EXHIBIT 10.9
EXECUTION COPY
BGF INDUSTRIES, INC.
$100,000,000
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
NOTE PURCHASE AGREEMENT
January 15, 1999
First Union Capital Markets
000 Xxxxx Xxxxxxx Xxxxxx, XX-00
Xxxxxxxxx, XX 00000-0000
Ladies and Gentlemen:
BGF Industries, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell (the "Initial Placement") to First Union Capital Markets, a
division of Wheat First Securities, Inc., (the "Initial Purchaser"),
$100,000,000 principal amount of its 10 1/4% Senior Subordinated Notes Due 2009
(the "Notes"). The Notes are to be issued under an indenture (the "Indenture")
to be dated as of the Closing Date (as defined below) between the Company and
The Bank of New York, as trustee (the "Trustee"). This Agreement, the
registration rights agreement, to be dated the Closing Date, between the Initial
Purchaser and the Company (the "Registration Rights Agreement"), the Notes and
the Indenture are hereinafter collectively referred to as the "Transaction
Documents" and the transactions contemplated herein and therein are hereinafter
referred to as the "Transactions."
The sale of the Notes to the Initial Purchaser will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon certain exemptions from the registration
requirements of the Securities Act. You have advised the Company that you will
offer and sell the Notes purchased by you hereunder in accordance with Section 4
hereof as soon as you deem advisable.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum, dated December 23, 1998 (the "Preliminary
Memorandum"), and a final offering memorandum, dated January 15, 1999 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company, the
Transaction Documents and the Transactions. The Company hereby confirms that it
has authorized the use of the Preliminary Memorandum and the Final Memorandum,
and
any amendment or supplement thereto, in connection with the offer and sale of
the Notes by the Initial Purchaser. Unless stated to the contrary, all
references herein to the Final Memorandum are to the Final Memorandum at the
Execution Time (as defined below) and are not meant to include any amendment or
supplement, or any information incorporated by reference therein, subsequent to
the Execution Time.
As used herein, "Material Adverse Effect" means (i) a material adverse
effect upon the business, operations, properties, assets, condition (financial
or otherwise) or prospects of the Company and the Subsidiary (as defined below),
taken as a whole, whether before or after the issue and sale of the Notes and
the consummation of the other transactions contemplated herein or (ii) a
material impairment of the ability of the Company to execute, deliver or perform
any of its obligations under, or the material impairment of the ability of the
Trustee and the holders of the Notes (the "Holders") to enforce any obligations
under, any of the Transaction Documents. Capitalized terms used but not defined
herein have the meaning ascribed to them in the Final Memorandum.
1. The Company's Representations and Warranties. The Company
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represents and warrants to the Initial Purchaser the following:
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the
date hereof, does not and at the Closing Date will not (and any amendment
or supplement thereto, at the date thereof and at the Closing Date, will
not), contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
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however, that the Company makes no representation or warranty as to any
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statements made in or omissions from the Preliminary Memorandum or the
Final Memorandum (or any amendment or supplement thereto) in reliance upon
and in conformity with information relating to the Initial Purchaser
furnished to the Company in writing by the Initial Purchaser, expressly for
use therein.
(b) No holder of securities of the Company (other than holders of the
Notes) will be entitled to have such securities registered under any
registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement.
(c) None of the Company or any of its Affiliates (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")), nor any
person acting on its or their behalf (other than the Initial Purchaser or
any of its Affiliates, as to whom the Company makes no representation or
warranty) has, directly or indirectly:
(i) made offers or sales of any security, or solicited offers to
buy any security, which is or will be integrated with the sale of the
Notes in a manner that would require the registration of the Notes
under the Securities Act;
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(ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with
any offer or sale of the Notes;
(iii) taken any action designed to cause or result in, or that
has constituted or that might reasonably be expected to constitute,
stabilization or manipulation of the price of the Notes;
(iv) paid or agreed to pay to any person any compensation for
soliciting another to purchase any of the Notes;
(v) engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S"))
with respect to the Notes, and each of the Company and its Affiliates
and any person acting on its or their behalf (other than the Initial
Purchaser or any of its Affiliates, as to whom the Company makes no
representation) has complied with the offering restrictions
requirement of Rule 903 under Regulation S.
(d) The Notes satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(e) Each of the Company and BGF Overseas, Inc., a company organized
under the laws of the United States Virgin Islands (the "Subsidiary"), is a
corporation duly organized and existing and in good standing under the laws
of its jurisdiction of incorporation. Each of the Company and the
Subsidiary has the corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to
be conducted and is duly qualified as a foreign corporation and in good
standing under the laws of all jurisdictions in which it is doing business,
except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect.
(f) The Subsidiary is the only subsidiary of the Company in existence
on the date of this Agreement and is not a "significant subsidiary" of the
Company within the meaning of Rule 1-02 of Regulation S-X under the
Securities Act. The capital stock of the Subsidiary is duly authorized,
validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of the Subsidiary are beneficially owned directly
by the Company, free and clear of any perfected security interest or any
other security interests, claims, liens or encumbrances other than liens
granted pursuant to the Senior Secured Credit Agreement, dated as of
September 30, 1998, among the Company, the lenders named therein and First
Union National Bank, as agent (the "Bank Facility").
(g) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable.
(h) The Company has the corporate power and requisite authority to
execute, deliver and perform its obligations under the Transaction
Documents.
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(i) Each of the Transaction Documents and each other document or
instrument to be delivered in connection therewith has been, duly
authorized by all necessary corporate action of the Company; each of the
Transaction Documents and each other document or instrument to be delivered
in connection herewith or therewith to be executed and delivered on or
prior to the date hereof is, and each of the Transaction Documents and each
other document or instrument to be delivered in connection herewith or
therewith to be executed and delivered after the Closing Date, will be,
upon such execution and delivery, the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except to the extent that the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the enforcement of creditors' rights
generally ("Bankruptcy Law") or by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or
at law) ("Equity").
