COMMUNITY DISTRIBUTORS, INC.
(Payment of Principal and Interest Guaranteed
by CDI Group, Inc.)
$80,000,000
10.25% Senior Notes due 2004
PURCHASE AGREEMENT
October 10, 1997
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
$80,000,000
10.25% Senior Notes due 2004
of COMMUNITY DISTRIBUTORS, INC.
(Payment of Principal and Interest Guaranteed by
CDI Group, Inc.)
PURCHASE AGREEMENT
October 10, 1997
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Community Distributors, Inc. (the "Company"), a Delaware corporation,
proposes to issue and sell to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
Corporation ("DLJ") and Bear, ▇▇▇▇▇▇▇ & Co. Inc. (each an "Initial Purchaser"
and, collectively, the "Initial Purchasers") an aggregate of $80,000,000 in
principal amount of its 10.25% Senior Notes due 2004 (the "Series A Notes"),
subject to the terms and conditions set forth herein. The Series A Notes are to
be issued pursuant to the provisions of an indenture (the "Indenture"), to be
dated as of the Closing Date (as defined below), among the Company, CDI Group,
Inc. (the "Holding Company") and The Bank of New York, as trustee (the
"Trustee"). The Series A Notes and the Series B Notes (as defined below)
issuable in exchange therefor are collectively referred to herein as the
"Notes." The Notes will be guaranteed (the Guarantee") by the Holding Company.
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Indenture.
1. Offering Memorandum. The Series A Notes 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 Company and the Holding Company have prepared a preliminary offering
memorandum, dated September 26 1997 (the "Preliminary Offering Memorandum") and
a final offering memorandum, dated October 10, 1997 (the "Offering Memorandum"),
relating to the Series A Notes and the Guarantee.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities (other than the Series B Notes) issued in exchange therefor, in
substitution thereof or upon conversion thereof) shall bear the following
legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
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 FOLLOWING 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)(A "QIB"), (B) IT IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES 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 (AN "IAI"), OR (D) IT HAS OTHERWISE ACQUIRED THIS NOTE OR A
BENEFICIAL INTEREST HEREIN IN ACCORDANCE WITH THE TERMS OF THE INDENTURE
RELATING TO THIS NOTE AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS,
(2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE
144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE
SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE
DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR THE HOLDING COMPANY, (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, (D) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE
FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
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SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT 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 NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "U.S. PERSONS" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO
THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE 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 Company agrees to issue and sell to the
Initial Purchasers, and the Initial Purchasers agree, severally and not jointly,
to purchase from the Company, the principal amount of Series A Notes set forth
opposite the name of such Initial Purchaser on Schedule A hereto at a purchase
price equal to 97% of the principal amount thereof (the "Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised the Company that
the Initial Purchasers will make offers (the "Exempt Resales") of the Series A
Notes purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to (i) persons whom the Initial Purchasers
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBs") or (ii) persons permitted to purchase the Series A
Notes in offshore transactions in reliance upon Regulation S under the Act
(each, a "Regulation S Purchaser") (such persons specified in clauses (i) and
(ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will have
registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "Transfer Restricted Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Holding Company will agree to
4
use their respective reasonable best efforts to file with the Securities and
Exchange Commission (the "Commission"), under the circumstances set forth
therein, (i) a registration statement under the Act (the "Exchange Offer
Registration Statement") relating to the Company's 10.25% Senior Notes due 2004
(the "Series B Notes"), to be offered in exchange for the Series A Notes (such
offer to exchange being referred to as the "Exchange Offer") and the Guarantee
thereof and (ii) if necessary pursuant to the terms thereof, a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Series A Notes, and use their respective reasonable best efforts
to cause such Registration Statements to be declared and remain effective and
usable for the periods specified in the Registration Rights Agreement and to
consummate the Exchange Offer. This Agreement, the Indenture, the Notes, the
Guarantee, and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A
Notes shall be made at the office of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, 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 October 16, 1997, or at such other time as shall be
agreed upon by the Initial Purchasers and the Company. The time and date of such
delivery and the payment are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Series A Notes (collectively, the "Global Notes") shall
be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct) in each case with any transfer taxes thereon duly paid by the
Company against payment by the Initial Purchasers of the Purchase Price thereof
by wire transfer in same day funds to the order of the Company. The Global Notes
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 Company and the Holding Company. Each of the Company
and the Holding Company hereby agrees with each Initial Purchaser as follows:
5
(a) To advise the Initial Purchasers promptly and, if requested by an
Initial Purchaser, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by an Initial Purchaser pursuant to Section 5(e) hereof,
or the initiation of any proceeding by any state securities commission or any
other federal or state regulatory authority for such purpose and (ii) of the
happening of any event during the period referred to in Section 5(d) hereof 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 Offering Memorandum in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Company shall use its reasonable best efforts
to prevent the issuance of any stop order or order suspending the qualification
or exemption of any Series A Notes under any state securities or Blue Sky laws
and, if at any time any state securities commission or other federal or state
regulatory authority shall issue an order suspending the qualification or
exemption of any Series A Notes under any state securities or Blue Sky laws, the
Company shall use its reasonable best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Company, without charge, 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.
