum, none of the Company or its
Subsidiaries is subject to any known liability, absolute or contingent, under
any Environmental Law except for any such liability which would not,
individually or in the aggregate, have a Material Adverse Effect; except as
disclosed in the Final Memorandum, there is no civil, criminal or administrative
action, suit, demand, hearing, notice of violation or deficiency, investigation,
proceeding or notice of potential responsibility or demand letter or request for
information pending or, to the knowledge of the Company threatened against the
Company or any Subsidiaries under any Environmental Law which, if determined
-12-
adversely to the Company or any Subsidiary would, individually or in the
aggregate, result in a Material Adverse Effect.
(z) Except as disclosed in the Final Memorandum, each of the Company
or its Subsidiaries carries insurance (including self insurance) in such amounts
and covering such risks as is adequate for the conduct of its business and the
value of its properties and as shall be customary, in the good faith judgment of
the Company, for companies similarly situated within the industry of the
Company.
(aa) As of the Closing Date, (assuming that on or prior to such date
the Confirmation Order shall have become a Final Order and the Approved Plan has
become Effective), none of the Company or its Subsidiaries has any liability for
any prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing, 401(k) plan or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any Subsidiary makes or ever
has made a contribution and in which any employee of the Company or any
Subsidiary is or has ever been a participant. With respect to such plans, the
Company and each Subsidiary is in compliance in all material respects with all
applicable provisions of ERISA. The execution and delivery of this Agreement by
the Company and the sale of the Units by the Company to the Initial Purchaser
will not involve any prohibited transaction (within the meaning of Section 406
of ERISA) of the Company.
(bb) The Company is not and, after giving effect to the offering and
sale of the Units, the Company will not be an "investment company" or a company
"controlled by" an "investment company" or "promoter" or "principal underwriter"
for an "investment company," as such terms are defined in the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder.
(cc) Except as disclosed in the Final Memorandum, no holder of
securities of the Company or any Subsidiary will be entitled to have such
securities registered under the registration statements required to be filed by
the Company pursuant to the Registration Rights Agreement.
(dd) As of the Closing Date, (assuming that on or prior to such date
the Confirmation Order has become a Final Order and the Approved Plan has become
Effective), and immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and current fair saleable value
of the assets of the Company (on a consolidated basis) will exceed the sum of
its stated liabilities and identified contingent liabilities; the Company (on a
consolidated basis) will not be, as of the Closing Date, that (assuming on or
prior to such date the Confirmation Order has become a Final Order and the
Approved Plan has become Effective), and after giving effect to the
-13-
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, (a) left with unreasonably small capital
with which to carry on its business as it is proposed to be conducted as
described in the Final Memorandum, (b) unable to pay its debts (contingent or
otherwise) as they mature or (c) otherwise insolvent.
(ee) Neither the Company nor any person acting on its behalf has
offered or sold the Units by means of any general solicitation or general
advertising within the meaning of Rule 502(c) under the Act or, with respect to
Securities sold outside the United States to non-U.S. persons (as defined in
Rule 902 under the Act), by means of any directed selling efforts within the
meaning of Rule 902 under the Act, and the Company, any affiliate of the Company
and any person acting on its or their behalf have complied with and will
implement the "offering restrictions" within the meaning of such Rule 902;
PROVIDED, that no representation is made in this subsection with respect to
actions by the Initial Purchaser.
(ff) Except as disclosed in the Final Memorandum, neither the Company
nor any other person acting on behalf of the Company (other than the Initial
Purchaser as to whom the Company makes no representation) has solicited offers
to buy or offered or sold or otherwise negotiated in respect of any security (as
defined in the Act) that is or could be integrated with the sale of the Units in
a manner that would require the registration under the Act of the Units or
Securities; and the Company will take reasonable precautions designed to insure
that any offer or sale, direct or indirect, in the United States or to any U.S.
person (as defined in Rule 902 under the Act) of any Units or Securities or any
substantially similar security issued by the Company, within six months
subsequent to the date on which the distribution of the Units has been
completed, is made under restrictions and other circumstances reasonably
designed not to affect the status of the offer and sale of the Units in the
United States and to U.S. persons contemplated by this Agreement as transactions
exempt from the registration requirements of the Act;
(gg) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes.
(hh) Assuming the accuracy of and compliance with the representations
and warranties of the Initial Purchaser in Section 8 hereof, it is not necessary
in connection with the offer, sale and delivery of the Units to the Initial
Purchaser in the manner contemplated by this Agreement to register any of the
Securities under the Act or to qualify the Indenture under the TIA.
-14-
(ii) As of the Closing Date, (assuming that on or prior to such date,
the Confirmation Order has become a Final Order and the Approved Plan has become
Effective), no other securities of the Company are of the same class (within the
meaning of Rule 144A under the Act) as the Securities and listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a U.S. automated inter-dealer quotation system.
(jj) None of the Company or its Subsidiaries has taken, nor will any
of them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of the
price of the Securities.
(kk) Upon (i) execution and delivery of the Collateral Agreements by
the Company, the Subsidiary Guarantors parties thereto and the Trustee, (ii) the
execution and filing of all appropriate forms as required under the Uniform
Commercial Code and (iii) in the case of (A) the Pledged Securities and (B) the
capital stock of the Subsidiary Guarantors (the "Pledged Subsidiaries Stock")
pledged to the Trustee pursuant to the Pledge Agreement, the delivery to and
possession by the Trustee of such Pledged Securities and Pledged Subsidiaries
Stock, duly endorsed for transfer in accordance with Article 8 of the Uniform
Commercial Code, the Collateral Agreements will create and constitute a valid
and enforceable first priority pledge of and perfected security interest in the
Collateral.
(ll) Neither the Company nor any of its Subsidiaries is a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(mm) As of the Closing Date, the Approved Plan shall be substantially
identical to the Proposed Plan.