(j) The execution, delivery and performance of the Transaction
Documents and each other document and instrument to be executed, delivered
or performed by the Company in connection therewith, the consummation of
the transactions herein and therein contemplated, the compliance with each
of the terms hereof or thereof, and the issuance, delivery and performance
of the Notes do not and on the Closing Date will not (i) violate any
statute, law, rule, regulation, order, judgment or decree (singly "Law" and
collectively "Laws") applicable to the Company or the Subsidiary of any
court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or the
Subsidiary or any of its or their properties (ii) conflict with, result in
a breach or violation of or constitute a default under the certificate of
incorporation or bylaws of the Company or the Subsidiary or any indenture,
mortgage, deed of trust, contract, undertaking, loan agreement, lease or
other agreement or instrument to which the Company or the Subsidiary is a
party or by which the Company or the Subsidiary or any of their respective
properties are bound ("Contracts"), (iii) result in or require the creation
or imposition of any mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the
foregoing ("Lien"), upon any of the properties or assets of the Company or
the Subsidiary.
(k) No consent, approval, authorization or order of any Tribunal or
other person is required in connection with the execution, delivery and
performance by the Company of the Transaction Documents or any other
document or instrument to be delivered, executed or performed by the
Company or the Subsidiary in connection therewith or the consummation of
the transactions contemplated hereby or thereby, other than any such
consent, approval, authorization or order which has been obtained and
remains in full force and effect or which has been waived in writing by the
Initial Purchaser or such as may be required under applicable state
securities or Blue Sky laws.
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(l) The audited financial statements (including the notes thereto) of
the Company included in the Final Memorandum comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-1 under the Securities Act and fairly present in all
material respects the financial position of the Company and the results of
operations and cash flow of the Company as of the dates and for the periods
therein specified. Such financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved. Since the date of
the most recent financial statements included in the Final Memorandum,
except as described therein and in the notes thereto or in the Final
Memorandum, (i) neither the Company nor the Subsidiary has incurred any
liabilities or obligations, direct or contingent, or entered into or agreed
to enter into any transactions or Contracts (written or oral) which
liabilities, obligations, transactions or Contracts would, individually or
in the aggregate, have a Material Adverse Effect, (ii) the Company has not
purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock, (iii) there has not been any material change in the long-term
indebtedness of the Company or the Subsidiary and (iv) none of the material
assets of either the Company or the Subsidiary have materially diminished
in value ordinary wear and tear excepted.
(m) Each of the Company and the Subsidiary maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP 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 inventory assets is compared with the
existing inventory assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(n) Upon giving effect to the issue and sale of the Notes as
contemplated herein and the application of the net proceeds thereof as
contemplated in the Final Memorandum:
(i) The fair saleable value of the assets of the Company and
the Subsidiary, on a stand-alone basis, exceeds the amount that will
be required to be paid on or in respect of the existing debts and
other liabilities (including contingent liabilities) of the Company
and the Subsidiary as they mature.
(ii) The assets of each of the Company and the Subsidiary, on a
stand-alone basis, do not constitute unreasonably small capital to
carry out its business as now conducted and as proposed to be
conducted, including its capital needs, taking into account the
particular capital requirements of the business conducted by each of
the Company and the Subsidiary.
(iii) The Company does not intend to, and will not permit the
Subsidiary to, incur debts beyond its ability to pay such debts as
they mature (taking into
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account the timing and amounts of cash to be payable on or in respect
of debt of each of the Company and the Subsidiary).
(o) Each of the Company and the Subsidiary owns, leases or has
sufficient rights to use, and after consummation of the issue and sale of
the Notes as contemplated herein, will own, lease or have sufficient rights
to use, such properties and assets as are necessary to the conduct of its
operations as presently conducted and as contemplated to be conducted
immediately following consummation of the issue and sale of the Notes as
contemplated herein, and neither the Company nor the Subsidiary and, to the
knowledge of the Company, any other party thereto, is in default under any
lease, except in each case for such defects or defaults that, individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect. None of the material assets of either the Company or the
Subsidiary is subject to any restriction which would prevent continuation
of the use currently made, or contemplated to be made, thereof or which
would materially adversely affect the value thereof.
(p) Neither the Company nor the Subsidiary is (i) in violation of its
charter, bylaws or other organizational documents, (ii) in breach or
violation of any Laws or (iii) in breach of or default under (nor has any
event occurred which, with notice or the lapse of time or both, would
constitute a default under) or in violation of any of the terms or
provisions of any Contract, except for any such breach, default, violation
or event in each case of (i), (ii) or (iii) which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect.
(q) There is no action, suit, proceeding, claim, lawsuit and/or
investigation conducted by or before any Tribunal ("Litigation") pending
or, to the best knowledge of the Company after due investigation,
threatened, by, against, or which may relate to or affect (a) any benefit
plan or any fiduciary or administrator thereof, (b) the Transactions or (c)
either of the Company or the Subsidiary which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
There are no outstanding injunctions or restraining orders prohibiting
consummation of the Transactions or any other transactions contemplated in
connection therewith. Neither the Company nor the Subsidiary is in default
with respect to any judgment, order, writ, injunction or decree of any
Tribunal, and there are no unsatisfied judgments against either the Company
or the Subsidiary or their respective businesses or properties which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. Neither the Company nor the Subsidiary has been
advised that there is a reasonable likelihood of an adverse determination
of any Litigation which adverse determination, should it occur, could
reasonably be expected to have a Material Adverse Effect.
(r) The proceeds from the issuance and sale of the Notes will be used
solely for the purposes specified in the Final Memorandum. None of the
issuance or sale of the Notes, the application of the proceeds therefrom,
or the consummation of Transactions or
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any of the other transactions contemplated thereby will violate Regulations
T, U, or X of the Board of Governors of the Federal Reserve System.
(s) All material Tax Returns, foreign and domestic, required to be
filed by or on behalf of the Company and the Subsidiary in any jurisdiction
have been filed, and all material Taxes (whether or not actually shown on
such Tax Returns) for which they are directly, or indirectly as a member of
a consolidated group, liable have been paid other than any Tax (i) the
validity or amount of which is being contested in good faith, (ii) for
which adequate reserve, or other appropriate provision, if any, as required
in conformity with GAAP shall have been made, and (iii) with respect to
which any right to execute upon or sell any assets of the Company or of the
Subsidiary has not matured or has been and continues to be effectively
enjoined, superseded or stayed ("Contested Claims"); all such Tax Returns
are true, correct and complete in all material respects. To the knowledge
of the Company, there is no material proposed tax assessment with respect
to Taxes due by, or on behalf of, the Company or the Subsidiary except for
Contested Claims.
