Exhibit 1.1
Execution Copy
WRC MEDIA INC.
WEEKLY READER CORPORATION
JLC LEARNING CORPORATION
AND
THE NOTE GUARANTORS LISTED HEREIN
$152,000,000
152,000 UNITS CONSISTING OF
12 3/4% SENIOR SUBORDINATED NOTES DUE 2009 and
205,656 SHARES OF COMMON STOCK OF WRC MEDIA INC.
PURCHASE AGREEMENT
NOVEMBER 10, 1999
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
WRC MEDIA INC.
WEEKLY READER CORPORATION
JLC LEARNING CORPORATION
$152,000,000
152,000 Units consisting of
12 3/4% Senior Subordinated Notes due 2009 and
205,656 shares of the Common Stock of WRC Media Inc.
PURCHASE AGREEMENT
November 10, 1999
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
Banc of America Securities LLC
c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
WRC Media Inc., a Delaware corporation (the "COMPANY"), Weekly
Reader Corporation, a Delaware corporation ("WEEKLY READER"), and JLC Learning
Corporation, a Delaware corporation ("JLC LEARNING" and, together with the
Company and Weekly Reader, the "ISSUERS"), propose to issue and sell to
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation and Banc of America
Securities LLC (collectively, the "INITIAL PURCHASERS") 152,000 units (the
"Units"), each consisting of $1,000 in aggregate principal amount of their
12 3/4% Senior Subordinated Notes due 2009 (the "SENIOR SUBORDINATED NOTES") and
1.353 shares of common stock of the Company (the "COMMON STOCK") issued as part
of the Units par value $0.01 per share (the "UNIT COMMON STOCK"), subject to the
terms and conditions set forth herein. The Units will be issued pursuant to a
unit agreement (the "UNIT AGREEMENT"), to be dated as of the Closing Date, in
form and substance reasonably satisfactory to the Initial Purchasers and the
Company, between the Issuers, the Note Guarantors and The Bankers Trust Company,
as unit agent (the "UNIT AGREEMENT"). The Senior Subordinated Notes are to be
issued pursuant to the provisions of an indenture (the "INDENTURE"), to be dated
as of the Closing Date (as defined below), among the Issuers, the Note
Guarantors (as defined below) and The Bankers Trust Company, as trustee (the
"TRUSTEE"). The Senior Subordinated Notes and the New Senior Subordinated Notes
(as defined below) issuable in exchange therefor are collectively referred to
herein as the "NOTES." The Notes will be guaranteed (the "NOTE GUARANTEES") by
each of the entities listed on Schedule A hereto (each, a "NOTE
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GUARANTOR" and collectively the "NOTE GUARANTORS"). Capitalized terms used but
not defined herein shall have the meanings given to such terms in the Offering
Memorandum (as defined below).
The Units, the Notes and the Unit Common Stock are
collectively referred to herein as the "SECURITIES."
The Units are being issued and sold in connection with the
recapitalization of PRIMEDIA, Inc.'s ("PRIMEDIA") Supplemental Education Group
(the "RECAPITALIZATION") pursuant to the terms of a Redemption, Stock Purchase
and Recapitalization Agreement, dated August 13, 1999, by and between PRIMEDIA
and the Company, as amended by the amendment dated October 26, 1999, and as may
further be amended prior to the Closing Date (provided that any such further
amendments are in form and substance reasonably satisfactory to the Initial
Purchasers) (the "RECAPITALIZATION AGREEMENT"). Pursuant to the Recapitalization
Agreement, PRIMEDIA will contribute 100% of the outstanding capital stock of
American Guidance Service, Inc. and PRIMEDIA Reference Inc. to Weekly Reader and
the Issuers will make cash payments to PRIMEDIA. Upon consummation of the
transactions contemplated by the Recapitalization Agreement, the Company will
own 94.9% of Weekly Reader's common stock with PRIMEDIA retaining the remaining
5.1%.
Immediately following consummation of the offering of the
Units, the Company will consummate the Recapitalization. For purposes of this
Agreement, the consummation of the offering of the Units and the consummation of
the Recapitalization will be deemed to occur simultaneously. For purposes of
this Agreement, the parties hereby acknowledge and agree that the
representations and warranties relating to due authorization, execution and
delivery with respect to Weekly Reader and the Note Guarantors contained in
Sections 6(e) through 6(s) hereof and the covenants relating to delivery of
certificates hereto by Weekly Reader and the Note Guarantors shall be made
immediately following consummation of the offering of the Units but shall be
deemed to have been made immediately prior to the consummation of such offering.
1. OFFERING MEMORANDUM. The Units will be offered and sold to
the Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "ACT"). The
Issuers and the Note Guarantors have prepared a preliminary offering memorandum,
dated October 26, 1999 (the "PRELIMINARY OFFERING MEMORANDUM") relating to the
Senior
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Subordinated Notes and Note Guarantees, and a final offering memorandum, dated
November 10, 1999 (the "OFFERING MEMORANDUM"), relating to the Units and the
Note Guarantees.
Upon original issuance thereof, and until such time as the
same is no longer required pursuant to the Indenture the Unit Agreement and the
Stockholders Agreement (as defined below), the Securities (and all securities
issued in exchange therefor, in substitution thereof or upon conversion thereof)
shall bear the following legend:
"This Security (or its predecessor) has not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act of 1933"),
and, accordingly, may not be offered, sold, pledged or otherwise
transferred within the United States or to, or for the account or
benefit of, U.S. Persons, except as set forth in the next sentence. By
its acquisition hereof or of a beneficial interest herein, the holder:
(1) Represents that (a) it is a "Qualified Institutional
Buyer" (as defined in Rule 144A under the Securities Act of
1933) (a "QIB"), (b) it has acquired this Security in an
offshore transaction in compliance with Regulation S under the
Act or (c) it is an institutional "Accredited Investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act of 1933 (an "IAI")),
(2) Agrees that it will not resell or otherwise transfer this
Security except (a) to the Company or any of its subsidiaries,
(b) to a person whom the Seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in
a transaction meeting the requirements of Rule 144A, (c) in an
offshore transaction meeting the requirements of Rule 903 or
904 of the Securities Act of 1933, (d) in a transaction
meeting the requirements of Rule 144 under the Securities Act
of 1933, (e) to an IAI that, prior to such transfer, furnishes
the [Trustee] [Unit Agent] [Company] a signed letter
containing certain representations and agreements relating to
the transfer of this Security (the form of which can be
obtained from the [Trustee] [Unit Agent] [Company]) and, if
such transfer is in respect of an aggregate principal amount
of Security less than $250,000, an opinion of counsel
acceptable to the Company that such transfer is in compliance
with the Securities Act of 1933, (f) in accordance
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with another exemption from the registration requirements of
the Securities Act of 1933 (and based upon an opinion of
counsel acceptable to the Company) or (g) pursuant to an
effective registration statement and, in each case, in
accordance with the applicable securities laws of any state of
the United States or any other applicable jurisdiction and
(3) Agrees that it will deliver to each person to whom this
Security or an interest herein is transferred a notice
substantially to the effect of this Legend.
