XXXXX & LORD, INC.
$300,000,000
9 1/8% SENIOR SUBORDINATED NOTES DUE 2008
NOTE PURCHASE AGREEMENT
FEBRUARY 19, 1998
First Union Capital Markets
000 Xxxxx Xxxxxxx Xxxxxx, XX-00
Xxxxxxxxx, XX 00000-0000
Ladies and Gentlemen:
Xxxxx & Lord, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell (the "Initial Placement") to First Union Capital
Markets, a division of Wheat First Securities, Inc. (the "Initial Purchaser"),
$300,000,000 principal amount of its 9 1/8% Senior Subordinated Notes Due 2008
(the "Notes"). The Notes will be unconditionally guaranteed (the "Note
Guarantees"), on an unsecured senior subordinated basis, by Xxxxx & Lord
Industries, Inc., a Delaware corporation ("Industries"), G&L Service Company,
North America, Inc., a Delaware corporation ("Service Company"), Swift Textiles,
Inc., a Delaware corporation ("Textiles"), and Swift Denim Services, Inc., a
Delaware corporation ("Swift Denim") (collectively, the "Guarantors"). The Notes
and the Note Guarantees are to be issued under an indenture (the "Indenture") to
be dated as of the Closing Date (as defined below) among the Company, the
Guarantors and SunTrust Bank, Atlanta, as trustee (the "Trustee"). This
Agreement, the registration rights agreement, to be dated the Closing Date,
between the Initial Purchaser and the Company (the "Registration Rights
Agreement"), the Notes, the Note Guarantees and the Indenture are hereinafter
collectively referred to as the "Transaction Documents" and the transactions
contemplated therein the "Transactions."
The sale of the Notes to the Initial Purchaser will be made
without registration of the Notes under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon certain exemptions from the
registration requirements of the Securities Act. You have advised the Company
that you will offer and sell the Notes purchased by you hereunder in accordance
with Section 4 hereof as soon as you deem advisable.
In connection with the sale of the Notes, the Company and the
Guarantors have prepared a preliminary offering memorandum, dated February 2,
1998 (the "Preliminary
Memorandum"), and a final offering memorandum, dated February 19, 1998 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum
sets forth certain information concerning the Company, the Guarantors and the
Transaction Documents. Each of the Company and the Guarantors hereby confirms
that it has authorized the use of the Preliminary Memorandum and the Final
Memorandum, and any amendment or supplement thereto, in connection with the
offer and sale of the Notes by the Initial Purchaser. Unless stated to the
contrary, all references herein to the Final Memorandum are to the Final
Memorandum at the Execution Time (as defined below) and are not meant to include
any amendment or supplement, or any information incorporated by reference
therein, subsequent to the Execution Time.
Capitalized terms used herein but not defined have the meaning
ascribed to them in the Indenture.
1. Representations and Warranties. The Company and the
Guarantors jointly and severally represent and warrant to the Initial Purchaser
the following:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Final
Memorandum, at the date hereof, does not and at the Closing Date will
not (and any amendment or supplement thereto, at the date thereof and
at the Closing Date, will not), contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Company and the
Guarantors make no representation or warranty as to the information
contained in or omitted from the Preliminary Memorandum or the Final
Memorandum, or any amendment or supplement thereto, with respect to the
Initial Purchaser provided by the Initial Purchaser to the Company or
the Guarantors specifically for inclusion therein.
(b) No holder of securities of the Company or the Guarantors
will be entitled to have such securities registered under any
registration statement required to be filed by the Company and the
Guarantors pursuant to the Registration Rights Agreement other than as
expressly permitted thereby.
(c) None of the Company, the Guarantors or any of their
Affiliates (as defined in Rule 501(b) of Regulation D under the
Securities Act ("Regulation D")), nor any person acting on their behalf
(other than the Initial Purchaser or any of its Affiliates, as to whom
the Company and the Guarantors make no representation or warranty) has,
directly or indirectly, made offers or sales of any security, or
solicited offers to buy any security, under circumstances that would
require the registration of the Notes or the Note Guarantees under the
Securities Act.
(d) None of the Company, the Guarantors, or any of their
Affiliates, has directly or indirectly engaged in any form of general
solicitation or general advertising (within the meaning of Regulation
D) in connection with any offer or sale of the Notes.
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(e) None of the Company, the Guarantors, any of their
Affiliates or any person acting on their behalf (other than the Initial
Purchaser or any of its Affiliates, as to whom the Company makes no
representation or warranty) has, directly or indirectly, (i) taken any
action designed to cause or result in, or that has constituted or that
might reasonably be expected to constitute, stabilization or
manipulation of the price of any security of the Company or the
Guarantors to facilitate the sale or resale of the Notes; or (ii) paid
or agreed to pay to any person any compensation for soliciting another
to purchase any securities of the Company or the Guarantors (except as
contemplated by this Agreement).
(f) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(g) None of the Company, the Guarantors, any of their
Affiliates or any person acting on their behalf (other than the Initial
Purchaser or any Affiliate of the Initial Purchaser, as to which no
representation is made) has, directly or indirectly, engaged in any
directed selling efforts (as that term is defined in Regulation S under
the Securities Act ("Regulation S")) with respect to the Notes; and the
Company, the Guarantors and their Affiliates and any person acting on
their behalf (other than the Initial Purchaser or any Affiliate of the
Initial Purchaser, as to which no representation is made) have complied
with the offering restrictions requirement of Regulation S.
(h) It is not necessary in connection with the offer, sale and
delivery of the Notes in the manner contemplated by this Agreement and
the Final Memorandum to register the Notes under the Securities Act or
to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(i) Each of the Company and its Subsidiaries is a corporation
duly organized and existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and its Subsidiaries
has the corporate power and authority to own and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted in the Final Memorandum and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which it is
doing business, except where failure to be so qualified or in good
standing, singly or in the aggregate, has not had and will not have a
Material Adverse Effect. (As used herein, "Material Adverse Effect"
means (i) a material adverse effect upon the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries, taken as a whole, whether before or
after giving effect to the Transactions or (ii) a material impairment
of the ability of the Company and its Subsidiaries, taken as a whole,
to perform, or the material impairment of the ability of the Trustee
and the holders of the Notes (the "Holders") to enforce, any
obligations under the Transaction Documents.)