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Tax Return" means a report, return or other information (including
any amendments) required to be supplied to a Tribunal with respect to Taxes
including, where permitted or required, combined or consolidated returns
for any group of entities that includes the Company or the Subsidiary.
"Taxes" shall mean any taxes, assessments, fees, levies, imposts,
duties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including any interest, penalties and additions thereto
from time to time or at any time imposed by any Law or any Tribunal.
(t) (A) No ERISA Events have occurred or are reasonably expected to
occur which individually or in the aggregate resulted in or might
reasonably be expected to result in a liability of the Company or the
Subsidiary or any of their respective ERISA Affiliates which would
reasonably be expected to have a Material Adverse Effect.
(B) In accordance with the most recent actuarial valuations, the
Amount of Unfunded Benefit Liabilities individually or in the aggregate for
all Pension Plans (excluding for purposes of such computation any Pension
Plans which have a negative Amount of Unfunded Benefit Liabilities), is not
an amount which could reasonably be expected to have a Material Adverse
Effect.
(C) Neither the Company nor the Subsidiary has incurred or is
reasonably expected to incur any liability with respect to any Foreign Plan
or Foreign Plans which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect.
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As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Amount of Unfunded Benefit Liability" means, with respect to any
Pension Plan, (i) if set forth on the most recent actuarial valuation
report with respect to such Pension Plan, the amount of unfunded benefit
liabilities (as defined in Section 4001(a)(18) of ERISA) and (ii)
otherwise, the excess of (a) the greater of the current liability (as
defined in Section 412(1)(7) of the Internal Revenue Code) or the actuarial
present value of the accrued benefits with respect to such Pension Plan
over (b) the market value of the assets of such Pension Plan.
"Employee Pension Benefit Plan" means any "employee pension benefit
plan" as defined in Section 3(2) of ERISA (i) which is, or, at any time
within the five calendar years immediately preceding the date hereof, was
at any time, sponsored, maintained or contributed to by the Company or the
Subsidiary or any of their ERISA Affiliates or (ii) with respect to which
the Company or the Subsidiary retains any liability, including any
potential joint and several liability as a result of an affiliation with an
ERISA Affiliate or a party that would be an ERISA Affiliate except for the
fact the affiliation ceased more than five calendar years prior to the date
hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder and any successor statute, regulations and rulings.
"ERISA Affiliate," as applied to any person, means (i) any corporation
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of which
that person is, or was at any time within the five calendar years
immediately preceding the date hereof, a member; (ii) any trade or business
(whether or not incorporated) which is, or was at any time within the five
calendar years immediately preceding the date hereof, a member of a group
of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that person is, or was at any
time within the five calendar years immediately preceding the date hereof,
a member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
person, any corporation described in clause (i) above or any trade or
business described in clause (ii) above is, or was at any time within the
five calendar years immediately preceding the date hereof, a member.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan (excluding those for which the provision for 30-day notice
to the PBGC has been waived by regulation); (ii) the failure to meet the
minimum funding standard of Section 412 of the Internal Revenue Code with
respect to any Pension Plan (whether or not waived) or the failure to make
any required contribution within 30 days of its due date
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with respect to any Multiemployer Plan; (iii) the provision by the
administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA
of a notice of intent to terminate such plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the withdrawal by the Company
or the Subsidiary or any of their respective ERISA Affiliates from any
Multiple Employer Plan or the termination of any such Multiple Employer
Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v)
the institution by the PBGC of proceedings to terminate any Pension Plan,
or the occurrence of any event or condition which might reasonably be
expected to constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (vi) the
imposition of liability on the Company or the Subsidiary or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or
by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by the Company or the Subsidiary or any of their respective
ERISA Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is
any potential liability therefor, or the receipt by the Company or the
Subsidiary or any of their respective ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of
an act or omission which could reasonably be expected to give rise to the
imposition on the Company or the Subsidiary or any of their respective
ERISA Affiliates of fines, penalties, taxes or related charges under
Chapter 43 of the Internal Revenue Code or under Sections 406, 409 or
502(i) or (1) of ERISA in respect of any Employee Benefit Pension Plan;
(ix) receipt from the Internal Revenue Service of notice of the failure of
any Pension Plan (or any other Employee Pension Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any
trust forming part of any Pension Plan or Employee Pension Benefit Plan to
qualify for exemption from taxation under Section 501(a) of the Internal
Revenue Code; or (x) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan.
"Foreign Plan" means any employee benefit plan maintained outside the
U.S. by the Company, the Subsidiary or any of their respective ERISA
Affiliates for employees substantially all of whom are non-resident aliens
of the U.S. and for which the Company or the Subsidiary may be directly or
indirectly liable.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor code or statute.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any of the Company, the Subsidiary or
any of their respective ERISA Affiliates is making or accruing an
obligation to make contributions, or has within any of the preceding five
years made or accrued an obligation to make contributions.
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"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Company, the Subsidiary or any of their respective ERISA Affiliates and at
least one person other than the Company, the Subsidiary and the respective
ERISA Affiliates or (ii) was so maintained and in respect of which such
Company, Subsidiary or ERISA Affiliates could have liability under Section
4064 or Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's
functions under ERISA.
"Pension Plan" means a Single Employer Plan or Multiple Employer Plan.
"Single Employer Plan" means a "single-employer plan," as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Company, the Subsidiary or any of their respective ERISA Affiliates and no
person other than the Company, the Subsidiary or any of their respective
ERISA Affiliates or (ii) was so maintained and in respect of which such
Company, Subsidiary or any of their respective ERISA Affiliates could have
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
(u) Neither the Company nor the Subsidiary is subject to regulation
under the Public Utility Holding Company Act of 1935, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or
other Law which regulates the incurrence by the Company or the Subsidiary
of indebtedness, including, but not limited to, Laws relating to common
contract carriers or the sale of electricity, gas, steam, water or other
public utility services.