3. PURCHASE, SALE AND DELIVERY OF THE UNITS. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, 85,000 Units at a purchase price of 100% of the
principal amount of Notes being issued and sold. One or more certificates in
definitive form for the Units that the Initial Purchaser has agreed to purchase
hereunder, and in such denomination or denominations and registered in such name
or names as the Initial Purchaser requests upon notice to the Company at least
24 hours prior to the Closing Date, shall be delivered by or on behalf of the
Company to the Initial Purchaser, against payment by or on behalf of the Initial
Purchaser of the purchase price therefor; PROVIDED, HOWEVER that if the Closing
Date occurs prior to the date on which the
-15-
Approved Plan has become Effective, the Units shall be issued to, and the
consideration therefor shall be paid to, an escrow agent pursuant to an escrow
agreement in the form attached hereto as Exhibit B. Such delivery of and
payment for the Units shall be made at the offices of Shearman & Sterling at
10:00 a.m., New York City time, on the date the Confirmation Order becomes a
Final Order and the Approved Plan becomes Effective, or at such other place,
time or date as the Initial Purchaser, on the one hand, and the Company, on the
other hand, may agree upon, such time and date of delivery against payment being
herein referred to as the "Closing Date"; PROVIDED, HOWEVER, that the latest
date upon which the Closing Date may occur shall be August 1, 1997 (the "Latest
Possible Closing Date"). With respect to Securities to be delivered in
definitive certificated form, the Company will make certificates for such
Securities available for checking and packaging by the Initial Purchaser at the
offices of Xxxxxxxxx & Company, Inc. in New York, New York, or at such other
place as the Initial Purchaser may designate, on the business day next preceding
the Closing Date. Securities to be represented by one or more definitive global
Securities in book-entry form will be deposited on the Closing Date, by or on
behalf of the Company, with The Depository Trust Company ("DTC") or its
designated custodian, and registered in the name of Cede & Co.
4. OFFERING BY THE INITIAL PURCHASER. The Initial Purchaser proposes to
make an offering of the Units at the price and upon the terms set forth in the
Final Memorandum, as soon as practicable after this Agreement is entered into
and as in the judgment of the Initial Purchaser is advisable.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Initial Purchaser that:
(a) The Company shall not make any amendment or supplement to the
Final Memorandum of which the Initial Purchaser shall not previously have been
advised and furnished a copy for a reasonable period of time prior to the
proposed amendment or supplement and as to which the Initial Purchaser shall not
have given its consent. The Company shall promptly, upon the reasonable request
of the Initial Purchaser, make any amendments or supplements to the Preliminary
Memorandum or the Final Memorandum that may be necessary or advisable in
connection with the resale of the Securities by the Initial Purchaser.
(b) The Company shall use its best efforts, in cooperation with the
Initial Purchaser, to arrange for the qualification of the Units for offering
and sale under the securities or "Blue Sky" laws of such jurisdictions as the
Initial Purchaser may designate and shall continue such qualifications in effect
for as long as may be necessary to complete the resale of the Securities.
(c) If, at any time prior to the completion of the initial resale of
the Units by the Initial Purchaser to persons
-16-
other than affiliates of the Initial Purchaser (as determined by the Initial
Purchaser), any event occurs as a result of which the Final Memorandum as then
amended or supplemented would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
for any other reason it is necessary at any time to amend or supplement the
Final Memorandum to comply with applicable law, the Company will promptly notify
the Initial Purchaser thereof and will prepare, at the expense of the Company,
an amendment or supplement to the Final Memorandum that corrects such statement
or omission or effects such compliance.
(d) The Company will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the Final
Memorandum or any amendment or supplement thereto as the Initial Purchaser or
such counsel may reasonably request.
(e) For so long as any of the Securities remain outstanding, the
Company will furnish to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee,
the Warrant Agent or the holders of the Securities and, as soon as available,
copies of any reports or financial statements furnished to or filed by the
Company with the Commission or any national securities exchange on which any
class of securities of the Company may be listed.
(f) Except as described in the Final Memorandum, none of the Company
or any of its affiliates will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any "security" (as defined in the Act) which
could be integrated with the sale of the Units in a manner which would require
the registration of the Units under the Act.
(g) The Company will not solicit any offer to buy or offer to sell
the Units by means of any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act.
(h) For so long as any of the Securities remain outstanding, the
Company will make available, upon request, to any seller or prospective
purchaser of such Securities, the information specified in Rule 144A(d)(4) under
the Act, unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
(i) The Company will use its best efforts to (i) permit the Units and
the Securities to be designated PORTAL securities in accordance with the rules
and regulations adopted by the NASD relating to trading in the Private Offering,
Resales and Trading through Automated Linkages market (the "PORTAL
-17-
Market") and (ii) permit the Units and Securities to be eligible under Rule 144A
for clearance and settlement through DTC.
(j) (i) During the period beginning from the date hereof and
continuing until the date 180 days after the Closing Date, except as
contemplated by the Final Memorandum, the Company will not offer, sell, contract
to sell or otherwise dispose of, except as provided hereunder, any securities
that are similar to the Units or the Securities, including but not limited to,
any securities that are convertible into or exchangeable for, or that represent
the right to receive, Common Stock or any such securities similar to the
Securities, and the Company shall not offer, sell, contract to sell or otherwise
dispose of securities of the Company after such 180 day period if such
transaction would cause the initial offer and sale by the Company and resale by
the Initial Purchaser of the Units not to be exempt from the registration
requirements of the Act, and (ii) the Company will use its best efforts to cause
each person who has entered into a Lock-up Agreement (as herein defined) to
comply therewith, will not grant any waivers or consents to noncompliance
therewith and will enforce its rights under each such agreement, in each case
unless and to the extent that it shall have obtained the Initial Purchaser's
prior written consent, which consent shall not be unreasonably withheld.
(k) During the two year period after the Closing Date (or such
shorter period as may be provided for in Rule 144(k) under the Act, as the same
may be in effect from time to time), the Company will not, and will not permit
any of its subsidiaries or other affiliates (as defined in Rule 144A under the
Act) controlled by it to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been required by any of them,
except pursuant to an effective registration statement under the Act.