(j) All of the outstanding shares of Capital Stock of the
Company have been duly authorized and validly issued and are fully paid
and nonassessable. Schedule A hereto lists (i) each wholly owned
Subsidiary of the Company (including each Guarantor) along with its
jurisdiction of incorporation; and (ii) each other Subsidiary or Joint
Venture of
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the Company and, in the case of each such Subsidiary or Joint Venture,
the jurisdiction of incorporation, the title and amount of Capital
Stock outstanding and the amount of all such Capital Stock owned by the
Company expressed both in terms of the number of shares and as a
percentage of all Capital Stock in such shares' class outstanding. Each
Subsidiary of the Company does not and will not on the Closing Date
have outstanding any (i) securities convertible or exchangeable for its
Capital Stock, (ii) rights to subscribe for or to purchase any of its
Capital Stock or (iii) options providing for the purchase of,
agreements providing for the issuance (contingent or otherwise) of, or
any calls, commitments or claims of any character relating to, its
Capital Stock. All of the Capital Stock of each wholly owned Subsidiary
and the Capital Stock owned by the Company of each non-wholly owned
Subsidiary and Joint Venture as shown on Schedule A is beneficially
owned by the Company, directly or indirectly, free and clear of all
liens other than liens granted to secure the loan contemplated by the
credit agreement dated as of December 19, 1997, among Industries, as
borrower, the Company and certain subsidiaries of the Company as
guarantors, the lenders names therein, and the First Union National
Bank of North Carolina as agent, as amended by the Amended and Restated
Senior Credit Facility dated January 29, 1998 among the Company, the
Guarantors and First Union National Bank (the "Senior Credit
Facility").
(k) Each of the Company and the Guarantors has the corporate
power and requisite authority to execute, deliver and carry out the
terms and provisions of the Transaction Documents and has taken all
necessary corporate action to authorize the execution, delivery and
performance of the Transaction Documents and the Exchange Notes.
(l) Each of the Transaction Documents and each other document
or instrument to be delivered in connection therewith has been duly
authorized; each of the Transaction Documents and each other document
or instrument to be delivered in connection therewith to be executed
and delivered on or prior to the date hereof has been duly executed and
delivered by each of the Company and the Guarantors that are a party
thereto; and each of the Transaction Documents and each other document
or instrument to be delivered in connection therewith to be executed
and delivered on or prior to the date hereof is, and each of the
Transaction Documents and each other document or instrument to be
delivered in connection therewith to be executed and delivered after
the Closing Date will be, upon such execution and delivery, the legal,
valid and binding obligations of the Company and each of the Guarantors
(to the extent a party thereto), enforceable in accordance with their
respective terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally
("Bankruptcy Law") or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law) ("Equity").
(m) The issuance, offering and sale of the Notes to the
Initial Purchaser by the Company pursuant to this Agreement and the
compliance by the Company and the Guarantors with the other provisions
of this Agreement; the execution, delivery and
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performance of the Transaction Documents and each other document and
instrument to be executed, delivered or performed by the Company and
the Guarantors in connection with the Transactions; and the
consummation of each of the transactions herein or therein contemplated
and, the compliance with each of the terms and provisions hereof or
thereof, do not and will not (i) violate any statute, law, ordinance,
regulation, rule, order, judgment, writ, injunction or decree of any
state, commonwealth, nation, territory, possession, province, county,
parish, township, village, municipality or other jurisdiction (singly,
"Law," and collectively, the "Laws") applicable to any of the Company
and the Guarantors, the charter or bylaws of any of them or any
judgment, order, writ or decree of any government, any arbitration
panel, any court or any governmental department, commission, board,
bureau, agency, authority or instrumentality of any state, province,
commonwealth, nation, territory, possession, county, parish, town,
township, village or municipality, whether now or hereafter constituted
and/or existing ("Tribunal") binding on any of them, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any contractual obligation of any of the
Company and the Guarantors, (iii) result in or require the creation or
imposition of any lien upon any of the properties or assets of any of
the Company and the Guarantors (other than any liens created under the
Senior Credit Facility) or (iv) require any approval of stockholders or
any approval or consent of any person under any contractual obligation
of any of the Company and the Guarantors except for such approvals or
consents which have been obtained and disclosed in writing to the
Initial Purchaser.
(n) No consent, approval, authorization or order of any
Tribunal or other person is required in connection with the execution
and delivery by the Company or the Guarantors of the Transaction
Documents or any other document or instrument to be delivered in
connection with the Transactions or the consummation of the
transactions contemplated hereby or thereby, other than any such
consent, approval, authorization or order which has been obtained and
remains in full force and effect or which has been waived in writing by
the Initial Purchaser or such as may be required under applicable state
securities or Blue Sky laws.
(o) The audited financial statements (including the notes
thereto) of each of the Company and the Acquired Business (as that term
is defined in the Final Memorandum) included in the Final Memorandum
comply as to form in all material respects with the requirements
applicable to registration statements on Form S-1 under the Securities
Act and fairly present in all material respects the consolidated
financial position of each of the Company and the Acquired Business and
the results of operations and cash flow thereof as of the dates and
periods therein specified. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved. Since the date of
the most recent financial statements included in the Final Memorandum,
except as described therein, (i) none of the Company or any of its
Subsidiaries 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
which liabilities, obligations, transactions or contracts would,
individually or in the aggregate, have a
5
Material Adverse Effect, (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 and (iii)
there has not been any material change in the long-term indebtedness of
the Company or any of its Subsidiaries. The unaudited pro forma
financial statements of the Company included in the Final Memorandum
comply as to form in all material respects with the requirements of the
Securities Act; the pro forma adjustments have been properly applied to
the historical amounts in the compilation of such pro forma statements;
the assumptions described in the notes to such pro forma statements
provide a reasonable basis for presenting the significant direct
effects of the transactions contemplated therein; and such pro forma
adjustments give appropriate effect to those adjustments, in each case,
in accordance with Regulation S-X under the Securities Act ("Regulation
S-X").
(p) Each of the Company and its Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(q) The Company is not now, and after giving effect to the
issuance of the Notes, the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions
contemplated thereby, will not be (i) insolvent, (ii) left with
unreasonably small capital with which to engage in its anticipated
businesses or (iii) incurring debts beyond its ability to pay such
debts as they become due. The Company is not in liquidation,
administration or receivership nor has any petition been presented for
the winding-up of the Company.
(r) The Company and each of its Subsidiaries has, and after
consummation of the Transactions will have, good, sufficient and legal
title to all their respective properties and assets, and all properties
held under lease by any of them, are, and immediately after the
consummation of the Transactions will be, held under valid, subsisting
and enforceable leases, and none of the Company or any of its
Subsidiaries and, to the knowledge of the Company, any other party
thereto, is in default under any lease, except in each case for such
defects or defaults that, singly or in the aggregate, would not have a
Material Adverse Effect. All such properties and assets owned or leased
are so owned or leased free and clear of liens other than liens
permitted under clauses (i) through (xii) and (xiv) of the definition
of "Permitted Liens" set forth in the Final Memorandum and liens
existing on the date hereof set forth in Schedule B hereto.
(s) None of the Company or any of its Subsidiaries is in
violation of its charter, by-laws or other organizational documents,
and no default or event that but for the giving
6
of notice or the lapse of time, or both, would constitute a default on
the part of the Company or any of its Subsidiaries exists under any
contractual obligation which would have a Material Adverse Effect.