(v) (A) Each of the Company and the Subsidiary owns or is licensed to
use all patents, trademarks, tradenames, copyrights, technology, know-
how and processes necessary for the conduct of the business of the
Company or the Subsidiary as currently conducted ("Intellectual
Property"), except where the failure to own or license such
Intellectual Property, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(B) To the Company's knowledge, no material claim has been
asserted by any person with respect to the use of any such
Intellectual Property, or challenging or questioning the validity or
effectiveness of any such Intellectual Property; to the Company's
knowledge, the use of such Intellectual Property by the Company or the
Subsidiary does not infringe on the rights of any person, subject to
such claims and infringements as would not, individually or in the
aggregate, have a Material Adverse Effect; the consummation of the
issue and sale of the Notes as contemplated herein will not impair the
ownership of (or the license to use, as the case may be) such
Intellectual Property by the Company or the Subsidiary.
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(w) (A) the operations of each of the Company and the Subsidiary
(including, without limitation, as the term is used throughout this
Section 1(w), all operations and conditions at or in the Facilities)
comply in all material respects with all Environmental Laws except for
any such noncompliance which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect;
(B) each of the Company and the Subsidiary has obtained all
Permits under Environmental Laws necessary to its operations under
currently applicable Laws, and all such Permits are being maintained
in good standing and each of the Company and the Subsidiary is in
compliance with all material terms and conditions of such Permits
except for any such failure to obtain, maintain or comply which,
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect;
(C) neither the Company nor the Subsidiary has received (a) any
notice or claim to the effect that it is or may be liable to any
person under any Environmental Law, including without limitation, any
notice or claim relating to any Hazardous Materials except as would
not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect or (b) any letter or request for information
under Section 104 of the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9604) or comparable
foreign or state laws regarding any matter which, individually or in
the aggregate, would reasonably be expected to result in a Material
Adverse Effect, and, to the best of the Company's knowledge, neither
the Company nor the Subsidiary is or will be involved in any
investigation, response or corrective action relating to or in
connection with any Hazardous Materials at any Facility or at any
other location except for such of the foregoing which, individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect;
(D) neither the Company nor the Subsidiary is subject to any
judicial or administrative proceeding alleging the violation of or
liability under any Environmental Laws which if adversely determined,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect;
(E) neither the Company, the Subsidiary nor any of their
respective Facilities or operations is subject to any outstanding
written order or agreement with any governmental authority or private
party relating to (a) any actual or potential violation of or
liability under Environmental Laws or (b) any Environmental Claims
except for such of the foregoing which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect;
(F) neither the Company nor the Subsidiary has any contingent
liability in connection with any Release or threatened Release of any
Hazardous Materials by
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either the Company or the Subsidiary except for such of the foregoing
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect;
(G) neither the Company nor the Subsidiary or any predecessor of
either the Company or the Subsidiary has filed any notice required
under any Environmental Law indicating past or present treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R.
Parts 260-270 or any state equivalent which would reasonably be
expected to have a Material Adverse Effect;
(H) no Hazardous Materials exist on, under or about any Facility
in a manner that, individually or in the aggregate, would reasonably
be expected to give rise to an Environmental Claim having a Material
Adverse Effect; neither the Company nor the Subsidiary has filed any
notice or report of a Release of any Hazardous Materials that,
individually or in the aggregate, would reasonably be expected to give
rise to an Environmental Claim having a Material Adverse Effect;
(I) neither the Company, the Subsidiary nor, to the best of the
Company's knowledge, any of their respective predecessors, has
disposed of any Hazardous Materials in a manner that, individually or
in the aggregate, would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(J) no unregistered or noncompliant underground storage tanks
and no unmonitored or otherwise noncompliant surface impoundments are
on or at any Facility; and
(K) no Lien in favor of any person relating to or in connection
with any Environmental Claim has been filed or has been attached to
any Facility or other assets of either the Company or the Subsidiary
except for any such Lien which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
Notwithstanding anything in this Section 1(x) to the contrary, no
event or condition has occurred which may interfere with present compliance
by the Company or the Subsidiary with any Environmental Law or which may
give rise to any liability under any Environmental Law, which, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Environmental Claim" means any allegation, notice of violation,
claim, demand, abatement order or other order or direction (conditional or
otherwise) by any governmental authority or any person for any response or
corrective action, any damage,
12
including, without limitation, personal injury (including sickness, disease
or death), property damage, contribution, indemnity, indirect or
consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, in each case arising under or relating to any
Environmental Law, including without limitation, relating to, resulting
from or in connection with Hazardous Materials and relating to the Company,
the Subsidiary or any of their respective Facilities or predecessors in
interest.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, requirements, judgments, plans,
policies or decrees and the like relating to (i) environmental matters,
including, without limitation, those relating to fines, injunctions,
penalties, damages, contribution, cost recovery compensation, losses or
injuries resulting from the Release or threatened Release of Hazardous
Materials, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials including, without limitation, investigation, study,
assessment, testing, monitoring, containment, removal, remediation, or
clean-up of any such Release, or (iii) occupational safety and health,
industrial hygiene or the protection of the environment, natural resources,
human, plant or animal health or welfare, including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. (S) 9601 et. seq.), the Hazardous Materials Transportation Act
-- ---
(49 U.S.C. (S) 1801 et seq.), the Resource Conservation and Recovery Act
-- ---
(42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control Act (33
-- ---
U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.),
-- --- -- ---
the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the Federal
-- ---
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.), the
-- ---
Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) and the
-- ---
Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et
--
seq.), each as amended or supplemented, and any analogous future or present
---
statutes, orders, rules, regulations, requirements, judgments or decrees
promulgated pursuant thereto, each as in effect as of the date of
determination.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now, hereafter or heretofore owned, leased, operated or used by the
Company, the Subsidiary or any of their respective predecessors in
interest.