(l) The Company shall pay all stamp and other duties, if any, which
may be imposed by the United States or any political subdivision thereof or
taxing authority thereof or therein with respect to the issuance of the Units
and the Securities.
6. EXPENSES. The Company agrees to pay all costs and expenses incident
to the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing, word processing or other production of documents with respect to
the transactions contemplated hereby, including any costs of printing the
Preliminary Memorandum and the Final Memorandum and any amendment or supplement
thereto, (ii) all arrangements relating to the delivery to the Initial Purchaser
of copies of the foregoing documents, (iii) the fees and disbursements of the
counsel, the accountants and any other experts or advisors retained by the
Company, (iv) the
-18-
preparation, issuance and delivery to the Initial Purchaser of the Securities,
(v) the qualification for the Securities under state securities and "Blue Sky"
laws, including filing fees and fees and disbursements of counsel incurred by
the Initial Purchaser relating thereto, (vi) subject to the terms of the
Engagement Letter dated as of March 18, 1997 between the Company and the Initial
Purchaser (the "Engagement Letter"), the reasonable fees, disbursements and
charges of Xxxxxxxx Kill & Olick, P.C., counsel to the Initial Purchaser,
incurred in connection with the transactions contemplated hereby, (vii) expenses
in connection with any meetings with prospective investors in the Securities,
(viii) fees and expenses of the Trustee, the Warrant Agent and the transfer
agent for the Common Stock including fees and expenses of their respective
counsel incurred by any of them, (ix) all expenses and listing fees incurred in
connection with the application for quotation of the Securities on the PORTAL
Market, and (x) any fees charged by investment rating agencies for the rating of
any of the Securities. If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated or because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder other than solely by reason of a default by the
Initial Purchaser on its obligations hereunder after all conditions hereunder
have been satisfied in accordance herewith, subject to the terms of the
Engagement Letter, the Company agrees to promptly reimburse the Initial
Purchaser upon demand for all out-of-pocket expenses (including reasonable fees,
disbursements and charges of Xxxxxxxx Kill & Olick, P.C., counsel for the
Initial Purchaser) that shall have been incurred by the Initial Purchaser in
connection with the proposed purchase and sale of the Securities.
7. CONDITIONS OF THE INITIAL PURCHASER'S OBLIGATIONS. The obligation of
the Initial Purchaser to purchase and pay for the Securities shall, be subject
to the satisfaction or waiver of the following conditions on or prior to the
Closing Date:
(a) On the Closing Date, the Initial Purchaser shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchaser, of Shearman & Sterling, counsel for the Company, in form and
substance satisfactory to counsel for the Initial Purchaser, substantially to
the effect that:
(i) Each of the Company and Block Party, Inc., a corporation
wholly-owned by the Company, is duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Final
Memorandum.
-19-
(ii) Except as set forth in the Final Memorandum, based solely
upon certificates by officers of the Company which such counsel has no
reason to believe are inaccurate and to the best of such counsel's
knowledge, (A) no options, warrants or other rights to purchase from the
Company any Equity Interests in the Company are outstanding, (B) no
agreements or other obligations of the Company to issue, or other rights
granted by the Company to cause the Company to convert, any obligation
into, or exchange any securities for, any Equity Interests in the Company
are outstanding and (C) the Company is not obligated to have any of its
securities registered under a registration statement filed by the Company
under the Act with respect to any of the Securities.
(iii) The Notes have been duly and validly authorized and
executed by the Company and, when duly authenticated by the Trustee in
accordance with the Indenture and when delivered by the Company and paid
for by the Initial Purchaser in accordance with the terms of this
Agreement, the Notes will constitute the valid and legally binding
obligations of the Company and each of the Subsidiary Guarantors,
enforceable in accordance with their terms, except that the enforcement
thereof may be subject to (i) bankruptcy, insolvency (including all laws
relating to fraudulent transfer), reorganization, receivership, moratorium,
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity (whether applied by
a court of law or equity) and the discretion of the court before which any
proceeding therefor may be brought; and the holders of the Notes will be
entitled to the benefits of the Indenture.
(iv) The Company and Block Party, Inc. has all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Indenture, the Notes, the Intercreditor Agreement and
the Collateral Agreements; the Indenture is in sufficient form for
qualification under the TIA; the Indenture, the Notes, the Intercreditor
Agreement and the Collateral Agreements have been duly and validly
authorized by the Company and each Subsidiary Guarantor party thereto; the
Indenture, the Notes and the Collateral Agreements have been executed and
delivered by the Company and each Subsidiary Guarantor party thereto, and,
assuming due authorization, execution and delivery by the Trustee, assuming
due authorization, execution and delivery by the Trustee, in the case of
any agreement to which the Trustee is a party, each constitutes (and, with
respect to the Intercreditor Agreement, upon the execution and delivery of
the Intercreditor Agreement, will constitute) a valid and legally binding
obligation of the Company and each Subsidiary Guarantor party thereto,
enforceable against the Company and each such Subsidiary Guarantor in
accordance with its terms, except that the
-20-
enforcement thereof may be subject to (i) bankruptcy, insolvency (including
all laws relating to fraudulent transfer), reorganization, receivership,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) general principles of
equity (whether applied by a court of law or equity) and the discretion of
the court before which any proceeding therefor may be brought and (iii), in
the case of the Collateral Agreements, federal or state securities laws or
principles of public policy affecting enforcement of rights to indemnity or
contribution.
(v) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Registration
Rights Agreement; the Registration Rights Agreement has been duly and
validly authorized, executed and delivered by the Company and constitutes a
valid and legally binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that (A) the enforcement
thereof may be subject to (i) bankruptcy, insolvency (including all laws
relating to fraudulent transfer), reorganization, receivership, moratorium
or other similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity (whether applied by
a court of law or equity) and discretion of the court before which any
proceeding therefor may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal or state securities laws
or public policy considerations.