(t) There is no litigation pending or, to the best knowledge
of the Company after due investigation, threatened, by, against, or
which may relate to or affect (a) any benefit plan or any fiduciary or
administrator thereof, (b) the Transactions or (c) the Company or any
of its Subsidiaries, which singly or in the aggregate, could reasonably
be expected to have a Material Adverse Effect. There are no outstanding
injunctions or restraining orders prohibiting consummation of any of
the Transactions or any other transactions contemplated in connection
therewith. Neither the Company nor any of its Subsidiaries is in
default with respect to any judgment, order, writ, injunction or decree
of any Tribunal, and there are no unsatisfied judgments against the
Company or any of its Subsidiaries or their respective businesses or
properties. None of the Company or any of its Subsidiaries has been
advised that there is a reasonable likelihood of an adverse
determination of any litigation which adverse determination, should it
occur, would have a Material Adverse Effect.
(u) The proceeds from the issuance and sale of the Notes will
be used solely for the purposes specified in the Final Memorandum. None
of the issuance or sale of the Notes, the application of the proceeds
therefrom, or the consummation of the Transactions or any of the other
transactions contemplated thereby will violate Regulations G, T, U, or
X of the Board of Governors of the Federal Reserve System.
(v) All material tax returns, foreign and domestic, required
to be filed by the Company and each of its Subsidiaries in any
jurisdiction have been filed, and all material taxes for which they are
directly or indirectly liable or to which any of their respective
properties or assets are subject have been paid prior to the time that
such taxes could give rise to a lien thereon other than taxes being
contested in good faith and for which adequate reserves have been
established in accordance with GAAP. There is no material proposed tax
assessment against the Company or any of its Subsidiaries, and, to the
best knowledge of the Company, there is no basis for such assessment,
except for contested claims.
(w) (A) Except as set forth on Schedule C, no ERISA Events
have occurred or are reasonably expected to occur which individually or
in the aggregate resulted in or might reasonably be expected to result
in a liability of the Company or any of its Subsidiaries or any of
their respective ERISA Affiliates which would reasonably be expected to
have a Material Adverse Effect.
(B) In accordance with the most recent actuarial
valuations, the Amount of Unfunded Benefit Liabilities
individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans
which have a negative Amount of Unfunded Benefit Liabilities),
is not an amount which would reasonably be expected to have a
Material Adverse Effect.
7
(C) Neither the Company nor any of its Subsidiaries
has incurred or is reasonably expected to incur any liability
with respect to any Foreign Plan or Foreign Plans which
individually or in the aggregate has or would reasonably be
expected to have a Material Adverse Effect.
As used herein, the following terms shall have the respective
meaning ascribed to each below:
"Amount of Unfunded Benefit Liability" means, with respect to
any Pension Plan, (i) if set forth on the most recent actuarial valuation report
with respect to such Pension Plan, the amount of unfunded benefit liabilities
(as defined in Section 4001(a)(18) of ERISA) and (ii) otherwise, the excess of
(a) the greater of the current liability (as defined in Section 412(1)(7) of the
Internal Revenue Code) or the actuarial present value of the accrued benefits
with respect to such Pension Plan over (b) the market value of the assets of
such Pension Plan.
"Employee Pension Benefit Plan" means any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (i) which is, or, at any time
within the five calendar years immediately preceding the date hereof, was at any
time, sponsored, maintained or contributed to by the Company or its Subsidiaries
or any of their respective ERISA Affiliates or (ii) with respect to which any of
the Company or its Subsidiaries retains any liability, including any potential
joint and several liability as a result of an affiliation with an ERISA
Affiliate or a party that would be an ERISA Affiliate except for the fact the
affiliation ceased more than five calendar years prior to the date hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder and any successor statute, regulations and rulings.
"ERISA Affiliate," as applied to any person, means (i) any
corporation which is, or was at any time within the five calendar years
immediately preceding the date hereof, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; (ii) any trade or business
(whether or not incorporated) which is, or was at any time within the five
calendar years immediately preceding the date hereof, a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Internal Revenue Code of which that person is, or was at any time within
the five calendar years immediately preceding the date hereof, a member; and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Internal Revenue Code of which that person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is, or was at any time within the five calendar years immediately
preceding the date hereof, a member.
"ERISA Event" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal
8
Revenue Code with respect to any Pension Plan (whether or not waived) or the
failure to make any required contribution within 30 days of its due date with
respect to any Multiemployer Plan; (iii) the provision by the administrator of
any Pension Plan pursuant to Section 4041 (a) (2) of ERISA of a notice of intent
to terminate such plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the withdrawal by the Company or any of its Subsidiaries or any of
their respective ERISA Affiliates from any Multiple Employer Plan or the
termination of any such Multiple Employer Plan resulting in liability pursuant
to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which might reasonably be expected to constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (vi) the imposition of liability on the Company or any of its
Subsidiaries or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA; (vii) the withdrawal by the Company or any of its Subsidiaries or any of
their respective ERISA Affiliates in a complete or partial withdrawal (within
the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if
there is any potential liability therefor, or the receipt by the Company or any
of its Subsidiaries or any of their respective ERISA Affiliates of notice from
any Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated
under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or
omission which could reasonably be expected to give rise to the imposition on
the Company or any of its Subsidiaries or any of their respective ERISA
Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the
Internal Revenue Code or under Section 406, 409 or 502(i) or (1) of ERISA in
respect of any Employee Benefit Pension Plan; (ix) receipt from the Internal
Revenue Service of notice of the failure of any Pension Plan (or any other
Employee Pension Benefit Plan intended to be qualified under Section 401(a) of
the Internal Revenue Code) to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension Plan or
Employee Pension Benefit Plan to qualify for exemption from taxation under
Section 501(a) of the Internal Revenue Code; or (x) the imposition of a lien
pursuant to Section 401(a) (29) or 412(n) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan. Notwithstanding anything to
the contrary contained herein, the imposition of the lien arising under the
Pension Funding Agreement shall not be deemed an ERISA Event.
"Foreign Plan" means any employee benefit plan maintained
outside the U.S. by the Company, any of its Subsidiaries or any of their
respective Affiliates for employees substantially all of whom are non-resident
aliens of the U.S. and for which the Company or any of its Subsidiaries may be
directly or indirectly liable.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and any successor code or statute.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which any of the Company, its Subsidiaries or
any of their ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five years made or accrued an
obligation to make contributions.
9
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of
the Company, its Subsidiaries or any of their ERISA Affiliates and at least one
person other than the Company, its Subsidiaries and their ERISA Affiliates or
(ii) was so maintained and in respect of which such Company, Subsidiaries or
ERISA Affiliates could have liability under Section 4064 or Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"Pension Plan" means a Single Employer Plan or Multiple
Employer Plan.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"Pension Funding Agreement" means the agreement dated January
29, 1998 between the PBGC and the Company providing for additional funding by
the Company to certain pension plans and the creation of a lien in favor of the
PBGC on certain land and assets of the Company.