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous substance," "restricted hazardous waste," "infectious waste,"
"toxic substances" or any other formulations intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar
import under any applicable Environmental Laws or publications issued
pursuant thereto; (ii) any oil, petroleum, petroleum fraction or petroleum
derived substance; (iii) any drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources, (iv) any flammable substances or
explosives; (v) any radioactive
13
materials or gases; (vi) asbestos in any form; (vii) urea formaldehyde foam
insulation; (viii) electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess
of fifty parts per million; (ix) pesticides; (x) lead-based paint; and (xi)
any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority or which may or could
pose a hazard to human health or safety or the environment.
"Permits" has the meaning ascribed to it in Section 1(x) below.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including, without limitation, the abandonment or
disposal of any barrels, containers or other closed receptacles containing
any Hazardous Materials), or onto or out of any Facility, including the
movement of any Hazardous Material through the air, soil, surface water,
groundwater or property.
(x) Each of the Company and the Subsidiary has such certificates,
permits, licenses, franchises, consents, approvals, authorizations and
clearances ("Permits"), and is in compliance in all material respects with all
Laws as are necessary to own, lease or operate its properties and to conduct its
businesses in the manner as presently conducted and to be conducted immediately
after the consummation of the issue and sale of the Notes as contemplated
herein, except where the failure to have such Permits or to comply with such
Laws would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, and all such Permits are valid and in full force and
effect. Each of the Company and the Subsidiary is in compliance in all material
respects with its obligations under such Permits and no event has occurred or
will occur as a result of the consummation of the issue and sale of the Notes
and the other transactions contemplated herein that allows, or after notice or
lapse of time or both would allow, revocation or termination of such Permits
except for any such revocation or termination as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(y) Each of the Company and the Subsidiary carries insurance or is
entitled to the benefits of insurance in such amounts and covering such risks as
is generally maintained by companies of established repute engaged in the same
or similar businesses, and all such insurance is in full force and effect.
(z) No labor disturbance by the employees of the Company or the
Subsidiary exists or, to the best knowledge of the Company, is threatened and
the Company is not aware of any existing or imminent labor disturbance which
would reasonably be expected to have a Material Adverse Effect.
(aa) Any reprogramming and related testing required to permit the
proper functioning of each of the Company's and the Subsidiary's computer
systems in and following the year 2000 will be completed in all material
respects prior to December 31, 1999 (that is, each of the Company and the
Subsidiary will be "Year 2000 Compliant"), and the cost to each of the
14
Company and the Subsidiary of such reprogramming and testing will not result in
a default under any Contract nor would reasonably be expected to have a Material
Adverse Effect. Except for such reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems of
each of the Company and the Subsidiary are adequate for the conduct of its
business.
(bb) Except for the fees and expenses payable to the Initial
Purchaser, the Company did not employ any investment banker, broker, finder,
consultant, intermediary or other person in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby.
Any certificate signed by any officer of the Company and delivered to
the Initial Purchaser or its counsel shall be deemed to be a representation and
warranty made as of the date of such certificate by the Company to the Initial
Purchaser as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees to issue and sell to the Initial Purchaser, and the Initial Purchaser
agrees to purchase from the Company at a purchase price equal to 95.25% of the
principal amount thereof, $100,000,000 in principal amount of Notes.
3. Delivery and Payment. Delivery of and payment for the Notes shall
--------------------
be made at 10:00 AM, New York City time, on January 21, 1999, which date and
time may be postponed by agreement between the Initial Purchaser and the Company
(such date and time of delivery and payment for the Notes being herein called
the "Closing Date"). Delivery of the Notes shall be made to the Initial
Purchaser against payment by the Initial Purchaser of the purchase price thereof
to or upon the order of the Company by wire transfer payable in same day funds
or such other manner of payment as may be agreed by the Company and the Initial
Purchaser. Delivery of the Notes and payment for the Notes shall be made at the
offices of Cleary, Gottlieb, Xxxxx & Xxxxxxxx, Xxx Xxxxxxx Xxxxx, Xxx Xxxx, XX
00000. Certificates for the Notes shall be registered in such names and in such
denominations as the Initial Purchaser may request in writing not less than two
full Business Days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchaser in New York, New York, not later
than 1:00 PM on the Business Day prior to the Closing Date.
4. Offering of Notes and the Initial Purchaser' Representations and
----------------------------------------------------------------
Warranties. The Initial Purchaser represents and warrants to and agrees with
----------
the Company that:
(a) It has not offered or sold, and it will not offer or sell, any
Notes except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A under the Securities Act)
("QIBs") in transactions meeting the requirements of Rule 144A, (ii) to
other institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) who provide to it and to the
Company a letter in the
15
form of Exhibit A hereto or (iii) in compliance with Regulation S under the
Securities Act and in accordance with the restrictions set forth in Exhibit
B hereto. In connection with each sale pursuant to clause (i) above, the
Initial Purchaser has taken or will take reasonable steps to ensure that
the purchaser of such Notes is aware that such sale is being made in
reliance upon Rule 144A.
(b) It is an "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act).
(c) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Notes by means of any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act).
5. Agreements. The Company agrees with the Initial Purchaser that:
----------
(a) The Company will furnish to the Initial Purchaser and to Cleary,
Gottlieb, Xxxxx & Xxxxxxxx ("Counsel for the Initial Purchaser") as soon as
reasonably possible, without charge, during the period referred to in
paragraph (c) below, as many copies of the Final Memorandum and any
amendments and supplements thereto as they may reasonably request. The
Company will pay the expenses of printing or other production of all
documents relating to the offering of the Notes and will reimburse the
Initial Purchaser for payment of the required PORTAL filing fee.
(b) The Company will not amend or supplement the Final Memorandum
prior to the completion of the distribution of the Notes by the Initial
Purchaser, without the prior written consent of the Initial Purchaser,
which will not be unreasonably withheld.
(c) If at any time prior to the completion of the distribution of the
Notes acquired by the Initial Purchaser pursuant to this Agreement, during
which time you are required to deliver a Final Memorandum in connection
with sales of the Notes by you (as reasonably determined by the Initial
Purchaser, upon the advice of counsel), any event occurs as a result of
which the Final Memorandum, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it should be necessary to
amend or supplement the Final Memorandum to comply with applicable law, the
Company will promptly notify the Initial Purchaser of the same and, subject
to the requirements of paragraph (b) of this Section 5, will prepare and
provide to the Initial Purchaser pursuant to paragraph (a) of this Section
5, an amendment or supplement that will correct such statement or omission
or effect such compliance.