As used herein, the terms "Offshore Transaction" and "United States" have the
meanings given to them by Rule902 of Regulation S under the Securities Act of
1933. The [Indenture] [Unit Agreement] [Stockholders Agreement] will contain a
provision requiring the [Trustee] [Unit Agent] [Company] to refuse to register
any transfer of this Security in violation of the foregoing."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Issuers agree to issue
and sell to the Initial Purchasers, and the Initial Purchasers agree, severally
and not jointly, to purchase from the Issuers, the principal amounts of Units
set forth opposite the name of such Initial Purchaser on Schedule C hereto at a
purchase price equal to $956.21 per unit (the "PURCHASE PRICE").
3. TERMS OF OFFERING. The Initial Purchasers have advised the
Issuers that the Initial Purchasers will make offers (the "EXEMPT RESALES") of
the Units purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to (i) persons whom the Initial Purchasers
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBS") and (ii) to persons permitted to purchase the Units
in offshore transactions in reliance upon Regulation S under the Act (each, a
"REGULATION S PURCHASER") (such persons specified in clauses (i) and (ii) being
referred to herein as the "ELIGIBLE PURCHASERS"). The Initial Purchasers will
offer the Units to Eligible Purchasers initially at a price equal to $986.21 per
Unit. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Senior
Subordinated Notes will have the registration rights set forth in the
registration agreement (the "REGISTRATION
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RIGHTS AGREEMENT"), to be dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers and the Company, for so long
as such Senior Subordinated Notes constitute "Transfer Restricted Securities"
(as defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Issuers and the Note Guarantors will agree to file with
the Securities and Exchange Commission (the "COMMISSION") under the
circumstances set forth therein, (i) a registration statement under the Act (the
"EXCHANGE OFFER REGISTRATION STATEMENT") relating to the Issuers' 12 3/4% new
Senior Subordinated Notes due 2009 (the "NEW SENIOR SUBORDINATED NOTES"), to be
offered in exchange for the Senior Subordinated Notes (such offer to exchange
being referred to as the "EXCHANGE OFFER") and the Note Guarantees thereof and
(ii) a shelf registration statement pursuant to Rule 415 under the Act (the
"SHELF REGISTRATION STATEMENT" and, together with the Exchange Offer
Registration Statement, the "REGISTRATION STATEMENTS") relating to the resale by
certain holders of the Senior Subordinated Notes and to use their reasonable
best efforts to cause such Registration Statements to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer.
Holders (including subsequent transferees) of the Unit Common
Stock will have the registration rights set forth in a stockholders agreement
(the "STOCKHOLDERS AGREEMENT"), dated as of the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers and the Company,
among each of the Issuers, EAC III Inc. and certain of its affiliates (the "WRC
STOCKHOLDERS"), and the Initial Purchasers. Holders of the Unit Common Stock
shall also have certain "tag-along" rights and will be subject to certain
"drag-along" rights with respect to sales of Common Stock by EAC III Inc. and
its affiliates to third parties. Pursuant to the Stockholders Agreement, the
Company will agree to file a registration statement upon exercise of a demand
registration right of the holders of the Unit Common Stock (the "EQUITY
REGISTRATION STATEMENT") covering the resale of the Unit Common Stock by the
holder thereof and to use all commercially reasonable best efforts to cause such
Equity Registration Statement to be declared effective and to remain effective
for the period specified in the Stockholders Agreement.
This Agreement, the Securities, the Unit Agreement, the
Stockholders Agreement, the Indenture, the Notes, the Note Guarantees, the
Senior Credit Facilities (as described in the Offering Memorandum) and the
Registration
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Rights Agreement are hereinafter sometimes referred to collectively as the
"OPERATIVE DOCUMENTS."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Units shall be made at the offices of Cravath, Swaine & ▇▇▇▇▇, Worldwide Plaza,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:00 a.m. New
York City time, on November 17, 1999 or at such other time on the same date or
such other date as shall be agreed upon by the Initial Purchasers and the
Issuers in writing. The time and date of such delivery and the payment for the
Units are herein called the "CLOSING DATE."
(b) One or more of the Units in definitive global form,
registered in the name of Cede & Co., as nominee of The Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Units (collectively, the "GLOBAL UNITS"), shall be
delivered by the Issuers to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by the Issuers
against payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds to the order of the Issuers. The Global Units shall
be made available to the Initial Purchasers for inspection not later than 9:30
a.m., New York City time, on the business day immediately preceding the Closing
Date.
5. AGREEMENTS OF THE ISSUERS AND THE NOTE GUARANTORS. Each of
the Issuers and the Note Guarantors hereby agrees with the Initial Purchasers as
follows:
(a) To advise the Initial Purchasers promptly (and, if
requested by the Initial Purchasers, confirm such advice in writing) of (i) the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Securities for offering or
sale in any jurisdiction designated by the Initial Purchasers pursuant to
Section 5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such purpose
and (ii) the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the
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Offering Memorandum in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Issuers and the
Note Guarantors shall use their reasonable best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of any of
the Securities under any state securities or Blue Sky laws and, if at any time
any state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any of the
Securities under any state securities or Blue Sky laws, the Issuers and the Note
Guarantors shall use their reasonable best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Issuers as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as the Initial Purchasers may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchasers'
compliance with its representations and warranties and agreements set forth in
Section 7 hereof, the Issuers consent to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers, not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object after being so advised and to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchasers, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to an
Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate
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amendment or supplement to such Offering Memorandum so that the statements
therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Units pursuant to Exempt Resales
as contemplated hereby, to cooperate with the Initial Purchasers and counsel to
the Initial Purchasers in connection with the registration or qualification of
the Units for offer and sale to the Initial Purchasers and pursuant to Exempt
Resales under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; PROVIDED, HOWEVER, that neither
the Issuers nor any Note Guarantor shall be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation in any jurisdiction in which it is not now so
subject.
(f) So long as the Securities are outstanding, to furnish to
the Initial Purchasers upon their request as soon as available copies of all
reports or other communications furnished by the Issuers or any of the Note
Guarantors to their security holders their security or furnished to or filed
with the Commission or any national securities exchange on which any class of
securities of the Issuers or any of the Note Guarantors is listed and such other
publicly available information concerning the Company and/or its subsidiaries as
the Initial Purchasers may reasonably request.
(g) So long as any of the Securities remain outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3) under the Act,
and during any period in which the Issuers and the Note Guarantors are not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), to make available upon request to any holder of
Securities in connection with any sale thereof and any prospective purchaser of
such Securities from such holder, the information ("RULE 144A INFORMATION")
required by Rule 144A(d)(4) under the Act.
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(h) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of the obligations of the Issuers
and the Note Guarantors under this Agreement, including: (i) the fees,
disbursements and expenses of counsel to the Issuers and the Note Guarantors and
accountants of the Issuers and the Note Guarantors in connection with the sale
and delivery of the Units to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the foregoing
(including financial statements), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Units to the Initial Purchasers and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all expenses in
connection with the registration or qualification of the Units and the Note
Guarantees for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchasers in
connection with such registration or qualification and memoranda relating
thereto), (iv) the cost of printing certificates representing the Units and the
Note Guarantees, (v)all expenses and listing fees in connection with the
application for quotation of the Units in the National Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vi) the
fees and expenses of the Trustee and the Trustee's counsel in connection with
the Indenture, the Notes and the Note Guarantees, (vii) the fees and expenses of
the Unit Agent and the Unit Agent's counsel in connection with the Unit
Agreement, (viii)the costs and charges of any transfer agent, registrar and/or
depositary (including DTC), (ix) any fees charged by rating agencies for the
rating of the Notes, (x) all costs and expenses of the Exchange Offer and any
Registration Statement, as set forth in the Registration Rights Agreement, (xi)
all costs and expenses of the Equity Registration Statement, as set forth in the
Stockholders Agreement and (xii) and all other costs and expenses incident to
the performance of the obligations of the Issuers and the Note Guarantors
hereunder for which provision is not otherwise made in this Section.