(vi) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Warrant
Agreement. The Warrant Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency (including all laws relating to
fraudulent transfer), reorganization, receivership, moratorium, or other
similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) general principles of equity (whether applied by a court of
law or equity) and the discretion of the court before which any proceeding
therefor may be brought and (iii) federal or state securities laws or
principles of public policy affecting enforcement of rights to indemnity or
contribution.
(vii) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Warrants. The
Warrants have been duly and validly authorized and executed by the Company
and, when
-21-
duly countersigned by the Warrant Agent in accordance with the Warrant
Agreement and delivered and paid for by the Initial Purchaser, will have
been duly issued and delivered and will constitute valid and legally
binding obligations of the Company, entitled to the benefits of the Warrant
Agreement, and enforceable against the Company in accordance with their
terms, except that the enforcement thereof may be subject to (i)
bankruptcy, insolvency (including all laws relating to fraudulent
transfer), reorganization, receivership, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, (ii)
general principles of equity (whether applied by a court of law or equity)
and the discretion of the court before which any proceeding therefor may be
brought and (iii) federal or state securities laws or principles of public
policy affecting enforcement of rights to indemnity or contribution.
(viii) When issued in accordance with the terms and conditions
contained in the Warrant Agreement, upon exercise of the Warrants, the
Warrant Shares will be duly authorized, validly issued, fully paid and
non-assessable and will not be subject to any preemptive or similar rights.
(ix) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly and validly authorized, executed and delivered by
the Company.
(x) The statements set forth in the Final Memorandum under the
captions "Description of Units", Description of Notes", "Description of
Warrants" and "Description of Capital Stock", insofar as such statements
purport to constitute a summary of the legal matters and documents referred
to therein, fairly summarize in all material respects the legal matters and
documents referred to therein.
(xi) To the knowledge of such counsel and except as set forth in
the Final Memorandum, no legal or governmental proceedings are pending or
threatened to which the Company or any of its Subsidiaries is a party or to
which the property or assets of the Company or any Subsidiary is subject
which, if determined adversely to the Company or the Subsidiary, would
result, individually or in the aggregate, in a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Securities to be sold hereunder or
the consummation of the other transactions described in the Final
Memorandum.
(xii) Assuming that the New Notes have been duly authorized by
all necessary corporate action of the Company,
-22-
such New Notes when duly authenticated by the Trustee in accordance with
the Indenture and duly executed and delivered by the Company in accordance
with the terms of the Registration Rights Agreement and the Indenture, the
New Notes will constitute the valid and legally binding obligations of the
Company and the Subsidiary Guarantors, entitled to the benefits of the
Indenture and enforceable in accordance with their terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency (including
all laws relating to fraudulent transfer), reorganization, receivership,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity (whether
applied by a court of law or equity) and the discretion of the court before
which any proceeding therefor may be brought.
(xiii) Except as set forth in the Final Memorandum, the execution
and delivery of this Agreement, the Indenture, the Collateral Agreements,
the Intercreditor Agreement, the Warrant Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and sale of
the Units to the Initial Purchaser) will not conflict with or constitute or
result in a material breach or violation of or a default under (or an event
which with notice or passage of time or both would constitute a material
default under) (i) any of the terms or provisions of (A) any indenture,
mortgage, deed of trust, loan agreement, note, or (B) based upon
certificates by officers of the Company with respect to materiality, any
material lease, license, franchise agreement, Permit, certificate, contract
or other agreement or instrument to which the Company or any Subsidiary is
a party, except, with respect to each of clauses (A) and (B) hereof, for
any such conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect, (ii) the
certificate of incorporation or bylaws of the Company, or (iii) any
existing applicable Federal, New York or Delaware statute, law, rule or
regulation, which are normally applicable to corporations such as the
Company (other than the securities or blue sky laws of the various states,
as to which, in each case, we express no opinion), or any judgment, order
or decree of any court, governmental agency or body or arbitrator
applicable to the Company, its Subsidiaries or any of their respective
properties or assets, except for any such conflict, breach, violation,
default or event would not, individually or in the aggregate, have a
Material Adverse Effect.
(xiv) To the knowledge of such counsel, no consent, approval,
authorization or order of any domestic governmental authority is required
for the issuance and sale
-23-
by the Company of the Units to the Initial Purchaser or the other
transactions contemplated hereby, except such as have previously been
obtained and such as may be required under applicable state securities or
Blue Sky laws, as to which such counsel need express no opinion pursuant to
this clause (xiv).
(xv) Based upon the representations, warranties and agreements of
the Company in Sections 1 and 5 of this Agreement and of the Initial
Purchaser in Section 8 of this Agreement, it is not necessary in connection
with the offer, sale and delivery of the Units to the Initial Purchaser
under this Agreement or in connection with the initial resale of such Units
by the Initial Purchaser in accordance with Section 4 of this Agreement to
register the Units under the Securities Act, it being understood that no
opinion is expressed as to any subsequent resale of any Unit. Prior to the
commencement of the Exchange Offer (as defined in the Registration Rights
Agreement) or the effectiveness of the Shelf Registration Statement (as
defined in the Registration Rights Agreement), the Indenture is not
required to be qualified under the TIA.
(xvi) Neither the consummation of the transactions contemplated
by this Agreement (including, without limitation, any pledge of the capital
stock of any Subsidiary pursuant to the Pledge Agreement) nor the sale,
issuance, execution or delivery of the Units will violate Regulation G, T,
U or X of the Board of Governors of the Federal Reserve System.
(xvii) The Security Agreement creates a valid security interest
for the benefit of the Trustee in all of the Company's right, title and
interest in the Collateral to the extent that a security interest therein
can be created under Article 9 of the UCC, and, to the extent provided in
Section 9-306 of the UCC, all proceeds thereof. Assuming that the
Financing Statements executed by the Company have been filed in the offices
listed in the Security Agreement, the security interests of the Trustee, in
the Collateral, will be perfected security interests to the extent such
security interests can be perfected solely by filing a financing statement
under the UCC.