(d) The Company will arrange for the qualification of the Notes for
sale by the Initial Purchaser under the laws of such jurisdictions as the
Initial Purchaser may reasonably designate and will maintain such
qualifications in effect so long as required for the sale of the Notes by
the Initial Purchaser; provided, however, that the Company will not be
-------- -------
required to qualify generally to do business in any jurisdiction in which
it is
16
not then so qualified, to file any general consent to service of process or
to take any other action which would subject it to general service of
process or to taxation in any such jurisdiction where it is not then so
subject. The Company will promptly advise the Initial Purchaser of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(e) The Company, whenever it publishes or makes available to the
public (by filing with any regulatory authority or securities exchange or
by publishing a press release or otherwise) any information that would
reasonably be expected to be material in the context of the issue of the
Notes under this Agreement, shall promptly notify the Initial Purchaser as
to the nature of such information or event. The Company will likewise
notify the Initial Purchaser of (i) any decrease in the rating of the Notes
or any other debt securities of the Company by any nationally recognized
statistical rating organization (as defined in Rule 436(g)(2) under the
Securities Act) or (ii) any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating that
does not indicate the direction of the possible change, as soon as the
Company becomes aware of any such decrease or notice. The Company will
also deliver to the Initial Purchaser, as soon as available and without
request, copies of its latest yearly and quarterly financial statements and
any report of its auditors thereon.
(f) The Company will not, and will not permit any of its Affiliates
to, resell any of the Notes that have been acquired by any of them, other
than pursuant to an effective registration statement under the Securities
Act.
(g) Except as contemplated in the Registration Rights Agreement, none
of the Company or any of its Affiliates, nor any person acting on its or
their behalf (other than the Initial Purchaser or any of its Affiliates, as
to whom the Company expresses no opinion) will, directly or indirectly,
make offers or sales of any security, or solicit offers to buy any
security, under circumstances that would require the registration of the
Notes under the Securities Act.
(h) None of the Company or any of its Affiliates, nor any person
acting on its or their behalf (other than the Initial Purchaser or any of
its Affiliates, as to whom the Company expresses no opinion) will engage in
any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the Notes.
(i) So long as any of the Notes are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, the Company will
provide at its expense to each holder of the Notes and to each prospective
purchaser (as designated by such holder) of the Notes, upon the request of
such holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Securities Act, unless the Company is
then subject to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended
00
(xxx "Xxxxxxxx Xxx"). This covenant is intended to be for the benefit of
the holders, and the prospective purchasers designated by such holders from
time to time, of the Notes.
(j) The Company will cooperate with the Initial Purchaser and use its
best efforts to (i) permit the Notes to be designated PORTAL securities in
accordance with the Rules and regulations of the NASD relating to trading
in the Private Offerings, Resale and Trading through Automated Linkages
market ("PORTAL") and (ii) permit the Notes to be eligible for clearance
and settlement as described under "Book-Entry; Delivery and Form" in the
Final Memorandum.
(k) The Company will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(l) The Company will conduct its operations in a manner that will not
subject the Company to registration as an investment company under the
Investment Company Act of 1940, as amended.
(m) Each Note will bear a legend substantially to the following
effect until such legend shall no longer be necessary or advisable because
the Notes are no longer subject to the restrictions on transfer described
therein:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ADOPTED UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S ADOPTED UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
ADOPTED UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EITHER CASE, IN A MINIMUM
PRINCIPAL AMOUNT OF THE NOTES OF U.S. $250,000, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, AND THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-
18
DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH REGULATION S ADOPTED UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
ADOPTED UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT.
6. Conditions to the Obligations of the Initial Purchaser. The
------------------------------------------------------
obligation of the Initial Purchaser to purchase the Notes shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein at the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time") and the Closing Date, to
the accuracy of the statements of the Company made in any certificates pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Company shall have furnished to the Initial Purchaser the
opinion of Xxxxxx & Bird LLP ("Counsel for the Company"), dated the Closing
Date, in form and substance satisfactory to the Initial Purchaser, to the
effect set forth in Exhibit C hereto.
(b) The Initial Purchaser shall have received from Counsel for the
Initial Purchaser such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Notes and other related matters as
the Initial Purchaser may reasonably require, and the Company shall have
furnished to such counsel such documents as it reasonably requests for the
purpose of enabling it to pass upon such matters.
(c) The Company shall have furnished to the Initial Purchaser a
certificate dated the Closing Date, signed on behalf of the Company by any
two of its Chairman of the Board and Chief Executive Officer, President,
Chief Financial or Accounting Officers and any Vice President to the effect
that the signer of such certificate has carefully
19
examined the Final Memorandum, any amendment or supplement to the Final
Memorandum and this Agreement and that:
(i) the representations and warranties of the Company contained
in this Agreement are, without giving effect to any qualification
regarding a Material Adverse Effect that may be contained in any of
them, true, correct and complete in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date,
and the Company has performed and complied with all the covenants and
agreements and satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date; and
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no change or
development or event involving a prospective change which,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, except as set forth in or contemplated by
the Final Memorandum (exclusive of any amendment or supplement
thereto);
(d) At the Execution Time and at the Closing Date,
PricewaterhouseCoopers LLP shall have furnished to the Initial Purchaser a
letter or letters, dated respectively as of the Execution Time and as of
the Closing Date, in form and substance satisfactory to the Initial
Purchaser, confirming that they are independent public accountants within
the meaning of Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants (the "AICPA") and stating in
effect that:
(i) (a) on the basis of a reading of the unaudited financial
statements of the Company for the nine month period ended September
30, 1998 made available by the Company; their limited review in
accordance with the standards established by the AICPA under Statement
on Auditing Standards No. 71 of the unaudited interim financial
statements; carrying out certain specified procedures (but not an
audit in accordance with generally accepted auditing standards) that
would not necessarily reveal matters of significance with respect to
the comments set forth in such letter and a reading of the minutes of
the meetings of the board of directors of the Company and
(b) on the basis of a reading of the unaudited consolidated
financial statements of the Company for October and November of both
1998 and 1997 furnished by the Company and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters of the Company as to whether the unaudited
consolidated financial statements referred to in this clause (b) are
stated on a basis substantially consistent with that of the audited
consolidated financial statements of the Company included in the Final
Memorandum and a reading of the minutes of the meetings of the board
of directors of the Company, nothing came to their attention that
caused them to believe that
20
(A) any material modifications should be made to the
unaudited financial statements of the Company described in
clause (i)(a) above included in the Final Memorandum, for them
to be in conformity with generally accepted accounting
principles, or
(B) at November 30, 1998, there was any change in capital
stock, increases in long-term debt, decrease in consolidated net
current assets or in stockholders' equity, as compared with
amounts shown in the September 30, 1998 unaudited consolidated
balance sheet of the Company included in the Final Memorandum,
or for the period from October 1, 1998 to November 30, 1998,
there were any decreases, as compared with the corresponding
period in the preceding year, in net sales or net income, except
in all instances for changes or decreases set forth in such
letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless
said explanation is not deemed necessary by the Initial
Purchaser.