Notwithstanding the foregoing, the parties to this Agreement
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hereby acknowledge and agree that all costs incurred for the "road show" shall
be borne by the Initial Purchasers.
(i) To use its reasonable best efforts to effect the inclusion
of the Securities in PORTAL and to maintain the listing of the Securities on
PORTAL until completion of the Exchange Offer.
(j) To obtain the approval of DTC for "book-entry" transfer of
the Securities, and to comply with all of its agreements set forth in the
representation letters of the Issuers and the Note Guarantors to DTC relating to
the approval of the Securities by DTC for "book-entry" transfer.
(k) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any debt securities of the Issuers or
any Note Guarantor or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Issuers or any Note Guarantor substantially
similar to the Securities and the Note Guarantees (other than the Securities and
the Note Guarantees) without the prior written consent of the Initial
Purchasers.
(l) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Units to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Units under the Act.
(m) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Securities and the related Note Guarantees.
(n) To cause the Exchange Offer to be made in the appropriate
form to permit the New Senior Subordinated Notes and guarantees thereof by the
Note Guarantors registered pursuant to the Act to be offered in exchange for the
Senior Subordinated Notes and the Note Guarantees and to comply with all
applicable federal and state securities laws in connection with the Exchange
Offer.
(o) To cause the Equity Registration Statement to be made on
the appropriate form and to comply with all applicable federal and state
securities laws in connection therewith.
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(p) To comply with all of its agreements set forth in the
Registration Rights Agreement and the Stockholders Agreement.
(q) To comply with all of its agreements set forth in the Unit
Agreement.
(r) To use its reasonable best efforts to do and perform all
things required or necessary to be done and performed under this Agreement by it
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Units and the Note Guarantees.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ISSUERS.
The Issuers represent and warrant to, and agree with, the Initial Purchasers
that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information furnished to the Issuers in writing by the Initial Purchasers
expressly for use therein. No stop order preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated by
this Agreement are subject to the registration requirements of the Act, has been
issued.
(b) Each of the Issuers and each of the Note Guarantors is
and, after giving effect to the Recapitalization in accordance with the terms of
the Recapitalization Agreement, will be a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its business
as described in the Preliminary Offering Memorandum and the Offering Memorandum
and to own, lease and operate its properties, and each is, and after giving
effect to the Recapitalization in accordance with the terms of the
Recapitalization Agreement, will be duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or lease of property requires such
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qualification, except where the failure to be so qualified would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, assets, condition (financial or otherwise),
results of operations or prospects of the Issuers and the Note Guarantors, taken
as a whole (a "MATERIAL ADVERSE EFFECT").
(c) All outstanding shares of capital stock of each of the
Issuers have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights.
(d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company (other than JLC Learning and
Weekly Reader) after giving effect to the Recapitalization in accordance with
the terms of the Recapitalization Agreement. The entity listed on Schedule B
hereto is the only subsidiary, direct or indirect, of the Company before giving
effect to the Recapitalization in accordance with the terms of the
Recapitalization Agreement. All of the outstanding shares of capital stock of
each of the Company's subsidiaries have been and, after giving effect to the
Recapitalization in accordance with the terms of the Recapitalization Agreement,
will be duly authorized and validly issued, fully paid and non-assessable, and,
except for 5.1% of the common stock of Weekly Reader that PRIMEDIA will retain
upon consummation of the Recapitalization and the Preferred Stockholder
Warrants, owned by the Company, directly or indirectly through one or more
subsidiaries, free and clear of any security interest, claim, lien, encumbrances
or adverse interest of any nature (each, a "LIEN"), except as otherwise
disclosed in the Offering Memorandum and except Liens which would not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
(e) This Agreement has been duly authorized, executed and
delivered by the Company and JLC Learning. On the Closing Date, this Agreement
will have been duly authorized, executed and delivered by Weekly Reader and the
Note Guarantors.
(f) On or prior to the Closing Date, the Indenture will have
been duly authorized by each of the Issuers and the Note Guarantors and will
have been validly executed and delivered by each of the Issuers and each of the
Note Guarantors. When the Indenture has been duly executed and delivered by each
of the Issuers and each of the Note Guarantors, the Indenture will be a valid
and binding agreement of each of the Issuers and each Note Guarantor,
enforceable against the Issuers and each Note
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Guarantor in accordance with its terms, except as (i) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA" or "TRUST INDENTURE ACT"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) Each of the Issuers will have duly and validly authorized
the issuance of the Notes and the Unit Common Stock as a Unit. On the Closing
Date, the Units will conform in all material respects to the description thereof
contained in the Offering Memorandum.
(h) On or prior to the Closing Date, the Senior Subordinated
Notes will have been duly authorized and will have been validly executed and
delivered by each of the Issuers. When the Senior Subordinated Notes have been
issued, executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in accordance
with the terms of this Agreement (assuming due authorization, execution and
delivery of the Indenture by the Trustee and due authentication of the Senior
Subordinated Notes by the Trustee), the Senior Subordinated Notes will be
entitled to the benefits of the Indenture and will be valid and binding
obligations of the Issuers, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the Senior
Subordinated Notes will conform in all material respects to the description
thereof in the Offering Memorandum.
(i) On or prior to the Closing Date, the New Senior
Subordinated Notes will have been duly authorized by each of the Issuers. When
the New Senior Subordinated Notes are issued, executed and authenticated in
accordance with the terms of the Exchange Offer and the Indenture (assuming due
authorization, execution and delivery of the Indenture by the Trustee and due
authentication of the New Senior Subordinated Notes by the Trustee), the New
Senior Subordinated Notes will be entitled to the benefits of the Indenture and
will be the valid and binding obligations of each of the Issuers, enforceable
against each of the Issuers
14
in accordance with their terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(j) The Unit Common Stock has been duly and validly authorized
by the Company and, on the Closing Date, when issued and delivered to and paid
for by the Initial Purchasers, will be validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar rights other
than those that have been waived in connection with the Transactions. On the
Closing Date, the rights of the holders of the Unit Common Stock will conform in
all material respects to the description thereof in the Offering Memorandum.
(k) On or prior to the Closing Date, the shares of common
stock of Weekly Reader issuable upon exchange of the Unit Common Stock will have
been duly authorized and reserved for issuance and upon such exchange in
accordance with the terms of the Stockholders Agreement will be validly issued,
fully paid and nonassessable and not subject to any preemptive or similar rights
other than those that have been waived in connection therewith.