(xviii) Assuming (a) the continued exclusive possession by the
Trustee pursuant to the Pledge Agreement of stock certificates representing
the capital stock of the Subsidiary Guarantors (the "Pledged Shares")
referred to in the Pledge Agreement, together with stock powers properly
executed in blank with respect thereto and (b) that the Trustee was without
notice of any adverse claim (as such term is used in Section 8-302 of the
UCC) with respect to the Pledged Shares, the Pledge Agreement, together
with the delivery of the certificates representing the Pledged Shares
-24-
thereunder to Trustee, creates in Trustee's favor a perfected security
interest under the UCC in such Pledged Shares. Assuming the Trustee
acquired its interest in such Pledged Shares in good faith and without
notice of any adverse claims and that each such certificate is either in
bearer or registered form issued or endorsed in Agent's name or in blank,
Agent will acquire Agent's security interest in such Pledged Shares free of
adverse claims.
(xix) Each Subsidiary Security Agreement creates a valid security
interest for the benefit of the Trustee in all of the right, title and
interest of the Subsidiary that is a party to such Subsidiary Security
Agreement in such Subsidiary's Collateral to the extent that a security
interest therein can be created under Article 9 of the UCC, and, to the
extent provided in Section 9-306 of the UCC, all proceeds thereof.
Assuming that the Financing Statements executed by the Company and each
Subsidiary Guarantor have been filed in the offices listed in such
Subsidiary Security Agreement, the security interests of the Trustee, in
such Collateral, will be perfected security interests to the extent such
security interests can be perfected solely by filing a financing statement
under the UCC.
(xx) The Escrow Agreement creates a valid perfected security
interest for the benefit of the Collateral Agent in all of the Company's
right, title and interest in the Escrowed Interest Account, including,
without limitation, the Escrow Funds and the Pledged Securities, to the
extent that a security interest therein can be created under Article 8 of
the UCC. Assuming the Collateral Agent acquired its interest in the
Escrowed Interest Account, including, without limitation, the Escrow Funds
and the Pledged Securities, in good faith and without notice of any adverse
claims (as such term is used in Section 8-302 of the UCC), the Collateral
Agent will acquire its security interest in the Escrowed Interest Account,
including, without limitation, the Escrow Funds and the Pledged Securities,
free of adverse claims.
(xxi) Assuming the Collateral Agreements have been duly
authorized, executed and delivered by the Collateral Agent, the Mortgage is
a legal, valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms and creates a valid lien with
respect to the premises described therein subject only to Permitted Liens,
including, without limitation, the lien of the mortgage for the benefit of
XxXxxxxx'x Corporation. In that regard, in the event of foreclosure of the
lien of the Mortgage, the Collateral Agent will be entitled to obtain a
deficiency judgment against the Company for the differences between the
total amount of the obligations secured by the Mortgage and the amount
realized upon foreclosure. The financing statements with respect to the
fixtures,
-25-
attachments and other articles and personal property described in the
Mortgage are in appropriate form, pursuant to the Uniform Commercial Code
in effect in such State (the "UCC") will result in the perfection of the
security interests created by the Mortgage in the fixtures, attachments and
other articles and personal property described in the Mortgage, within the
meaning of the UCC without the necessity of any action by and Person with
respect thereto.
(xxii) Assuming that each Subsidiary Guarantor existing on the
Closing Date (i) is duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and (ii)
has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Subsidiary Guarantee to which it is a
party, the Subsidiary Guarantee to which each existing Subsidiary Guarantor
is a party constitutes the valid and legally binding agreement of such
Subsidiary Guarantor, enforceable in accordance with its terms except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency
(including all laws relating to fraudulent transfer), reorganization,
receivership, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity (whether applied by a court of law or equity) and the discretion of
the court before which any proceeding therefor may be brought.
Such counsel shall also state that it has reviewed and participated in
discussions concerning the preparation of the Final Memorandum with certain
officers or employees of the Company, with its counsel and its auditors, and
with representatives of the Initial Purchaser and their counsel. The
limitations inherent in the independent verification of factual matters and in
the role of outside counsel are such, however, that such counsel will not assume
any responsibility for the accuracy, completeness or fairness of any of the
statements made in the Final Memorandum except as set forth in subparagraph (xi)
of this Section 7(a). Such counsel shall advise the Initial Purchaser that,
subject to the limitations set forth above, on the basis of the information such
counsel gained in the course of performing the services referred to above, (i)
no facts came to such counsel's attention which gave such counsel reason to
believe that the Final Memorandum (other than the financial statements and
related notes thereto and the other financial, statistical, and other accounting
data (including projections) contained in the Final Memorandum or omitted
therefrom, as to which such counsel expresses no view), as of its date or the
Closing Date, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. In rendering such opinion, such counsel may (i) rely with respect
to
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matters of fact upon the representations and warranties of the Company and its
Subsidiaries set forth herein, upon certificates of officers of the Company and
its Subsidiaries and upon information obtained from public officials, (ii)
assume that all documents submitted to such counsel as originals are authentic,
that all copies submitted to such counsel conform to the originals thereof, and
that the signatures on all documents examined by such counsel are genuine, (iii)
state that such counsel's opinion is limited to the federal law of the United
States and the laws of the State of New York and the General Corporation Law of
the State of Delaware, (iv) if, on the Closing Date the Confirmation Order has
not become a Final Order and the Approved Plan has not become Effective, assume
for purposes of this opinion that the Confirmation Order has become a Final
Order and the Approved Plan has become Effective and (v) may make such other
assumptions and qualifications as may be reasonably acceptable to the Initial
Purchaser. The opinion of Xxxxxxxx & Xxxxxxxx described in this subsection (a)
shall be rendered at the request of the Company to, and may be relied upon
solely by, the Initial Purchaser and shall so state therein.
References to the Final Memorandum in this subsection (a) shall include any
amendment or supplement thereto prepared in accordance with the provisions of
this Agreement at the Closing Date.