(ii) on the basis of inquiries of certain officials of the
Company who have responsibility for financial and accounting matters
of the Company as to whether (a) at January 13, 1999, there was any
change in the common stock, increase in long-term debt or decrease in
consolidated net current assets or in stockholders' equity, as
compared with amounts shown in the September 30, 1998 unaudited
consolidated balance sheet of the Company included in the Final
Memorandum or (b) for the period from December 1, 1998 to January 13,
1999, there were any decreases, as compared with the corresponding
period in the preceding year, in net sales or net income, nothing came
to attention that caused them to believe that there were any such
change, increase or decrease, except for such changes, increases or
decreases that the Final Memorandum discloses have occurred or may
occur.
(iii) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth in the Final
Memorandum, including without limitation the information set forth
under the captions "Offering Memorandum Summary," "Summary Unaudited
as Adjusted Financial Information," "Summary Historical Financial
Information," "Risk Factors," "Use of Proceeds," "Capitalization,"
"Selected Financial and Operating Information," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and "Certain Relationships and Related Party
Transactions," in the Final Memorandum agrees with the accounting
records of the Company, excluding any questions of legal
interpretation.
21
All references in this Section 6(d) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the date of the
letter or letters.
(e) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum and prior to the Closing
Date, there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraph (d) of this Section 6, or (ii)
any change, or any development involving a prospective change, in or
affecting the business or properties of the Company and the Subsidiary, the
effect of which, in any case referred to in clause (i) or (ii) above, is,
in the judgment of the Initial Purchaser, so material and adverse as to
make it impractical or inadvisable to market the Notes as contemplated by
the Final Memorandum.
(f) Subsequent to the respective dates as of which information is
given in the Final Memorandum, after giving effect to the issue and sale of
the Notes as contemplated herein and on or prior to the Closing Date, (i)
neither the Company nor the Subsidiary shall have incurred any material
liability or obligation, direct or contingent, or entered into any material
transaction not in the ordinary course of business; (ii) the Company shall
not have purchased any of its outstanding capital stock, nor declared, paid
or otherwise made any dividend or distribution of any kind on its capital
stock; (iii) there shall not have been any material change in the capital
stock of the Company and the Subsidiary or in the short-term debt or long-
term debt of the Company or the Subsidiary; and (iv) none of the material
assets of the Company and the Subsidiary shall have materially diminished
in value (ordinary wear and tear excepted), except in each case as
described in or contemplated by the Final Memorandum.
(g) On the Closing Date, the Notes shall have a rating from Standard
& Poor's Corporation at least as favorable as B2 and from Xxxxx'x Investors
Service, Inc. at least as favorable as B.
(h) On or prior to the Closing Date, each of the Transaction
Documents (including any amendments thereto) shall have been duly
authorized, executed and delivered by each of the parties thereto, and the
Initial Purchaser shall have received copies of each such Transaction
Document (including any amendments thereto) as so executed and delivered in
the form provided to the Initial Purchaser on or before the date hereof,
except for changes approved by the Initial Purchaser.
(i) Concurrently with the consummation of the Transactions, all
amounts due and payable under the Senior Subordinated Credit Agreement
dated as of September 30, 1998 among the Company as borrower, certain
subsidiaries from time to time party thereto as guarantors, First Union
Investors, Inc. as agent and the lenders named therein, (the "Senior
Subordinated Credit Agreement") shall be paid on the Closing Date from the
proceeds of the sale of the Notes to the Initial Purchasers and any liens
securing amounts due and payable under the Senior Subordinated Credit
Agreement shall have been released effective upon receipt of such payments.
22
(j) The Company shall have been advised by the National Association
of Securities Dealers, Inc. (the "NASD") that the Notes have been
designated PORTAL-eligible securities in accordance with the Rules and
regulations of the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages Market (the "PORTAL
Market").
(k) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), the business or operations of the Company or the
Subsidiary shall not have been interfered with by fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any strike, labor dispute, slow down or work stoppage or from any legal or
governmental proceeding, order or decree, and the Company and the
Subsidiary and their properties shall not have sustained any loss or
damage, whether or not covered by insurance, as a result of any such
occurrence, except for any such interference, loss or damage which has not
had, and would not reasonably be expected to have, a Material Adverse
Effect.
(l) Prior to the Closing Date, the Company and the Subsidiary shall
have furnished to the Initial Purchaser or Counsel for the Initial
Purchaser such further information, certificates and documents as the
Initial Purchaser or Counsel for the Initial Purchaser may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
satisfactory in form and substance to the Initial Purchaser and Counsel for the
Initial Purchaser, this Agreement and all obligations of the Initial Purchaser
hereunder may be canceled at the Closing Date by the Initial Purchaser. Notice
of such cancellation shall be given to the Company in writing or by telephone or
by telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Cleary, Gottlieb, Xxxxx & Xxxxxxxx on the Closing
Date.