"Single Employer Plan" means a "single-employer plan," as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of
the Company, any of its Subsidiaries or any of their ERISA Affiliates and no
person other than the Company, any of its Subsidiaries or any of their ERISA
Affiliates or (ii) was so maintained and in respect of which such Company,
Subsidiaries or ERISA Affiliates could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
(x) The Company and each of its Subsidiaries is in compliance
with all Laws, except where the failure to comply, singly or in the
aggregate, would not have a Material Adverse Effect.
(y) None of the Company or any of its Subsidiaries is subject
to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Investment Company Act of 1940 (as any of the
preceding acts have been amended) or other Law which regulates the
incurrence by the Company or any of its Subsidiaries of indebtedness,
including, but not limited to, Laws relating to common contract
carriers or the sale of electricity, gas, steam, water or other public
utility services.
(z) (A) The Company and its Subsidiaries own or are licensed
to use all patents, trademarks, tradenames, copyrights, technology,
know-how and processes used in or necessary for the conduct of the
business of the Company as currently conducted ("Intellectual
Property") except where the failure to own or license the use of such
Intellectual Property does not, singly or in the aggregate, have a
Material Adverse Effect.
(B) To the Company's knowledge, no material claim has
been asserted by any person with respect to the use of any
such Intellectual Property, or challenging or questioning the
validity or effectiveness of any such Intellectual Property.
To the Company's knowledge, the use of such Intellectual
Property by the Company or any of its Subsidiaries does not
infringe on the rights of any
10
person, subject to such claims and infringements as do not,
singly or in the aggregate, have a Material Adverse Effect.
The consummation of the Transactions will not in any material
manner or to any material extent impair the ownership of (or
the license to use, as the case may be) of such intellectual
property by the Company or any of its Subsidiaries.
(aa) Except as set forth on Schedule D, and after giving
effect to the Transactions:
(A) the operations of each of the Company and its
Subsidiaries (including, without limitation, as the term is
used throughout this Section 1(aa), all operations and
conditions at or in the Facilities) comply in all material
respects with all Environmental Laws except for any such
noncompliance which would not reasonably be expected to have a
Material Adverse Effect;
(B) each of the Company and its Subsidiaries has
obtained all Permits under Environmental Laws necessary to
their respective operations, and all such Permits are being
maintained in good standing, and each of the Company and its
Subsidiaries is in compliance with all material terms and
conditions of such Permits except for any such failure to
obtain, maintain or comply which would not reasonably be
expected to have a Material Adverse Effect;
(C) none of the Company or its Subsidiaries has
received (a) any notice or claim to the effect that it is or
may be liable to any person under any Environmental Law,
including without limitation, any relating to any Hazardous
Materials except as would not reasonably be expected to have a
Material Adverse Effect or (b) any letter or request for
information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42
U.S.C. ss. 9604) or comparable foreign or state laws regarding
any matter which could reasonably be expected to result in a
Material Adverse Effect, and, to the best of the Company's
knowledge, none of the Company or its Subsidiaries is involved
in any investigation, response or corrective action relating
to or in connection with any Hazardous Materials at any
Facility or at any other location except for such of the
foregoing which would not reasonably be expected to have a
Material Adverse Effect;
(D) none of the Company or its Subsidiaries is
subject to any judicial or administrative proceeding alleging
the violation of or liability under any Environmental Laws
which if adversely determined could reasonably be expected to
have a Material Adverse Effect;
(E) none of the Company or its Subsidiaries or any of
their respective Facilities or operations is subject to any
outstanding written order or agreement with any governmental
authority or private party relating to (a) any actual or
potential violation of or liability under Environmental Laws
or (b) any Environmental Claims except for such of the
foregoing which would not reasonably be expected to have a
Material Adverse Effect;
11
(F) none of the Company or its Subsidiaries has any
contingent liability in connection with any Release or
threatened Release of any Hazardous Materials by any of the
Company or its Subsidiaries except for such of the foregoing
which would not reasonably be expected to have a Material
Adverse Effect;
(G) to the best of the Company's knowledge, none of
the Company or its Subsidiaries or any predecessor of any of
the Company or its Subsidiaries has filed any notice under any
Environmental Law indicating past or present treatment,
storage or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any comparable foreign or state laws;
(H) no Hazardous Materials exist on, under or about
any Facility in a manner that would reasonably be expected to
give rise to an Environmental Claim having a Material Adverse
Effect, and none of the Company or its Subsidiaries has filed
any notice or report of a Release of any Hazardous Materials
that would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(I) none of the Company or its Subsidiaries or, to
the best of the Company's knowledge, any of their respective
predecessors has disposed of any Hazardous Materials in a
manner that would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(J) to the best of the Company's knowledge, no
underground storage tanks or surface impoundments are on or at
any Facility; and
(K) no lien in favor of any person relating to or in
connection with any Environmental Claim has been filed or has
been attached to any Facility or other assets of the Company
or any of its Subsidiaries except for any such lien which
would not reasonably be expected to have a Material Adverse
Effect.
Notwithstanding anything in this Section 1(aa) to the
contrary, no event or condition has occurred which may interfere with present
compliance by the Company or its Subsidiaries with any Environmental Law, or
which may give rise to any liability under any Environmental Law, including,
without limitation, any matter disclosed on Schedule D which, individually or in
the aggregate, has had a Material Adverse Effect.
As used herein, the following terms shall have the respective
meaning ascribed to each below:
"Environmental Claims" means any allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any governmental authority or any person for any
response or corrective action, any damage, including, without limitation,
personal injury (including sickness, disease or death), property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment,
12
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case arising under any
Environmental Law, including without limitation, relating to, resulting from or
in connection with Hazardous Materials and relating to the Company, any of its
Subsidiaries or any of their respective Facilities or predecessors in interest.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, requirements, judgments, plans, policies
or decrees relating to (i) pollution, protection, preservation, cleanup or
reclamation of the environment, natural resources, human, plant or animal health
or welfare, (ii) the Release or threatened Release of Hazardous Materials, (iii)
manufacture, processing, treatment, handling, recycling, generation, use,
storage, transportation or disposal of Hazardous Materials including, without
limitation, investigation, study, assessment, testing, monitoring, containment,
removal, remediation, or clean-up of any such Release, or (iv) occupational
safety and health and industrial hygiene, each as in effect as of the date of
determination.
"Facilities" means any and all real property (including,
without limitation, all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by the
Company, its Subsidiaries or any of their respective predecessors in interest.
"Hazardous Materials" means (i) any chemical, material or
substance at any time defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
waste," "restricted hazardous waste," "infectious waste," "toxic substances" or
any other formulations intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any flammable substances or
explosives; (iv) any radioactive materials; (v) asbestos in any form; (vi) urea
formaldehyde foam insulation; (vii) electrical equipment which contains any oil
or dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million; (viii) pesticides; and (ix) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any governmental authority or which may or could pose a hazard to human health
or safety or the environment.
"Permits" has the meaning ascribed to it in Section 1(bb)
below.
"Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
onto or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
13
(bb) The Company and its Subsidiaries have, and immediately
after the consummation of the Transactions will have, such certificates,
permits, licenses, franchises, consents, approvals, authorizations and
clearances ("Permits"), and are (and will be immediately after the consummation
of the Transactions) in compliance in all material respects with all Laws as are
necessary to own, lease or operate their respective properties and to conduct
their businesses in the manner as presently conducted and to be conducted
immediately after the consummation of the Transactions except where the failure
to have such Permits or to comply with such Laws would not, singly or in the
aggregate, have a Material Adverse Effect, and all such Permits are valid and in
full force and effect and will be valid and in full force and effect immediately
upon consummation of the Transactions. The Company and its Subsidiaries are, and
immediately after the consummation of the Transactions will be, in compliance in
all material respects with their respective obligations under such Permits and
no event occurred that allows, or after notice or lapse of time would allow,
revocation or termination of such Permits except for any such revocation or
termination as would not, singly or in the aggregate, have a Material Adverse
Effect.
(cc) The Company and its Subsidiaries carry or are entitled to
the benefits of insurance (including self-insurance) in such amounts and
covering such risks as is generally maintained by companies of established
repute engaged in the same or similar businesses, and all such insurance is (and
will be immediately after the consummation of the Transactions) in full force
and effect, except where the failure to carry such insurance or be entitled to
the benefits of such insurance does not, singly or in the aggregate, have a
Material Adverse Effect.
(dd) No labor disturbance by the employees of the Company or
its Subsidiaries exists or, to the best knowledge of the Company, is threatened
and the Company is not aware of any existing or imminent labor disturbance by
the employees of the Company's or its Subsidiaries' principal suppliers,
manufacturers or customers that could, singly or in the aggregate, have a
Material Adverse Effect.
Any certificate signed by any officer of the Company or of any
of the Guarantors and delivered to the Initial Purchaser or its counsel shall be
deemed to be a representation and warranty by the Company or of the Guarantor,
as the case may be, to the Initial Purchaser as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to the Initial Purchaser, and the Initial Purchaser
agrees to purchase from the Company, at a purchase price equal to 97.25% of the
principal amount thereof, plus accrued interest, if any, from the Issue Date (as
defined in the Indenture) to the Closing Date, $300,000,000 in principal amount
of Notes.
3. Delivery and Payment. Delivery of and payment for the Notes
shall be made at 10:00 AM, New York City time, on February 24, 1998, which date
and time may be postponed by agreement between the Initial Purchaser and the
Company (such date and time of delivery and payment for the Notes being herein
called the "Closing Date"). Delivery of the Notes shall
14
be made to the Initial Purchaser against payment by the Initial Purchaser of the
purchase price thereof to or upon the order of the Company by intrabank transfer
payable in same day funds or such other manner of payment as may be agreed by
the Company and the Initial Purchaser. Delivery of the Notes shall be made at
such location as the Initial Purchaser shall reasonably designate at least one
Business Day in advance of the Closing Date and payment for the Notes shall be
made at the office of Cleary, Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000. Certificates for the Notes shall be registered in such
names and in such denominations as the Initial Purchaser may request not less
than two full Business Days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchaser in New York, New York, not later
than 1:00 PM on the Business Day prior to the Closing Date.
4. Offering of Notes. The Initial Purchaser represents and
warrants to and agrees with the Company and the Guarantors that:
(a) It has not offered or sold, and will not offer or sell,
any Notes except (i) within the United States to those it reasonably
believes to be qualified institutional buyers (as defined in Rule 144A
under the Securities Act) ("QIBs"), (ii) to other institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) who provide to it and to the Company a letter
in the form of Exhibit A hereto or (iii) outside the United States to
persons other than U.S. persons in reliance upon Regulation S under the
Securities Act. In connection with each sale pursuant to clause (i)
above, the Initial Purchaser has taken or will take reasonable steps to
ensure that the purchaser of such Notes is aware that such sale is
being made in reliance on Rule 144A.
(b) Neither it nor any person acting on its behalf has made or
will make offers or sales of the Notes by means of any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act).
(c) The Initial Purchaser is an "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act).
5. Agreements. The Company and its Subsidiaries agree with the
Initial Purchaser that:
(a) The Company will furnish to the Initial Purchaser and to
Cleary, Gottlieb, Xxxxx & Xxxxxxxx ("Counsel for the Initial
Purchaser"), without charge, during the period referred to in paragraph
(c) below, as many copies of the Final Memorandum and any amendments
and supplements thereto as they may reasonably request. The Company
will pay the expenses of printing or other production of all documents
relating to the offering of the Notes and will reimburse the Initial
Purchaser for payment of the required PORTAL filing fee.
15
(b) The Company will not amend or supplement the Final
Memorandum prior to the completion of the distribution of the Notes by
the Initial Purchaser, without the prior written consent of the Initial
Purchaser.
(c) If at any time prior to the completion of the sale of the
Notes acquired by the Initial Purchaser pursuant to this Agreement (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 any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it
should be necessary to amend or supplement the Final Memorandum to
comply with applicable law, the Company will promptly notify the
Initial Purchaser of the same and, subject to the requirements of
paragraph (b) of this Section 5, will prepare and provide to the
Initial Purchaser pursuant to paragraph (a) of this Section 5 an
amendment or supplement that will correct such statement or omission or
effect such compliance.
(d) The Company will arrange for the qualification of the
Notes for sale by the Initial Purchaser under the laws of such
jurisdictions as the Initial Purchaser may designate and will maintain
such qualifications in effect so long as required for the sale of the
Notes by the Initial Purchaser; provided, however, that none of the
Company or the Guarantors will be required to qualify generally to do
business in any jurisdiction in which any of them is not then so
qualified, to file any general consent to service of process or to take
any action which would subject any of them to general service of
process or to taxation in any such jurisdiction where it is not then so
subject. The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(e) The Company, whenever any of the Company and its
Subsidiaries publishes or makes available to the public (by filing with
any regulatory authority or securities exchange or by publishing a
press release or otherwise) any information that could reasonably be
expected to be material in the context of the issue of Notes under this
Agreement, shall promptly notify the Initial Purchaser as to the nature
of such information or event. The Company will likewise notify the
Initial Purchaser of (i) any decrease in the rating of the Notes or any
other debt securities of the Company or its Subsidiaries by any
nationally recognized statistical rating organization (as defined in
Rule 436(g)(2) under the Securities Act) or (ii) any notice given of
any intended or potential decrease in any such rating or of a possible
change in any such rating that does not indicate the direction of the
possible change, as soon as the Company becomes aware of any such
decrease or notice. The Company will also deliver to the Initial
Purchaser, as soon as available and without request, copies of its
latest annual report and quarterly statement and any report of its
auditors thereon.
16
(f) The Company will not, and will not permit any of their
Affiliates to, resell any Notes that have been acquired by any of them,
other than pursuant to an effective registration statement under the
Securities Act.
(g) Except as contemplated in the Registration Rights
Agreement, none of the Company, its Subsidiaries or any of their
Affiliates, nor any person acting on its or their behalf (other than
the Initial Purchaser or any of its Affiliates, as to whom the Company
and its Subsidiaries express no opinion) will, directly or indirectly,
make offers or sales of any security, or solicit offers to buy any
security, under circumstances that would require the registration of
the Notes under the Securities Act.