(b) On the Closing Date, the Initial Purchaser shall have received
the opinion, in form and substance satisfactory to the Initial Purchaser, dated
as of the Closing Date and addressed to the Initial Purchaser, of Xxxxxxxx Kill
& Olick P.C., counsel for the Initial Purchaser, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchaser may require. In rendering such opinion, Xxxxxxxx Kill & Olick P.C.
shall have received and may rely upon such certificates and other documents and
information as it may reasonably request to pass upon such matters.
(c) The Initial Purchaser shall have received from the Independent
Accountants a comfort letter dated the date hereof, in form and substance
satisfactory to the Initial Purchaser, to the effect set forth in Exhibit C
hereto.
(d) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects on and as of
the date hereof and on and as of the Closing Date as if made on and as of the
Closing Date (except for the representations and warranties which were true and
correct as of a certain specified date which shall continue to be true and
correct as of such date); the statements of the Company's officers made pursuant
to any certificate delivered in accordance with the provisions hereof shall be
true and correct in all material respects on and as of the date made and on and
as of the Closing Date; the Company shall have complied in all material respects
with all agreements and satisfied all
-27-
conditions to be performed or satisfied hereunder at or prior to the Closing
Date; and, except as described in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), subsequent to the date
of the most recent financial statements in such Final Memorandum, there shall
have been no development that, singly or in the aggregate, is reasonably likely
to have a Material Adverse Effect.
(e) The sale of the Units hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(f) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), other than as described in such Final Memorandum or contemplated
hereby, neither the Company nor any Subsidiary shall have incurred any
liabilities or obligations, direct or contingent not in the ordinary course of
business that are material to the Company and its Subsidiaries, taken as a
whole, or entered into any transactions not in the ordinary course of business
that are material to the business, condition (financial or other) or results of
operations or prospects of the Company, taken as a whole, and there shall not
have been any adverse change in the capital stock or long-term indebtedness of
the Company or any Subsidiary that is material to the business, condition
(financial or other) or results of operations or prospects of the Company and
the Subsidiaries, taken as a whole.
(g) Subsequent to the date of the most recent financial statements in
the Final Memorandum and except as stated therein (exclusive of any amendment or
supplement thereto after the date hereof), the conduct of the business and
operations of the Company shall not have been interfered with by strike, fire,
flood, hurricane, accident or other calamity (whether or not insured) or by any
court or governmental action, order or decree, and the properties of the Company
shall not have sustained any loss or damage (whether or not insured) as a result
of any such occurrence, except any such interference, loss or damage which would
not, individually or in the aggregate, have a Material Adverse Effect.
(h) The Initial Purchaser shall have received certificates of the
Company, dated the Closing Date, signed on behalf of the Company by the Chairman
of the Board, President or Chief Executive Officer and their Chief Financial
Officer, to the effect that:
(i) the representations and warranties of the Company and its
Subsidiaries contained in this Agreement are true and correct in all
material respects as of the date hereof and as of the Closing Date (except
for the representations and warranties which were true and correct as of a
certain specified date which shall continue to be true and correct as of
such date), and the Company and its
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Subsidiaries have performed all covenants and agreements and satisfied
hereunder all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date;
(ii) at the Closing Date, since the date hereof or since the date
of the most recent financial statements in the Final Memorandum (exclusive
of any amendment or supplement thereto after the date hereof), no event or
events have occurred, no information has become known nor does any
condition exist that, individually or the aggregate, would have a Material
Adverse Effect;
(iii) since the date hereof or since the date of the most recent
financial statements in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), other than as described in the
Final Memorandum or contemplated hereby, neither the Company nor any
Subsidiary has incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, that are material to
the Company and its Subsidiaries, taken as a whole, or entered into any
transactions not in the ordinary course of business that are material to
the business, condition (financial or otherwise) or results of operations
or prospects of the Company and its Subsidiaries, taken as a whole, and
there has not been any change in the capital stock or long-term
indebtedness of the Company or any Subsidiary that is material to the
business, condition (financial or other) or results of operations or
prospects of the Company and its Subsidiaries, taken as a whole; and
(iv) the sale of the Units hereunder has not been enjoined
(temporarily or permanently).
(i) On the Closing Date, the Initial Purchaser shall have received
the Registration Rights Agreement executed by the Company and such agreement
shall be in full force and effect at all times from and after the Closing Date.
(j) On the Closing Date, the Initial Purchaser shall have received
an opinion of counsel, in form and substance satisfactory to the Initial
Purchaser, to the effect that each Subsidiary Guarantor existing on the Closing
Date (i) is duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Final Memorandum and (ii) has all requisite
corporate power and authority to execute, deliver and perform its obligations
under the Subsidiary Guarantee to which it is a party.
(k) The directors and executive officers of the Company who are
holders of outstanding shares of or securities
-29-
exercisable or exchangeable for or convertible into shares of capital stock of
the Company and the principal holders of the Company's Series A Convertible
Preferred Stock shall have entered into a written agreement with the Initial
Purchaser in the form of Exhibit D hereto (each such agreement a "Lock-up
Agreement"), and executed originals of each Lock-up Agreement shall have been
delivered to you.
(l) The Company shall have entered into an employment agreement with
Xxxxx X. Xxxxxxxxx as chief executive officer for a term of no less than three
years, which agreement shall be effective on the Closing Date and otherwise on
terms and in a form reasonably satisfactory to the Initial Purchaser.
(m) On the Closing Date, the Company's issuance and sale of its Series
A Convertible Preferred Stock shall have been consummated in the manner set
forth in the Final Memorandum.
(n) On the Closing Date, no notice of appeal of the Confirmation
Order shall have been timely filed by a person or entity that had objected to
the Proposed Plan or the Approved Plan to the United States District Court for
the District of Delaware or to the bankruptcy appellate panel for the circuit in
which the District of Delaware is situated, which shall be pending as of the
Closing Date and either (i) seeks the nonconsummation of such Plan or any
portion of such Plan which is material to the effectiveness of such Plan as a
whole, or (ii) could reasonably be expected to have a Material Adverse Effect.