(l) On or prior to the Closing Date, the Note Guarantee to be
endorsed on the Senior Subordinated Notes by each Note Guarantor will have been
duly authorized by each Note Guarantor and will have been duly executed and
delivered by each Note Guarantor. When the Senior Subordinated Notes have been
issued, executed and authenticated in accordance with the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the terms
of this Agreement (assuming due authorization, execution and delivery of the
Indenture by the Trustee and due authentication of the Senior Subordinated Notes
by the Trustee), the Note Guarantee of each Note Guarantor endorsed thereon will
be entitled to the benefits of the Indenture and will be the valid and binding
obligation of each Note Guarantor, enforceable against each Note Guarantor in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Note Guarantees to be endorsed on the Senior Subordinated
Notes will conform in all material respects to the description thereof in the
Offering Memorandum.
15
(m) On or prior to the Closing Date, the Note Guarantee to be
endorsed on the New Senior Subordinated Notes by each Note Guarantor will have
been duly authorized by each Note Guarantor and, when issued, will have been
duly executed and delivered by each Note Guarantor. When the New Senior
Subordinated Notes have been issued, executed and authenticated in accordance
with the terms of the Exchange Offer and the Indenture (assuming due
authorization, execution and delivery of the Indenture by the Trustee and due
authentication of the New Senior Subordinated Notes by the Trustee), the Note
Guarantee of each Note Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the valid and binding obligation of each
Note Guarantor, enforceable against each Note Guarantor in accordance with its
terms, except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. When the New Senior Subordinated
Notes are issued, authenticated and delivered, the Note Guarantees to be
endorsed on the New Senior Subordinated Notes will conform in all material
respects to the description thereof in the Offering Memorandum.
(n) On or prior to the Closing Date, the Registration Rights
Agreement will have been duly authorized by each of the Issuers and the Note
Guarantors and will have been duly executed and delivered by each of the Issuers
and each of the Note Guarantors. When the Registration Rights Agreement has been
duly executed and delivered, the Registration Rights Agreement will be a valid
and binding agreement of each of the Issuers and each of the Note Guarantors,
enforceable against each of the Issuers and each of the Note Guarantors in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the
Registration Rights Agreement will conform in all material respects to the
description thereof in the Offering Memorandum.
(o) On or prior to the Closing Date, the Unit Agreement will
have been duly and validly authorized by each of the Issuers and the Note
Guarantors and, when duly executed and delivered by each of the Issuers and the
Note Guarantors, will be a valid and binding agreement of the Company,
enforceable against each of the Issuers and the Note Guarantors in accordance
with its terms, except as
16
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally, (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability and (iii) rights to indemnity and
contribution thereunder may be limited by applicable law.
(p) On or prior to the Closing Date, the Issuers and the Note
Guarantors will have duly and validly authorized the issuance of the Senior
Subordinated Notes and the Unit Common Stock as a Unit. When the Units are
issued and delivered to and paid for by the Initial Purchasers in accordance
with the terms of this Agreement, the Units will be valid and binding
obligations of the Issuers and the Note Guarantors, enforceable in accordance
with their terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing Date,
the Units will conform in all material respects to the description thereof in
the Offering Memorandum.
(q) On or prior to the Closing Date, the Stockholders
Agreement will have been duly authorized by the Company and each of the WRC
Stockholders and will have been duly executed and delivered by the Company and
each of the WRC Stockholders. When the Stockholders Agreement has been duly
executed and delivered by the Company and the WRC Stockholders, the Stockholders
Agreement will be a valid and binding agreement of the Company and each of the
WRC Stockholders, enforceable against the Company and each WRC Stockholder in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent transfer or similar laws affecting
creditors' rights generally, (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (iii) rights of indemnification in connection with violations
of any securities laws, statutory duties or willful, reckless or unlawful acts.
On the Closing Date, the Stockholders Agreement will conform in all material
respects to the description of the Offering Memorandum.
(r) The Recapitalization Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
17
generally, (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability, and (iii) the enforceability
thereof may be limited by an implied covenant of good faith and fair dealing. On
the Closing Date, the Recapitalization Agreement will conform in all material
respects to the description thereof in the Offering Memorandum.
(s) On or prior to the Closing Date, the Senior Credit
Facilities will have been duly authorized by each of the Issuers and each of the
Note Guarantors and will have been duly executed and delivered by each of the
Issuers and each of the Note Guarantors. When the Senior Credit Facilities have
been duly executed and delivered, the Senior Credit Facilities will be a valid
and binding agreement of each of the Issuers and each of the Note Guarantors,
enforceable against each of the Issuers and each of the Note Guarantors in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Senior Credit Facilities will conform in all material respects
to the description thereof in the Offering Memorandum.
(t) The indebtedness represented by the Senior Subordinated
Notes is being incurred for proper purposes and in good faith. On the Closing
Date (after giving effect to the application of the proceeds from the issuance
of the Units), (a) the fair value and present fair saleable value of the
Issuers' assets exceeds and would exceed its stated liabilities and identified
contingent liabilities, (b) each of the Issuers should be able to pay its debts
as they become absolute and matured and (c) the capital the Issuers is not and
would not be unreasonably small for the business in which it is engaged.
(u) (i)(A) As of the date hereof, neither the Company nor JLC
Learning is in violation of its respective charter or by-laws and (B) as of the
Closing Date, none of Weekly Reader or the Note Guarantors will be in violation
of its respective charter or by-laws and (ii) neither the Company nor JLC
Learning is in default in the performance of any obligation, agreement, covenant
or condition contained in any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Issuers and the Note
Guarantors, taken as a whole, to which the Company or JLC Learning is a party or
by which the Company or JLC Learning or their respective properties are bound
and none
18
of Weekly Reader or the Note Guarantors is in default in the performance of any
obligation, agreement, covenant or condition contained in any Material Contract
(as defined in the Recapitalization Agreement) that is material to the Issuers
and the Note Guarantors, taken as a whole, to which Weekly Reader or any of the
Note Guarantors is a party or by which Weekly Reader or any of the Note
Guarantors or their respective properties are bound except, in the case of
clause (i)(B) and clause(ii), for such defaults which, singly or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(v) The execution, delivery and performance of this Agreement,
the other Operative Documents and the Recapitalization Agreement by each of the
Issuers and each of the Note Guarantors, compliance by each of the Issuers and
each of the Note Guarantors with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby, thereby and the
consummation of the Transactions will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as (a) have been or will be obtained
prior to the Closing Date and (b) may be required under the securities or Blue
Sky laws of the various states), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under (a) the charter or by-laws
of any of the Issuers or the Note Guarantors (in the case of Weekly Reader, as
amended by the Charter Amendment (as defined in the Recapitalization Agreement))
or (b) any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Issuers and the Note Guarantors, taken as a
whole, to which any of the Issuers or the Note Guarantors is a party or by which
the Issuers or any of the Note Guarantors or their respective properties are
bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over any of the Issuers or the Note Guarantors or
their respective properties, (iv) result in the imposition or creation of (or
the obligation to create or impose) a Lien under any agreement or instrument to
which any of the Issuers or the Note Guarantors are a party or by which any of
the Issuers or the Note Guarantors or their respective properties are bound, or
(v) result in the termination, suspension or revocation of any Authorization (as
defined below) of any of the Issuers or the Note Guarantors or result in any
other impairment of the rights of the holder of any such Authorization, except,
in the case of clauses (i), (ii)(b), (iii), (iv) and (v), as singly or in the
aggregate, would
19
not reasonably be expected to have a Material Adverse Effect.