(h) None of the Company, its Subsidiaries, any of their
Affiliates or any person acting on its or their behalf (other than the
Initial Purchaser or any of its Affiliates, as to whom the Company and
its Subsidiaries express no opinion) will engage in any form of general
solicitation or general advertising (within the meaning of Regulation
D) in connection with any offer or sale of the Notes.
(i) So long as any of the Notes are "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act, if the
Company ceases to be subject to the reporting requirements of Sections
13 and 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), it will provide to each holder of the Notes and to each
prospective purchaser (as designated by such holder) of the Notes, upon
the request of such holder or prospective purchaser, any information
required to be provided by Rule 144A(d)(4) under the Securities Act.
This covenant is intended to be for the benefit of the holders, and the
prospective purchasers designated by such holders, from time to time of
the Notes.
(j) The Company will cooperate with the Initial Purchaser and
use their best efforts to (i) permit the Notes to be designated PORTAL
securities in accordance with the rules and regulations of the NASD
relating to trading in the Private Offerings, Resale and Trading
through Automated Linkages market ("PORTAL") and (ii) permit the Notes
that are sold to QIBs to be eligible for clearance and settlement
through The Depository Trust Company.
(k) The Company will apply the net proceeds from the sale of
the Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(l) The Company and its Subsidiaries will conduct their
operations in a manner that will not subject the Company or any of its
Subsidiaries to registration as an investment company under the
Investment Company Act.
6. Conditions to the Obligations of the Initial Purchaser. The
obligations of the Initial Purchaser to purchase the Notes shall be subject to
the accuracy in all material respects of the representations and warranties on
the part of the Company and the Guarantors contained herein at the date and time
that this Agreement is executed and delivered by the parties hereto (the
"Execution Time") and the Closing Date, to the accuracy of the statements of the
Company
17
and the Guarantors made in any certificates pursuant to the provisions hereof,
to the performance by the Company and the Guarantors of their obligations
hereunder and to the following additional conditions:
(a) The Company and the Guarantors shall have furnished to the
Initial Purchaser the opinion of Rosenman & Colin LLP ("Counsel for the
Company"), dated the Closing Date, in form and substance satisfactory
to the Initial Purchaser to the effect set forth in Exhibit B hereto.
(b) The Initial Purchaser shall have received from Counsel for
the Initial Purchaser such opinion or opinions, dated the Closing Date,
with respect to the issuance and sale of the Notes, the Final
Memorandum (as amended or supplemented at the Closing Date) and other
related matters as the Initial Purchaser may reasonably require, and
the Company and the Guarantors shall have furnished to such counsel
such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
(c) Each of the Company and the Guarantors shall have
furnished to the Initial Purchaser a certificate dated the Closing
Date, signed on behalf of each of the Company and the Guarantors by any
two of its Chairman of the Board, Chief Executive Officer, President,
Chief Financial Officer and any Vice President to the effect that the
signer of such certificate has carefully examined the Final Memorandum,
any amendment or supplement to the Final Memorandum and this Agreement
and that:
(i) the representations and warranties of the Company
and the Guarantors, contained in this Agreement are true and
correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date, and the
Company and the Guarantors have complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to the Closing
Date; and
(ii) since the date of the most recent financial
statements included in the Final Memorandum, there has been no
change or development or event involving a prospective change
constituting a Material Adverse Effect, except as set forth in
or contemplated by the Final Memorandum (exclusive of any
amendment or supplement thereto).
(d) At the Execution Time and at the Closing Date, Ernst &
Young shall have furnished to the Initial Purchaser a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Initial
Purchaser, confirming that they are independent public accountants
within the meaning of Rule 101 of the Code of Professional Conduct of
the American Institute of Certified Public Accountants (the "AICPA")
and stating in effect that:
(i) in their opinion, the audited financial
statements and financial statement schedules of the Company
and its Subsidiaries included or incorporated
18
in the Final Memorandum and reported on by them comply in form
in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations thereunder;
(ii) on the basis of a reading of the unaudited
financial statements of the Company for the three month period
ended December 27, 1997 and December 28, 1996 made available
by the Company and its Subsidiaries; their limited review in
accordance with the standards established by the AICPA under
Statement on Auditing Standards No. 71 of the unaudited
interim financial statements; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) that would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and committees of
the board of directors of the Company and its Subsidiaries;
and inquiries of certain officials of the Company and its
Subsidiaries who have responsibility for financial and
accounting matters of the Company and its Subsidiaries as to
whether the unaudited financial statements referred to above
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations; as to transactions and events
subsequent to September 27, 1997, nothing came to their
attention that caused them to believe that:
(1) any material modifications should be made to the
unaudited financial statements of the Company described above
included in the Final Memorandum, for them to be in conformity
with generally accepted accounting principles, or
(2) the unaudited financial statements of the Company
described above included in the Final Memorandum do not comply
in form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations thereunder.
(3) with respect to the period subsequent to December
27, 1997, there were at any specified date not more than three
Business Days prior to the date of the letter, any changes in
the capital stock, increases in the long-term debt or
decreases in consolidated net current assets or stockholders'
equity of the Company and its Subsidiaries, as compared with
amounts shown on the December 27, 1997 audited balance sheet
of the Company and its Subsidiaries included in the Final
Memorandum, or for the period from December 28, 1997 to such
specified date there were any decreases, as compared with the
corresponding period in the preceding year, in net sales,
operating income, income before income taxes and extraordinary
items, income before extraordinary items and accounting change
and net earnings, except in all instances for changes or
decreases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is not deemed
necessary by the Initial Purchaser;
19
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its Subsidiaries) set forth in the Final
Memorandum, including without limitation the information set
forth under the captions "Offering Memorandum Summary,"
"Summary Financial Data," "Risk Factors," "Use of Proceeds,"
"Unaudited Pro Forma Combined Financial Information of the
Company," "Selected Historical Financial Information,"
"Management Discussion and Analysis of Financial Condition and
Results of Operations," "Management Discussion and Analysis of
Acquired Business" and "Business," in the Final Memorandum
agrees with the accounting records of the Company and its
Subsidiaries, excluding any questions of legal interpretation;
and
(iv) as to pro forma financial information,
(A) they have read the unaudited pro forma
financial information included in the Final Memorandum;
(B) they have inquired of certain officials
of the Company and its Subsidiaries who have responsibility
for financial and accounting matters as to the basis for their
determination of the pro forma adjustments and whether the
unaudited pro forma financial statements included in the Final
Memorandum comply as to form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation
S-X;
(C) they have compared the historical
financial information included in the unaudited pro forma
balance sheet and the unaudited pro forma income statement in
the Final Memorandum with the historical information for the
Company and the Acquired Business and found them to be in
agreement;
(D) they have proved the arithmetic accuracy
of the application of the pro forma adjustments to the
financial amounts in the unaudited pro forma financial
statements, and as a result of the procedures specified in
(A), (B), (C) and (D), nothing came to their attention that
caused them to believe that the unaudited pro forma financial
statements included in the Final Memorandum do not comply as
to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X and
that the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of the unaudited
pro forma financial statements included in the Final
Memorandum; and
(E) they have performed certain other
specified procedures as a result of which they determined that
certain pro forma information of an accounting, financial, or
statistical nature set forth in the Final Memorandum,
including without limitation the information set forth under
the captions "Offering Memorandum Summary," "Unaudited Pro
Forma Combined Financial
20
Information of the Company" and "Risk Factors" in the Final
Memorandum, agrees to or can be derived from the pro forma
financial statements of the Company or the analysis completed
in the preparation of such pro forma financial statements,
excluding any questions of legal interpretation.