(o) Unless the parties have agreed in accordance with Section 3 above
that the Closing Date shall occur prior to the date on which the Approved Plan
has become Effective, the Approved Plan shall have become Effective and the
Confirmation Order shall have become a Final Order.
On or before the Closing Date, the Initial Purchaser and counsel for
the Initial Purchaser shall each have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and its subsidiaries as
they shall have heretofore reasonably requested from the Company and its
Subsidiaries.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provision
hereof only if they are reasonably satisfactory in all respects to the Initial
Purchaser and counsel for the Initial Purchaser. The Company shall furnish to
the Initial Purchaser such conformed copies of such documents, opinions,
certificates, letters, schedules and instruments in such quantities as the
Initial Purchaser shall reasonably request.
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8. REPRESENTATIONS AND WARRANTIES BY THE INITIAL PURCHASER. The Initial
Purchaser represents and warrants (as to itself only) that it is a QIB with such
knowledge and experience in financial and business matters as are necessary in
order to evaluate the merits and risks of an investment in the Units. The
Initial Purchaser agrees with the Company (as to itself only) that (a) it has
not and will not solicit offers for, or offer or sell, the Securities by any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Act and the rules and regulations promulgated
thereunder, and (b) it has and will solicit offers for the Units only from, and
will offer and sell the Securities only to (A) in the case of offers inside the
United States, (i) persons whom the Initial Purchaser reasonably believes to be
QIBs or, if any such person is buying for one or more institutional accounts for
which such person is acting as fiduciary or agent, only when such person has
represented to the Initial Purchaser that each such account is a QIB, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, and, in each case, in transactions under Rule 144A or (ii) a limited
number of other institutional investors reasonably believed by the Initial
Purchaser to be Accredited Investors that, prior to their purchase of the
Securities, deliver to the Initial Purchaser a letter containing the
representations and agreements set forth in Appendix A to the Final Memorandum
and (B) in the case of offers outside the United States, persons other than U.S.
persons ("foreign purchaser"), which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust); provided,
however, that, in the case of this clause (b), in purchasing such Securities,
such persons are deemed to have represented and agreed as provided under the
caption "Notice to Investors" contained in the Final Memorandum. The Initial
Purchaser acknowledges and agrees that, except as permitted by this Agreement,
it will not offer, sell or deliver any Units (a) as part of the distribution at
any time. The Initial Purchaser acknowledges and agrees that it will not offer,
sell or deliver any Securities in any jurisdiction outside of the United States,
its territories or possessions except under circumstances that will result in
compliance with the provisions of Regulation S under the Act and the applicable
laws of such jurisdiction.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless the Initial Purchaser, 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, against any losses, claims, damages or liabilities to which
the Initial Purchaser or such controlling person may become subject under the
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
-31-
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto;
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto, a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or
(iii) any breach by the Company or any of its Subsidiaries of their
respective representations, warranties and agreements set forth in
subsection (t), (ee), (ff), (gg), (hh), (ii), (jj) or (ll) of Section 2;
and, subject to the provisions hereof, will reimburse, as incurred, the Initial
Purchaser and each such controlling person for any legal or other expenses
reasonably incurred by the Initial Purchaser or such controlling person in
connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action in
respect thereof; provided, however, the Company will not be liable in any such
case to the extent (but only to the extent) that any such loss, claim, damage or
liability is finally judicially determined by a court of competent jurisdiction
in a final, unappealable judgment, to have resulted primarily from any untrue
statement or alleged untrue statement or omission or alleged omission made in
any Memorandum or any amendment or supplement thereto in reliance upon and in
conformity with written information concerning the Initial Purchaser furnished
to the Company by the Initial Purchaser specifically for use therein. This
indemnity agreement will be in addition to any liability that the Company may
otherwise have to the indemnifiable parties. The Company shall not be liable
under this Section 9 for any settlement of any claim or action effected without
its prior written consent, which shall not be unreasonably withheld; and
provided further, however, that this indemnity, as to the Preliminary
Memorandum, shall not inure to the benefit of the Initial Purchaser (or any
person controlling such Initial Purchaser) on account of any loss, claim, damage
or liability arising from the sale of Units to any person by such Initial
Purchaser if such Initial Purchaser failed to send or give a copy of the Final
Memorandum (as the same may be supplemented or amended) to such person at or
prior to the written confirmation of the sale of the Securities to such person,
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact in such Preliminary Memorandum was corrected in the
Final Memorandum, unless such failure resulted from noncompliance by the Company
with Section 5(c).
(b) The Initial Purchaser agrees to indemnify and hold harmless each
of the Company, its directors, officers and each person, if any, who controls
the Company within the meaning of
-32-
Section 15 of the Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which the Company or any such director,
officer or controlling person may become subject under the Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) are finally judicially determined by a court of competent
jurisdiction in a final, unappealable judgment, to have resulted solely from (i)
any untrue statement or alleged untrue statement of any material fact contained
in any Memorandum or any amendment or supplement thereto, (ii) the omission or
the alleged omission to state therein a material fact required to be stated in
any Memorandum or any amendment or supplement thereto or necessary to make the
statements therein not misleading, in each case to the extent, (but only to the
extent) that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information concerning such Initial Purchaser, furnished to the Company by the
Initial Purchaser specifically for use therein; and, subject to the limitation
set forth immediately preceding this clause, will reimburse, as incurred, any
legal or other expenses incurred by the Company or any such director, officer or
controlling person in connection with any such loss, claim, damage, liability or
action in respect thereof. This indemnity agreement will be in addition to any
liability that the Initial Purchaser may otherwise have to the indemnified
parties.