(w) There are no legal or governmental proceedings pending or,
to any Issuer's or any Note Guarantor's knowledge, threatened to which any of
the Issuers or the Note Guarantors is, or, to any Issuer's or any Note
Guarantor's knowledge, is threatened to be made, a party or to which any of
their respective properties are, or, to any Issuer's or any Note Guarantor's
knowledge, are threatened to be made, subject, which would, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(x) None of the Issuers or the Note Guarantors has and, after
giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Agreement, will have violated any foreign, federal, state or
local law or regulation relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or any provisions of the
Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(y) There are no and, after giving effect to the
Recapitalization in accordance with the terms of the Recapitalization Agreement,
there will be no costs or liabilities associated with Environmental Laws in
effect as of or prior to the Closing Date (including, without limitation, any
capital or operating expenditures required for clean-up, closure of properties
or compliance with Environmental Laws or any Authorization, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(z) Each of the Issuers and the Note Guarantors has and, after
giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Agreement, will have such permits, licenses, consents,
exemptions, franchises, authorizations and other approvals (each, an
"AUTHORIZATION") of, and has and, after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Agreement, will have made all
filings with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other
20
tribunals, including without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have any
such Authorization or to make any such filing or notice would not, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Each
such Authorization is and, after giving effect to the Recapitalization in
accordance with the terms of the Recapitalization Agreement, will be valid and
in full force and effect, and each of the Company and its subsidiaries is and,
after giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Agreement, will be in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain and, after giving effect to the Recapitalization
in accordance with the terms of the Recapitalization Agreement, will contain, no
restrictions that are burdensome to any of the Issuers or the Note Guarantors;
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(aa) Each of the Issuers and the Note Guarantors has and,
immediately after the Recapitalization in accordance with the terms of the
Recapitalization Agreement, will have, good and marketable title in fee simple
to all real property owned by any of them, good and valid title to the leasehold
estates on all real property leased by them, and good and valid title to all
personal property owned by it that is material to the business of the Issuers
and the Note Guarantors, in each case free and clear of all Liens and defects,
except ▇▇▇▇▇ described in the Offering Memorandum and except Liens which would
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(bb) Each of the Issuers and the Note Guarantors owns or
possesses, and immediately after the Recapitalization in accordance with the
terms of the
21
Recapitalization Agreement, will own or possess, or has acquired sufficient
right to use or otherwise exploit, or can acquire on reasonable terms, all
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names ("INTELLECTUAL PROPERTY") currently employed by it in connection
with the business now operated, or immediately after the Recapitalization in
accordance with the terms of the Recapitalization Agreement, to be operated by
the Issuers and the Note Guarantors, except where the failure to own or possess
or have sufficient right to use or otherwise exploit or otherwise be able to
acquire such intellectual property would not, singly or in the aggregate, have a
Material Adverse Effect. None of the Issuers or the Note Guarantors received any
notice of infringement of or conflict with asserted rights of others with
respect to any of such intellectual property that, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect.
(cc) Each of the Issuers and the Note Guarantors has and,
immediately after the Recapitalization in accordance with the terms of the
Recapitalization Agreement, will have insurance covering their respective
businesses, which insurance is in amounts and insures against such losses and
risks as are adequate to protect each of them and their respective businesses
and is customary for companies engaged in similar businesses or similar
industries. To the best of their knowledge, none of the Issuers or the Note
Guarantors has received notice from any insurer or agent of such insurer that
substantial capital improvements or other material expenditures will have to be
made in order to continue such insurance.
(dd) The accountants that have certified the financial
statements included in the Preliminary Offering Memorandum and the Offering
Memorandum are independent public accountants with respect to the Issuers and
the Note Guarantors, as required by Rule 101 of the American Institute of
Certified Public Accountants' Code of Professional Conduct and its
interpretations and rulings thereunder.
(ee) The historical financial statements, together with
related notes forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly the consolidated financial position, results
of operations and changes in financial position of (i) Weekly Reader and its
subsidiaries, (ii) American
22
Guidance Service, Inc. and (iii) JLC Learning on the basis stated in the
Offering Memorandum at the respective dates or for the respective periods to
which they apply; such statements and related notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Offering
Memorandum (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the entities for which they
were prepared.
(ff) The PRO FORMA financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been prepared
on a basis consistent with the historical financial statements included in the
Offering Memorandum (except for the PRO FORMA adjustments specified therein) and
give effect to assumptions used in the preparation thereof on a reasonable basis
and in good faith and present fairly the historical and proposed transactions
contemplated by the Preliminary Offering Memorandum and the Offering Memorandum;
and such PRO FORMA financial statements include all material adjustments to the
historical financial information required by Rule 11-02 of Regulation S-X under
the Act to reflect the transactions described in the Offering Memorandum. The
other PRO FORMA financial and statistical information and data included in the
Offering Memorandum are, in all material respects, accurately presented and
prepared on a basis consistent with the PRO FORMA financial statements.
(gg) The Issuers and the Note Guarantors are not and, after
giving effect to the Recapitalization in accordance with the terms of the
Recapitalization Agreement, the offering and sale of the Units and the
application of the net proceeds thereof as described in the Offering Memorandum,
will not be, an "investment company," as such term is defined in the Investment
Company Act of 1940, as amended.
(hh) Except as disclosed in the Offering Memorandum, there are
and, after giving effect to the Recapitalization in accordance with the terms of
the Recapitalization Agreement, there will be no contracts, agreements or
understandings between any Issuer or any Note Guarantor and any person granting
such person the right to require such Issuer or each Note Guarantor to file a
registration statement under the Act with respect to any securities of such
Issuer or each Note Guarantor or to
23
require such Issuer or each Note Guarantor to include such securities with the
Securities and Note Guarantees registered pursuant to any Registration Statement
or the Equity Registration Statement.
(ii) None of the Issuers or the Note Guarantors or any agent
thereof acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Units to
violate, Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
(jj) Since the date of the Preliminary Offering Memorandum, no
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act (i) has imposed (or has informed
any Issuer or any Note Guarantor that it is considering imposing) any condition
(financial or otherwise) on any Issuer's or any Note Guarantor's retaining any
rating assigned to any Issuer or any Note Guarantor, any securities of any
Issuer or any Note Guarantor or (ii) has indicated to any Issuer or any Note
Guarantor that it is considering (a) the downgrading, suspension, or withdrawal
of, or any review for a possible change that does not indicate the direction of
the possible change in, any rating so assigned or (b) any change in the outlook
for any rating of any Issuer, any Note Guarantor or any securities of any Issuer
or any Note Guarantor.
(kk) Since the respective dates as of which information is
given in the Offering Memorandum, other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there has not occurred any material adverse change
or any development involving a prospective material adverse change in the
business, assets, condition (financial or otherwise), results of operations, or
prospects of the Issuers and the Note Guarantors, taken as a whole, (ii) there
has not been any material adverse change or any development involving a
prospective material adverse change in the capital stock or in the long-term
debt of any of the Issuers or the Note Guarantors and (iii) none of the Issuers
or the Note Guarantors has incurred any material liability or obligation, direct
or contingent, except, in the case of this clause (iii), for such liabilities or
obligations which, singly or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.