All references in this Section 6(d) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
date of the letter or letters.
(e) At the Execution Time and at the Closing Date, Deloitte &
Touche shall have furnished to the Initial Purchaser a letter or
letters, dated respectively as of the Execution Time and as of the
Closing Date, in form and substance satisfactory to the Initial
Purchaser, confirming that they are independent public accountants
within the meaning of Rule 101 of the Code of Professional Conduct of
the American Institute of Certified Public Accountants (the "AICPA")
and stating in effect that:
(i) in their opinion, the audited financial
statements and financial statement schedules of the Acquired
Business included or incorporated in the Final Memorandum and
reported on by them comply in form in all material respects
with the applicable accounting requirements of the Act and the
related published rules and regulations thereunder;
(ii) on the basis of a reading of the unaudited
interim financial statements for the three and six month
periods ended December 31, 1997 and December 31, 1996 made
available by the Acquired Business, their limited review in
accordance with the standards established by the AICPA under
Statement on Auditing Standards No. 71 of the unaudited
interim financial statements; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) that would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and committees of
the board of directors of the Acquired Business; and made
inquiries of certain officials of the Acquired Business who
have responsibility for financial and accounting matters of
the Acquired Business as to whether the unaudited financial
statements referred to above comply as to form in all material
respects with the applicable accounting requirements of the
Act and the related published rules and regulations; as to
transactions and events subsequent to December 31, 1997,
nothing came to their attention that caused them to believe
that:
(1) any material modifications should be made to the
unaudited financial statements of the Acquired Business
included in the Final Memorandum, for them to be in conformity
with generally accepted accounting principles;
(2) the unaudited financial statements of the
Acquired Business included in the Final Memorandum do not
comply in form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations thereunder; or
21
(3) for the period from December 31, 1997 to January
29, 1998, there were any decreases, as compared with the
corresponding period in the preceding year, in combined net
current assets, combined net sales, or in combined net income,
except in all instances for changes or decreases set forth in
such letter, in which case the letter shall be accompanied by
an explanation by the Acquired Business, as the case may be,
as to the significance thereof unless said explanation is not
deemed necessary by the Initial Purchaser.
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Acquired Business) set forth in the Final Memorandum,
including without limitation the information set forth under
the captions "Offering Memorandum Summary," "Summary Financial
Data," "Risk Factors," "Use of Proceeds," "Unaudited Pro Forma
Combined Financial Information of the Company," "Selected
Historical Financial Information," "Management Discussion and
Analysis of Financial Condition and Results of Operations,"
"Management Discussion and Analysis of Acquired Business" and
"Business" in the Final Memorandum, agrees with the accounting
records of the Acquired Business, excluding any questions of
legal interpretation.
All references in this Section 6(e) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
date of the letter or letters.
(f) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Final Memorandum, there shall
not have been (i) any change or decrease specified in the letter or
letters referred to in paragraphs (d) and (e) of this Section 6, or
(ii) any change, or any development involving a prospective change, in
or affecting the business or properties of the Company and its
Subsidiaries, the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the judgment of the Initial Purchaser, so
material and adverse as to make it impractical or inadvisable to market
the Notes as contemplated by the Final Memorandum.
(g) Subsequent to the respective dates as of which information
is given in the Final Memorandum and giving effect to the Acquisition,
(i) the Company and its Subsidiaries shall not have incurred any
material liability or obligation, direct or contingent, or entered into
any material transaction not in the ordinary course of business; (ii)
the Company and its Subsidiaries shall not have purchased any of its
outstanding Capital Stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its Capital Stock; and (iii)
there shall not have been any material change in the Capital Stock of
the Company and its Subsidiaries or in the short-term debt or long-term
debt of the Company and its Subsidiaries, except in each case as
described in or contemplated by the Final Memorandum.
22
(h) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of the Notes by any "nationally
recognized statistical rating organization" (as defined for purposes of
Rule 436(g) under the Securities Act) or any notice given of any
intended or potential decrease in any such rating or of a possible
change in any such rating that does not indicate the direction of the
possible change.
(i) Each of the Transaction Documents (including any
amendments thereto) shall have been duly authorized, executed and
delivered by each of the parties thereto, and the Initial Purchaser
shall have received copies of each such Transaction Document (including
any amendments thereto) as so executed and delivered in the form
provided to the Initial Purchaser on or before the date hereof except
for changes approved by the Initial Purchaser or changes which do not
materially affect the rights or obligations of the Company and the
Guarantors.
(j) All amounts due and payable under the Senior Subordinated
Credit Agreement dated as of December 19, 1997 among Industries as
borrower, the Company and Service Company as guarantors, First Union
Corp. as agent and the lenders named therein, as amended by Amendment
No. 1, dated January 29, 1998, among Industries, the Company, Service
Company, First Union Corp. as agent and the lenders named therein and
by Amendment No. 2, dated January 29, 1998, among the Company,
Industries, Service Company, Textiles, Swift Denim, First Union Corp.
as agent and the lenders named therein (the "Senior Subordinated Credit
Agreement") shall be paid on the Closing Date from the proceeds of the
sale of the Notes to the Initial Purchasers.
(k) The Company shall have been advised by the National
Association of Securities Dealers, Inc. (the "NASD") that the Notes
have been designated PORTAL-eligible securities in accordance with the
rules and regulations of the NASD relating to trading in the Private
Offerings, Resales and Trading through Automated Linkages Market (the
"PORTAL Market").
(l) Prior to the Closing Date, the Company and the Guarantors
shall have furnished to the Initial Purchaser such further information,
certificates and documents as the Initial Purchaser may reasonably
request.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Initial Purchaser and Counsel for the
Initial Purchaser, this Agreement and all obligations of the Initial Purchaser
hereunder may be canceled at the Closing Date by the Initial Purchaser. Notice
of such cancellation shall be given to the Company in writing or by telephone or
by telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will
be delivered at the office of Counsel for the Initial Purchaser on the Closing
Date.