7. Reimbursement of Expenses; Fees. (a) The Company will, whether or
-------------------------------
not the sale of the Notes provided for herein is consummated, pay all expenses
incident to the performance of its obligations under this Agreement and the
offering documents, including the fees and disbursements of its accountants and
counsel, the costs of printing or other production and delivery of the
Preliminary Memorandum, the Final Memorandum, all amendments thereof and
supplements thereto, each Transaction Document and all other documents relating
to the offering of the Notes, the costs of preparing, printing, packaging and
delivering the Notes, the fees and disbursements, including fees of counsel,
incurred in compliance with Section 5(d), the fees and disbursements of the
Trustee and the fees of any agency that rates the Notes, and the fees and
expenses, if any, incurred in connection with the admission of the Notes for
trading in the PORTAL Market.
23
(b) If the sale of the Notes provided for herein is not consummated
because any condition to the obligation of the Initial Purchaser set forth in
Section 6 hereof is not satisfied or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof other than by reason of a default by the Initial
Purchaser, the Company shall reimburse the Initial Purchaser for all reasonable
out-of-pocket expenses (including legal fees and expenses) incurred by the
Initial Purchaser in connection with the proposed purchase and resale of the
Notes.
8. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Final Memorandum or any information provided by the
Company to any Holder or prospective purchaser of Notes pursuant to Section
5(i), or in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
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Company will not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information relating to
the Initial Purchaser furnished to the Company by or on behalf of the Initial
Purchaser specifically for inclusion therein; and, provided, further, that with
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respect to any untrue statement or omission of a material fact made in the
Preliminary Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of the Initial Purchaser to the extent that any
such losses, claims, damages or liabilities asserted against the Initial
Purchaser occurs under circumstances where it shall have been determined by a
court of competent jurisdiction by final and nonappealable judgment that (x) the
Company had previously furnished copies of the Final Memorandum to the Initial
Purchaser as required by this Agreement, (y) the untrue statement or omission of
a material fact contained in the Preliminary Memorandum was corrected in the
Final Memorandum and (z) there was not sent or given to such person asserting
any such losses, claims, damages or liabilities, at or prior to the written
confirmation of the sale of Notes to such person, a copy of the Final
Memorandum. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each person who
controls the Company within the meaning of either the Securities Act or the
Exchange Act to the same extent as the foregoing
24
indemnity from the Company to the Initial Purchaser, but only with reference to
written information relating to the Initial Purchaser furnished to the Company
by or on behalf of the Initial Purchaser specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which the Initial Purchaser may otherwise have.
The Company acknowledges that the statements set forth in the last paragraph of
the cover page and under the heading "Plan of Distribution" in the Preliminary
Memorandum and the Final Memorandum constitute the only information furnished in
writing by or on behalf of the Initial Purchaser for inclusion in the
Preliminary Memorandum or Final Memorandum (or in any amendment or supplement
thereto).
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
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satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall have authorized the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided further, that the indemnifying party shall not be responsible for the
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fees and expenses of more than one separate counsel (together with appropriate
local counsel) representing all the indemnified parties under paragraph (a) or
paragraph (b) above. An indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not an indemnified party is an actual or potential party
to such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
25
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Company, on the one hand, and the Initial Purchaser,
on the other, agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company, on the one hand, and the Initial Purchaser, on the other, may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and by the Initial Purchaser, on the
other, from the offering of the Notes; provided, however, that in no case shall
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the Initial Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Notes purchased by the Initial
Purchaser hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company, on the one hand, and the
Initial Purchaser, on the other, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company, on the one hand, and of the Initial Purchaser, on the
other, in connection with the statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses), and benefits received by the
Initial Purchaser shall be deemed to be equal to the total purchase discounts
and commissions received by the Initial Purchaser from the Company in connection
with the purchase of the Notes hereunder. Relative fault shall be determined by
reference to, among other things, whether any alleged untrue statement or
omission relates to information provided by the Company or the Initial Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Initial Purchaser agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person who controls the Initial Purchaser within the meaning of either
the Securities Act or the Exchange Act and each director, officer, employee and
agent of the Initial Purchaser shall have the same rights to contribution as the
Initial Purchaser, and each person who controls the Company within the meaning
of either the Securities Act or the Exchange Act and each officer, director,
employee and agent of the Company shall have the same rights to contribution as
the Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Termination. This Agreement shall be subject to termination by
-----------
notice given by the Initial Purchaser to the Company prior to delivery of and
payment for the Notes if, after the date hereof and prior to such delivery and
payment, there shall have occurred a material adverse change in the condition of
the financial, banking or capital markets in the United States the effect of
which, in the judgment of the Initial Purchaser, makes it impractical to market
the Notes or to enforce sale contracts with respect to the Notes.
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and
26
of the Initial Purchaser set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of the Initial Purchaser or the Company or any of its officers, directors
or controlling persons referred to in Section 8 hereof, and will survive
delivery of and payment for the Notes. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and
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effective only on receipt, and, if sent to the Initial Purchaser, will be
mailed, delivered or telecopied and confirmed to it at 000 Xxxxx Xxxxxxx Xxxxxx,
XX-00, Xxxxxxxxx, XX 00000-0000, Telecopy No.: (000) 000-0000, Attention: Xxxx
Xxxx; or, if sent to the Company, will be mailed, delivered or telecopied and
confirmed to them at 0000 Xxxxxx Xxxxxxx Xxx, Xxxxxxxxxx, X.X. 00000, Telecopy
No.: (000) 000-0000, Attention: Chief Financial Officer.
12. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and assigns and
the officers and directors and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(i) hereof, nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm, corporation or other entity any legal or equitable
right, remedy or claim under or in respect to this Agreement or any provisions
herein contained. No purchaser of Notes from the Initial Purchaser shall be
deemed to be a successor merely by reason of such purchase.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
--------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
14. Business Day. For purposes of this Agreement, "Business Day"
------------
means any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of Charlotte, North Carolina or of New York, New York, or is a
day on which banking institutions therein located are authorized or required by
law or other governmental action to close.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
27
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement among the
Company and the Initial Purchaser.
Very truly yours,
BGF INDUSTRIES, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
----------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Senior Vice-President
Chief Financial Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Xxxx Xxxx
-------------------
Name: Xxxx Xxxx
Title: Director