(ll) The Company has delivered to the Initial
Purchasers true and correct conformed copies of the
24
Recapitalization Agreement, including all schedules and exhibits thereto, and
there have been no amendments, alterations, modifications or waivers thereto or
in the exhibits or schedules thereto, except as have been delivered to the
Initial Purchasers.
(mm) No labor disturbance by or dispute with the employees of
any of the Issuers or the Note Guarantors exists, or, to the best of their
knowledge, is contemplated or threatened, except for such disturbances or
disputes that, singly or in the aggregate, would not have a Material Adverse
Effect.
(nn) The Issuers and the Note Guarantors maintain 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.
(oo) All material tax returns required to be filed by the
Issuers and the Note Guarantors in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by any of
the Issuers or the Note Guarantors have been paid, other than those being
contested in good faith and for which adequate reserves have been provided or
other than those which, singly or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(pp) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Act.
(qq) When the Securities and the Note Guarantees are issued
and delivered pursuant to this Agreement, neither the Securities nor the Note
Guarantees will be of the same class (within the meaning of Rule 144A under the
Act) as any security of the Issuers or the Note Guarantors that is listed on a
national securities exchange registered under
25
Section 6 of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(rr) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by the Issuers, the Note
Guarantors or any of their respective representatives (other than the Initial
Purchasers, as to whom the Issuers make no representation) in connection with
the offer and sale of the Units contemplated hereby, including, but not limited
to, articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general solicitation
or general advertising. No securities of the same class as the Units have been
issued and sold by the Issuers within the six-month period immediately prior to
the date hereof.
(ss) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the TIA.
(tt) None of the Issuers, the Note Guarantors nor any of their
respective affiliates or any person acting on its or their behalf (other than
the Initial Purchasers, as to whom the Issuers make no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act ("REGULATION S") with respect to the Units or the
Note Guarantees.
(uu) The Units offered and sold in reliance on Regulation S
have been and will be offered and sold only in offshore transactions.
(vv) The sale of the Units pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act;
provided that, the Issuers and the Note Guarantors make no representation as to
actions taken by the Initial Purchasers.
(ww) The Issuers, the Note Guarantors and their respective
affiliates and all persons acting on their behalf (other than the Initial
Purchasers, as to whom the Issuers makes no representation) have complied with
and will comply with the offering restrictions requirements of Regulation S in
connection with the offering of the Units outside the United States and, in
connection therewith, the Offering Memorandum will contain the disclosure
required by Rule 902(g).
26
(xx) The Securities sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the distribution
compliance periods referred to in Rule 903(c)(3) of the Act and only upon
certification of beneficial ownership of such Security by non-U.S. persons or
U.S. persons who purchased such Securities in transactions that were exempt from
the registration requirements of the Act.
(yy) No registration under the Act of the Securities or the
Note Guarantees is required for the sale of the Securities and the Note
Guarantees to the Initial Purchasers as contemplated hereby or for the Exempt
Resales, assuming the accuracy of the Initial Purchasers' representations and
warranties and agreements set forth in Section 7 hereof.
(zz) Each certificate signed by any officer of any Issuer or
any Note Guarantor and delivered to the Initial Purchasers or counsel for the
Initial Purchasers shall be deemed to be a representation and warranty by such
Issuer or each Note Guarantor to the Initial Purchasers as to the matters
covered thereby.
(aaa) The Unit Common Stock, when issued on the Closing Date,
will represent 3.0% of the fully-diluted Common Stock of the Company.
The Issuers acknowledge that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 9 hereof, counsel to the Issuers and the Note Guarantors and counsel to
the Initial Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of
the Initial Purchasers, severally and not jointly, represents and warrants to
the Issuers and the Note Guarantors, and agrees that:
(a) Such Initial Purchaser is either a QIB or an institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Act) (an "ACCREDITED INSTITUTION"), in either case, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Units.
27
(b) Such Initial Purchaser (A) is not acquiring the Units with
a view to any distribution thereof or with any present intention of offering or
selling any of the Units in a transaction that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Units only (x) to QIBs
in reliance on the exemption from the registration requirements of the Act
provided by Rule 144A and (y) in offshore transactions in reliance upon
Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D under
the Act) has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Units pursuant
hereto, including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, such Initial Purchaser will solicit offers to buy the Units only
from, and will offer to sell the Units only to, Eligible Purchasers. Each
Initial Purchaser further agrees that it will offer to sell the Units only to,
and will solicit offers to buy the Units only from (A) Eligible Purchasers that
the Initial Purchaser reasonably believes are QIBs and (B) Regulation S
Purchasers, in each case, that agree that (x) the Units purchased by them may be
resold, pledged or otherwise transferred within the time period referred to
under Rule 144(k) (taking into account the provisions of Rule 144(d) under the
Act, if applicable) under the Act, as in effect on the date of the transfer of
such Units, only (I) to the Company or any of its subsidiaries, (II) to a person
whom the seller reasonably believes is a QIB purchasing for its own account or
for the account of a QIB in a transaction meeting the requirements of Rule 144A
under the Act, (III) in an offshore transaction (as defined in Rule 902 under
the Act) meeting the requirements of Rule 904 of the Act, (IV) in a transaction
meeting the requirements of Rule 144 under the Act, (V) to an Accredited
Institution that, prior to such transfer, furnishes the Trustee a signed letter
containing certain representations and agreements relating to the registration
of transfer of such Units (the form of which is substantially the same as an
exhibit to the Indenture) and, if such transfer is in respect of an aggregate
principal amount of Units less than $250,000, an opinion of counsel acceptable
to the Company that such
28
transfer is in compliance with the Act, (VI) in accordance with another
exemption from the registration requirements of the Act (and based upon an
opinion of counsel acceptable to the Company) or (VII) pursuant to an effective
registration statement and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction and (y) they will deliver to each person to whom such Units or an
interest therein is transferred a notice substantially to the effect of the
foregoing.
(e) Neither such Initial Purchaser nor any of its affiliates
or any person acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect to the
Units or the Note Guarantees.
(f) The Units offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(g) The sale of the Units offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Units in the United States or to, or for the
benefit or account of, a U.S. Person (other than a distributor), in each case,
as defined in Rule 902 under the Act (i) as part of its distribution at any time
and (ii) otherwise until the end of the distribution compliance periods in
connection with the commencement of the offering of the Units pursuant hereto
and the Closing Date, other than in accordance with Regulation S of the Act or
another exemption from the registration requirements of the Act. Such Initial
Purchaser agrees that, during such distribution compliance periods, it will not
cause any advertisement with respect to the Units (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in any
public place and will not issue any circular relating to the Units, except such
advertisements as permitted by and include the statements required by Regulation
S.
(i) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Units by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the
distribution compliance periods referred to in
29
Rule 903(c)(3) under the Act, it will send to such distributor, dealer or person
receiving a selling concession, fee or other remuneration a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Act"), and may not be offered
and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of your distribution at any time or (ii)
otherwise until the end of the distribution compliance period in
connection with the commencement of the Offering and the Closing Date,
except in either case in accordance with Regulation S under the Act (or
Rule 144A or to Accredited Institutions in transactions that are exempt
from the registration requirements of the Act), and in connection with
any subsequent sale by you of the Securities covered hereby in reliance
on Regulation S during the period referred to above to any distributor,
dealer or person receiving a selling concession, fee or other
remuneration, you must deliver a notice to substantially the foregoing
effect. Terms used above have the meanings assigned to them in
Regulation S."