23
7. Reimbursement of Expenses; Fees. The Company and the
Guarantors will, whether or not the sale of the Notes provided for herein is
consummated, (i) pay all expenses incident to the performance of its obligations
under the offering documents, including the fees and disbursements of its
accountants and counsel, the cost of printing or other production and delivery
of the Preliminary Memorandum, the Final Memorandum, all amendments thereof and
supplements thereto, each Transaction Document and all other documents relating
to the offering of the Notes, the cost of preparing, printing, packaging and
delivering the Notes, the fees and disbursements, including fees of counsel
incurred in compliance with Section 5(d), the fees and disbursements of the
Trustee and the fees of any agency that rates the Notes, the fees and expenses,
if any, incurred in connection with the admission of the Notes for trading in
the PORTAL Market and (ii) reimburse the Initial Purchaser as requested for all
reasonable out-of-pocket expenses (including reasonable legal fees and expenses)
incurred by the Initial Purchaser in connection with the proposed purchase and
resale of the Notes.
8. Indemnification and Contribution. (a) The Company and the
Guarantors jointly and severally agree to indemnify and hold harmless the
Initial Purchaser, the directors, officers, employees and agents of the Initial
Purchaser and each person who controls the Initial Purchaser within the meaning
of either the Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Memorandum, the Final Memorandum
or any information provided by the Company and the Guarantors to any Holder or
prospective purchaser of Notes pursuant to Section 5(i), or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, and agree to reimburse each such
indemnified party, as incurred, for any legal or other expenses incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company and the Guarantors will
not be liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company or the Guarantors by or on behalf of the Initial Purchaser
specifically for inclusion therein; and, provided, further, that with respect to
any untrue statement or omission of material fact made in the Preliminary
Memorandum, the indemnity agreement contained in this Section 8(a) shall not
inure to the benefit of the Initial Purchaser to the extent that any such
losses, claims, damages or liabilities asserted against the Initial Purchaser
occurs under circumstances where it shall have been determined by a court of
competent jurisdiction by final and nonappealable judgment that (x) the Company
had previously furnished copies of the Final Memorandum to the Initial Purchaser
as required by this Agreement, (y) the untrue statement or omission of a
material fact contained in the Preliminary Memorandum was corrected in the Final
Memorandum and (z) there was not sent or given to such person asserting any such
losses, claims, damages or
24
liabilities, at or prior to the written confirmation of the sale of Notes to
such person, a copy of the Final Memorandum.
(b) The Initial Purchaser agrees to indemnify and hold
harmless (i) the Company, (ii) each Guarantor, (iii) each of their respective
directors and officers and (iv) each person who controls the Company or any
Guarantor within the meaning of either the Securities Act or the Exchange Act to
the same extent as the foregoing indemnity from the Company and the Guarantors
to the Initial Purchaser, but only with reference to written information
relating to the Initial Purchaser furnished to the Company and the Guarantors by
or on behalf of the Initial Purchaser specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which the Initial Purchaser may otherwise have.
The Company and the Guarantors acknowledge that the statements set forth in the
last paragraph of the cover page and under the headings "Notice to Investors"
and "Plan of Distribution" in the Preliminary Memorandum and the Final
Memorandum constitute the only information furnished in writing by or on behalf
of the Initial Purchaser for inclusion in the Preliminary Memorandum or Final
Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
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 paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) 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 actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall have authorized the indemnified party to employ
separate counsel at the expense of the indemnifying party; provided further,
that the indemnifying party shall not be responsible for the fees and expenses
of more than one
25
separate counsel (together with appropriate local counsel) representing all the
indemnified parties under paragraph (a) or (b) above. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable or insufficient to hold harmless an
indemnified party for any reason, the Company and the Guarantors, on the one
hand, and the Initial Purchaser, on the other, agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and the Guarantors, on the one
hand, and the Initial Purchaser, on the other, may be subject in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Guarantors, on the one hand, and by the Initial Purchaser, on the other,
from the offering of the Notes; provided, however, that in no case shall the
Initial Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Notes purchased by the Initial
Purchaser hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company and the Guarantors, on the
one hand, and the Initial Purchaser, on the other, shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Guarantors, on the one hand, and of
the Initial Purchaser, on the other, in connection with the statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company and the Guarantors shall be
deemed to be equal to the total net proceeds from the offering (before deducting
expenses), and benefits received by the Initial Purchaser shall be deemed to be
equal to the total purchase discounts and commissions received by the Initial
Purchaser from the Company in connection with the purchase of the Notes
hereunder. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission relates to information
provided by the Company, the Guarantors or the Initial Purchaser and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Guarantors and
the Initial Purchaser agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities, expenses or judgments referred to in the
immediately preceding paragraph shall be deemed to include any legal or other
expenses incurred by such indemnified person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of the Initial
Purchaser shall have
26
the same rights to contribution as the Initial Purchaser, and each person who
controls the Company or any Guarantor within the meaning of either the
Securities Act or the Exchange Act and each officer, director, employee and
agent of the Company or any Guarantor shall have the same rights to contribution
as the Company and the Guarantors, subject in each case to the applicable terms
and conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination
by notice given by the Initial Purchaser to the Company prior to delivery of and
payment for the Notes if, after the date hereof and prior to such time, there
shall have occurred a material adverse change in the condition of the financial,
banking or capital markets the effect of which, in the judgment of the Initial
Purchaser, makes it impractical to market the Notes or to enforce sale contracts
with respect to the Notes.
10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company, the Guarantors or their officers and of the Initial Purchaser set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Initial Purchaser or
the Company, the Guarantors or any of their officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Notes. The provisions of Sections 7 and 8 hereof shall survive
the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telecopied and confirmed to it at 000 Xxxxx Xxxxxxx Xxxxxx,
XX-00, Xxxxxxxxx, XX 00000-0000, Telecopy No.: (000) 000-0000, Attention: Xxxxx
Xxxxxx; or, if sent to the Company, will be mailed, delivered or telecopied and
confirmed to them at 0000 XxXxxxx Xxxx, Xxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx,
XX 00000, Attention: Xxxxxxx X. Xxxxxx.
12. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns and the officers and directors and controlling persons referred to in
Section 8 hereof, and, except as expressly set forth in Section 5(i) hereof,
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person, firm, corporation or other entity any legal
or equitable right, remedy or claim under or in respect to this Agreement or any
provisions herein contained. No purchaser of Notes from the Initial Purchaser
shall be deemed to be a successor merely by reason of such purchase.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
14. Business Day. For purposes of this Agreement, "Business
Day" means any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of Charlotte, North Carolina or of New York, New York, or
is a day on which banking institutions therein located are authorized or
required by law or other governmental action to close.
27
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
28
EXHIBIT B
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
among the Company, the Guarantors and the Initial Purchaser.
Very truly yours,
XXXXX & LORD, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice-President
XXXXX & LORD INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice-President
G&L SERVICE COMPANY,
NORTH AMERICA, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice-President
SWIFT TEXTILES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice-President
SWIFT DENIM SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice-President
B-29
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
FIRST UNION CAPITAL MARKETS
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Director
B-30