(c) As promptly as reasonably practical after receipt by an
indemnified party under this Section 9 of notice of the commencement of any
action for which such indemnified party is entitled to indemnification under
this Section 9, such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 9, notify the
indemnifying party of the commencement thereof in writing; but the omission to
so notify the indemnifying party (i) will not relieve such indemnifying party
from any liability under paragraph (a) or (b) above unless and to the extent it
is not materially prejudiced as a result thereof and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraphs (a) and
(b) above. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may determine, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the
-33-
indemnifying party, or (iii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after receipt by the indemnifying
party of notice of the institution of such action, then, in each such case, the
indemnifying party shall not have the right to direct the defense of such action
on behalf of such indemnified party or parties and such indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf of such indemnified party or parties at the expense of the indemnifying
party. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser in the case of
paragraph (a) of this Section 9 or the Company in the case of paragraph (b) of
this Section 9, representing the indemnified parties under such paragraph (a) or
paragraph (b), as the case may be, who are parties to such action or actions) or
(ii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party. After such
notice from the indemnifying party to such indemnified party, the indemnifying
party will not be liable for the costs and expenses of any settlement of such
action effected by such indemnified party without the prior written consent of
the indemnifying party (which consent shall not be unreasonably withheld),
unless such indemnified party waived in writing its rights under this Section 9,
in which case the indemnified party may effect such a settlement without such
consent.
(d) No indemnifying party shall be liable under this Section 9 for
any settlement of any claim or action (or threatened claim or action) effected
without its written consent, which shall not be unreasonably withheld, but if a
claim or action settled with its written consent, or if there be a final
judgment for the plaintiff with respect to any such claim or action, each
indemnifying party jointly and severally agrees, subject to the exceptions and
limitation set forth above, to indemnify and hold harmless each indemnified
party from and against any and all losses, claims, damages or liabilities (and
legal and other expenses as set forth above) incurred by reason of such
settlement or judgment. No indemnifying party shall,
-34-
without the prior written consent of the indemnified party, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which the indemnified party is or could have been a party, or indemnity could
have been sought hereunder by the indemnified party, unless such settlement (A)
includes an unconditional written release of the indemnified party, in form and
substance satisfactory to the indemnified party, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of the indemnified party.
(e) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contributions, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the foregoing
clause (i) is not permitted by applicable law, not only such relative benefits
but also the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
benefits received by the Company on the one hand and the Initial Purchaser on
the other shall be deemed to be in the same proportion as the total proceeds
from the offering (before deducting expenses) received by the Company bear to
the total discounts and commissions received by such Initial Purchaser. The
relative fault of the parties 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 such Initial Purchaser on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission or alleged statement or
omissions, and any other equitable considerations appropriate in the
circumstances.
(f) The Company and the Initial Purchaser agree that it would not be
equitable if the amount of such contribution determined pursuant to paragraph
(e) were determined by pro rata or per capita allocation or by any other method
of allocation that does not take into account the equitable considerations
referred to in the first sentence of the immediately preceding paragraph (e).
Notwithstanding any other provision of the immediately preceding paragraph (e),
the Initial Purchaser shall
-35-
not be obligated to make contributions hereunder that in the aggregate exceed
the total discounts, commissions and other compensation received by such Initial
Purchaser under this Agreement, less the aggregate amount of any damages that
such Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of the immediately preceding paragraph (d), 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 shall have the same rights to contribution as the
Initial Purchaser, and each director of the Company, each officer of the Company
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company.
10. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company and its
officers and the Initial Purchaser set forth in this Agreement or made by or on
behalf of them pursuant to this Agreement shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company and its
Subsidiaries, any of their respective officers or directors, the Initial
Purchaser or any controlling person referred to in Section 9 hereof and shall
survive delivery of and payment for the Units. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9 and 14
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchaser by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
(i) the Company shall have sustained any loss or interference
with respect to its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any strike, labor dispute, slow down or work stoppage or any legal or
governmental proceeding, which loss or interference, in the sole judgment
of the Initial Purchaser, has had or has a Material Adverse Effect or there
shall have been, in the sole judgment of the Initial Purchaser, any event
or development involving or reasonably likely to cause or result in a
Material Adverse Effect (including without limitation a change in
management or control of the Company), except in each case as described in
the Final
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Memorandum (exclusive of any amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the NASDAQ National Market shall have
been suspended or minimum or maximum prices shall have been established on
any such exchange or market;
(iii)a banking moratorium shall have been declared by New York or
United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity
or emergency, or (C) any material change in the financial markets of the
United States which, in the case of clause (A), (B) or (C) and in the sole
judgment of the Initial Purchaser, makes it impracticable or inadvisable to
proceed with the private offering or the delivery of the Units as
contemplated by the Final Memorandum.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASER. The statements set
forth in the last paragraph on the front cover page, the first and second
sentence of the third paragraph on page i (to the extent such statements relate
to the Initial Purchaser), and in the first, fourth and sixth paragraphs under
the heading "Plan of Distribution" in the Memorandum (to the extent such
statements relate to the Initial Purchaser) constitute the only information
furnished by the Initial Purchaser to the Company or its Subsidiaries for the
purposes of Sections 2(a) and 9 hereof.
13. NOTICES. All communications hereunder shall be in writing and, if
sent to the Initial Purchaser, shall be mailed or delivered or telecopied and
confirmed in writing to (i) Xxxxxxxxx & Company, Inc., 000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxxxx, Telecopy No.
(000) 000-0000; with a copy to Xxxxxxxx Kill & Olick P.C., 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxxx X. Xxxxx, Esq. and if sent
to the Company, shall be mailed or delivered or telecopied and confirmed in
writing to it at 000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000,
Attention: Chief Financial Officer, Telecopy No. (000) 000-0000; with a copy to
Shearman & Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxxxx X. Xxxxx, Esq., Telecopy No. (000) 000-0000.
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All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the United States mail, postage prepaid, if mailed; one
business day after being timely delivered to a next-day air courier; and when
receipt is acknowledged by the addressed, if telecopied.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchaser, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control the Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchaser contained in Section 9 of this Agreement
shall also be for the benefit of the directors of the Company their respective
officers and any person or persons who control the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of
Securities from the Initial Purchaser will be deemed a successor because of such
purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY THEREIN.
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement among the Company and the
Initial Purchaser.
* * * * *
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Very truly yours,
DISCOVERY ZONE, INC.
By: /s/ Xxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer and President
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above written.
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Executive Vice President
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