(j) Such Initial Purchaser agrees that the Units offered and
sold in reliance on Regulation S will be represented upon issuance by a global
security that may not be exchanged for definitive securities until the
expiration of the distribution compliance period referred to in Rule 903(c)(3)
of the Act and only upon certification of beneficial ownership of such Units by
non-U.S. persons or U.S. persons who purchased such Units in transactions that
were exempt from the registration requirements of the Act.
Such Initial Purchaser acknowledges that the Issuers and the
Note Guarantors and, for purposes of the opinions to be delivered to each
Initial Purchaser pursuant to Section 9 hereof, counsel to the Issuers and the
Note Guarantors and counsel to the Initial Purchasers will rely upon the
accuracy and truth of the foregoing representations, and such Initial Purchaser
hereby consents to such reliance.
8. INDEMNIFICATION.
(a) Each of the Issuers and the Note Guarantors agree, jointly
and severally, to indemnify and hold harmless each Initial Purchaser, its
directors, its officers and each person, if any, who controls such Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
30
Exchange Act, from and against any and all losses, claims, damages, liabilities
and judgments (including, without limitation, any legal or other expenses
incurred in connection with investigating or defending any matter, including any
action, that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by any Issuer or any Note Guarantor to any holder or
prospective purchaser of Units pursuant to Section 5(h) or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished to
the Issuers in writing by any Initial Purchaser expressly for use therein;
PROVIDED, HOWEVER, that the foregoing indemnity agreement with respect to any
Preliminary Offering Memorandum shall not inure to the benefit of any Initial
Purchaser from whom the person asserting any such losses, claims, damages or
liabilities purchased Units, or any person controlling such Initial Purchaser,
if a copy of the Offering Memorandum (as then amended or supplemented if the
Issuers shall have furnished any amendments or supplements thereto) was not seen
or given by or on behalf of such Initial Purchaser to such person, if required
by law so to have been delivered, at or prior to the written confirmation of the
sale of the Units to such person, and if the Offering Memorandum (as so amended
or supplemented) would have corrected any such untrue statement of a material
fact contained in, and each omission or alleged omission of material fact from,
such Preliminary Offering Memorandum giving rise to such losses, claims, damages
or liabilities, unless such failure is the result of noncompliance by the
Issuers with Section 5(b) hereof.
(b) The Initial Purchasers agree, severally and not jointly,
to indemnify and hold harmless the Issuers and the Note Guarantors, and their
respective directors and officers and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Issuers or any Note Guarantor, to the same extent as the foregoing indemnity
from the Issuers and the Note Guarantors to each Initial Purchaser but only with
reference to information furnished in writing to the Issuers by any Initial
Purchaser expressly for use in the Preliminary Offering Memorandum or the
Offering Memorandum.
31
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchasers shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchasers). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expeses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
Corporation, in the case of the parties indemnified pursuant to Section 8(a),
and by the Issuers, in the case of parties indemnified pursuant to Section 8(b).
No indemnifying party shall be liable for any settlement of any such action
effected without its written consent, but if settled with its written consent,
which consent will not be unreasonably withheld, the indemnifying party shall
indemnify and hold harmless the indemnified party from and
32
against any and all losses, claims, damages, liabilities and judgments by reason
of any settlement of any action effected with its written consent. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in respect of
any losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers and the Note Guarantors, on the one hand, and the Initial Purchasers, on
the other hand, from the offering of the Units or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Issuers and the
Note Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers and the
Note Guarantors, on the one hand, and the Initial Purchasers, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Units (after underwriting discounts and commissions, but before
deducting expenses) received by the Issuers, and the total discounts and
commissions received by the Initial Purchasers bear to the total price to
investors of the Units, in each case as set forth in Schedule C hereto. The
relative fault of the Issuers and the Note Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to
33
state a material fact relates to information supplied by the Issuers or the Not
Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Issuers and the Note Guarantors and the Initial Purchasers
agree that it would not be just and equitable if contribution pursuant to this
Section 8(d) were determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating or
defending any matter, including any action, that could have given rise to such
losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, the Initial Purchasers shall not be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchasers exceeds the amount of any
damages which the Initial Purchasers have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligation to contribute pursuant to this Section 8(d) are several in proportion
to the respective principal amount of Units purchased by each of the Initial
Purchasers hereunder and not joint.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the Initial Purchasers to purchase the Units under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the
Issuers and the Note Guarantors contained in this Agreement
34
shall be true and correct in all material respects on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any notice have
been given of any potential or intended downgrading, suspension or withdrawal
of, or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of any Issuer or any Note Guarantor or any securities of any Issuer or
any Note Guarantor (including, without limitation, the placing of any of the
foregoing ratings on credit watch with negative or developing implications or
under review with an uncertain direction) by any "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Act, (ii) there shall not have occurred any change, nor
shall notice have been given of any potential or intended change, in the outlook
for any rating of any Issuer or any Note Guarantor or any securities of any
Issuer or any Note Guarantor by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Units than that on which the Units
were marketed.
(c) Since the respective dates as of which information is
given in the Offering Memorandum, other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the business, assets, condition
(financial or otherwise), results of operations or prospects of the Issuers and
the Note Guarantors, taken as a whole, (ii) there shall not have been any change
or any development involving a prospective change in the capital stock or in the
long-term debt of the Issuers or any of the Note Guarantors and (iii) neither
any of the Issuers nor any of the Note Guarantors shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Units on the terms and in the manner contemplated in the Offering Memorandum.
(d) The Initial Purchasers shall have received on the Closing
Date a certificate dated the Closing Date, signed by the Presidents and the
Chief Financial Officers of the Issuers, confirming the matters set forth in
35
Sections 6(kk), 9(a) and 9(b) and stating that each of the Issuers and the Note
Guarantors has complied in all material respects with all the agreements and
satisfied in all material respects all of the conditions herein contained and
required to be complied with or satisfied on or prior to the Closing Date.
(e) The Initial Purchasers shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchasers and counsel for the
Initial Purchasers), dated the Closing Date, of Cravath, Swaine & ▇▇▇▇▇, counsel
for the Issuers and the Note Guarantors substantially in the form attached
hereto as Exhibit A.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the
Initial Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.
(g) The Initial Purchasers shall have received, at the time
this Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchasers each of (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, (ii)
Deloitte & Touche LLP, and (iii) PricewaterhouseCoopers LLP, all of which are
independent public accountants, containing the information and statements of the
type ordinarily included in accountants' "comfort letters" to the Initial
Purchasers with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(h) The Units shall have been approved by the NASD for trading
and duly listed in PORTAL.
(i) The Initial Purchasers shall have received, or receive
substantially simultaneously with the closing of the offering of the Units, a
counterpart, conformed as executed, of the Indenture which shall have been
entered into by the Issuers, the Note Guarantors and the Trustee.
(j) The Company and JLC Learning shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have received, or
receive substantially simultaneously with the closing of the offering of the
Units, an original copy thereof, duly executed by the Issuers and the Note
Guarantors.
36
(k) The Company shall have executed the Unit Agreement and the
Initial Purchasers shall have received an original copy thereof, duly executed
by the Company.
(l) Each of the Issuers and the WRC Stockholders shall have
executed the Stockholders Agreement, and the Initial Purchasers shall have
received an original copy thereof, duly executed by the Company and each of the
Issuers and WRC Stockholders.
(m) The Senior Credit Facilities shall have been entered into
by the parties thereto, and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof and of all other documents and
agreements entered into in connection therewith. Each condition to the closing
contemplated by the Senior Credit Facilities shall have been satisfied or
waived. There shall exist at and as of the Closing Date (after giving effect to
the transactions contemplated by this Agreement and the Recapitalization
Agreement) no conditions that would constitute a default (or an event that, with
notice or the lapse of time or both, would constitute a default) under the
Senior Credit Facilities. On the Closing Date, the closing under the Senior
Credit Facilities shall have been consummated on terms that conform in all
material respects to the description thereof in the Offering Memorandum.
(n) All documents relating to the Recapitalization shall have
been entered into by the parties thereto, and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof and of all other documents
and agreements entered into in connection therewith. Each condition to the
closing of the transactions contemplated by the documents relating to the
Recapitalization shall have been satisfied or, with the Initial Purchasers'
specific approval, waived. There shall exist at and as of the Closing Date
(after giving effect to the transactions contemplated by this Agreement, the
Recapitalization Agreement and the Senior Credit Facilities) no condition that
would constitute a default (or an event that with notice or the lapse of time,
or both, would constitute a default) under the documents relating to the
Recapitalization. Prior to, or simultaneously with, the closing of the Offering,
the Recapitalization shall have been consummated on terms that conform in all
material respects to the description thereof in the Offering Memorandum. The
Initial Purchasers shall have received evidence satisfactory to the Initial
Purchasers that the Recapitalization has been so consummated.
37
(o) On the Closing Date, Weekly Reader and the Note Guarantors
shall have approved, adopted, ratified and confirmed the execution, delivery and
performance of this Agreement by the Company and JLC Learning, and the Initial
Purchasers shall have received a counterpart of this Agreement executed by
Weekly Reader and each Note Guarantor as parties hereto.
(p) The Issuers and Note Guarantors shall not have failed in
any material respect at or prior to the Closing Date to perform or comply with
any of the agreements herein contained and required to be performed or complied
with by the Issuers or the Note Guarantors, as the case may be, at or prior to
the Closing Date.
(q) The Initial Purchasers shall have received, addressed to
the Initial Purchasers, a solvency certificate of the Chief Financial Officers
of the Issuers that is identical to the solvency certificate required to be
delivered to the lenders under the Senior Credit Facilities.
(r) The Initial Purchasers shall have received executed copies
of each of the employment agreements described in the Offering Memorandum under
the caption "Management- Employment Agreements."
10. INITIAL PURCHASERS' INFORMATION. The Issuers and the
Initial Purchasers acknowledge and agree for all purposes under this Agreement
that the statements with respect to the offering of the Units set forth in the
first sentence of the third paragraph, in the fourth sentence of the fourth
paragraph, in the sixth paragraph and in the fourth sentence of the eighth
paragraph under the caption "Plan of Distribution" in the Offering Memorandum
constitute the only information furnished to the Issuers in writing by the
Initial Purchasers expressly for use in the Offering Memorandum (or any
amendment or supplement thereto).
11. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to
the Closing Date by the Initial Purchasers by written notice to the Issuers if
any of the following has occurred: (i) any outbreak or escalation of hostilities
or other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchasers' judgment, is material and adverse and, in the Initial
Purchasers' judgment, makes it impracticable to market the
38
Units on the terms and in the manner contemplated in the Offering Memorandum,
(ii) the suspension or material limitation of trading in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange, the
Chicago Board of Options Exchange or the Nasdaq National Market or limitation on
prices for securities or other instruments on any such exchange or the Nasdaq
National Market, (iii) the suspension of trading of any securities of any of the
Issuers or the Note Guarantors on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects,
or will materially and adversely affect, the business, prospects, financial
condition or results of operations of the Issuers and the Note Guarantors, taken
as a whole, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the financial markets in the
United States and, in your judgment, makes it impracticable to market the Units
on the terms and in the manner contemplated in the Offering Memorandum.
12. MISCELLANEOUS.
Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Issuers or any Note Guarantor, to ▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and (ii) if to the
Initial Purchasers, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Syndicate Department, or in
any case to such other address as the person to be notified may have requested
in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Issuers and the Note
Guarantors and the Initial Purchasers set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Units, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling the Initial Purchasers, the Issuers and any Note Guarantor, the
officers or directors of the Issuers or any Note Guarantor, or any person
controlling the Issuers or any Note Guarantor, (ii)
39
acceptance of the Units and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Units are not delivered by or on behalf
of the Issuers as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 11), the Issuers and each Note Guarantor,
jointly and severally, agree to reimburse the Initial Purchasers for all
out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by them. Notwithstanding any termination of this Agreement, the Issuers
shall be liable for all expenses which it has agreed to pay pursuant to Section
5(i) hereof. The Issuers and each Note Guarantor also agree, jointly and
severally, to reimburse each Initial Purchaser and its officers, directors and
each person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act for any and all fees and
expenses (including without limitation the fees and expenses of counsel)
incurred by it in connection with enforcing its rights under this Agreement
(including without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Issuers and the
Note Guarantors, the Initial Purchasers, the Initial Purchasers' directors and
officers, any controlling persons referred to herein, the directors of the
Issuers and the Note Guarantors and their respective successors and assigns, all
as and to the extent provided in this Agreement, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include a purchaser of any of the Units from
the Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
40
Please confirm that the foregoing correctly sets forth the
agreement between the Issuers and the Initial Purchasers.
Very truly yours,
WRC MEDIA INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
JLC LEARNING CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
41
The foregoing Purchase Agreement is hereby confirmed and accepted as of the date
first above written.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
By: /s/ D. ▇▇▇▇ ▇▇▇▇▇▇▇▇, I
------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇, I
Title: Vice President
Banc of America Securities LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Principal
42
To be executed on the Closing Date:
The undersigned hereby confirms that the foregoing letter, as of the date
thereof, correctly sets forth the agreement between the Initial Purchasers, WRC
Media Inc., JLC Learning Corporation and the undersigned.
Weekly Reader Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
PRIMEDIA Reference Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
Funk & Wagnalls Yearbook Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
Lifetime Learning Systems, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
43
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
American Guidance Service, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
AGS International Sales, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
44
SCHEDULE A
Note Guarantors
PRIMEDIA Reference Inc.
Funk & Wagnalls Yearbook Corporation
Lifetime Learning Systems, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc.
American Guidance Service, Inc.
AGS International Sales, Inc.
45
SCHEDULE B
Subsidiary of the Company Immediately Prior to the
Recapitalization
JLC Learning Corporation
46
SCHEDULE C
Principal Amount
Initial Purchaser of Units
---------------------------- ----------------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation $106,400,000
Banc of America Securities LLC 45,600,000
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Total $152,000,000
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47
EXHIBIT A
Form of Cravath, Swaine & ▇▇▇▇▇ Opinion