Subject to the Initial Purchasers' compliance with their representations and
warranties and agreements set forth in Section 7 hereof, the Company consents to
the use of the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments and supplements thereto required pursuant hereto, by the Initial
Purchasers in connection with Exempt Resales.
(c) During the period referred to in Section 5(d) hereof, (i) 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 (ii) to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
supplement to the Offering Memorandum which may be reasonably necessary or
advisable in connection with Exempt Resales.
(d) If, after the date hereof during such period as in the
6
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, any event shall occur 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 it is necessary to amend or supplement the
Offering Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances 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 the Series A Notes 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 Series A Notes 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 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 Company nor
the Holding Company shall be required in connection therewith to register or
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal year to
the record holders of the Notes a financial report of the Company and its
subsidiaries, if any on a consolidated basis (and a similar financial report
of all unconsolidated subsidiaries, if any), all such financial reports to
include a consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholder's equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent certified public accountants and (ii) to mail and make
generally available as soon as practicable after the end of
7
each quarterly period (except for the last quarterly period of each fiscal year)
to such holders, a consolidated balance sheet, a consolidated statement of
operations and a consolidated statement of cash flows (and similar financial
reports of all unconsolidated subsidiaries, if any) as of the end of and for
such period, and for the period from the beginning of such year to the close of
such quarterly period, together with comparable information for the
corresponding periods of the preceding year; provided, however, that the above
requirements shall be deemed satisfied upon delivery by the Company of an Annual
Report on Form 10-K (in the case of clause (i) above) or a Quarterly Report on
Form 10-Q (in the case of clause (ii) above) which complies with the
requirements of the Commission.
(g) So long as the Notes are outstanding, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
(other than publicly disseminated press releases) furnished by either the
Company or the Holding Company to its security holders or furnished to or filed
with the Commission or any national securities exchange on which any class of
securities of either the Company or the Holding Company is listed and such other
publicly available information concerning the Company, the Holding Company
and/or their respective subsidiaries, if any, as the Initial Purchasers may
reasonably request.
(h) For so long as any of the Series A Notes remain outstanding and
during any period in which the Company and the Holding Company, and their
respective subsidiaries, if any, are not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any holder of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such holder, the
information ("Rule 144A Information") required by Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to performance of the obligations of the Company and the
Holding Company under this Agreement including: (i) the fees, disbursements and
expenses of counsel to the Company and the Holding Company and accountants of
the Company and the Holding Company in connection with the sale and delivery of
the Series A Notes to the Initial Purchasers and pursuant to Exempt Resales, and
all other fees or 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) prior to or during the period specified in Section 5(d) hereof,
including the mailing and delivering of copies thereof to the Initial Purchasers
and persons
8
designated by them as specified herein, (ii) all costs and expenses related to
the transfer and delivery of the Series A Notes to the Initial Purchasers,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes and the Guarantee 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 reasonable fees
and disbursements of counsel for the Initial Purchasers in connection with such
registration or qualification and memoranda relating thereto), (v) the cost of
printing certificates representing the Series A Notes and the Guarantee, (vi)
all expenses and listing fees in connection with the application for quotation
of the Series A Notes in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and
expenses of the Trustee and Trustee's counsel in connection with the Indenture,
the Notes and the Guarantee, (viii) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC) for the Notes, (ix) any fees charged
by rating agencies for the rating of the Notes, (x) all costs and expenses of
the Exchange Offer and any Registration Statement, as set forth in the
Registration Rights Agreement, and (xii) all other costs and expenses incident
to the performance of the obligations of the Company and the Holding Company
hereunder for which provision is not otherwise made in this Section 5.
(j) To use its reasonable best efforts to permit the inclusion of the
Series A Notes in PORTAL and to permit the listing of the Series A Notes on
PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the
Notes, and to comply with all of its agreements set forth in the representation
letters of the Company and the Holding Company to DTC relating to the approval
of the Notes by DTC for "book entry" transfer.
(l) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or the
Holding Company or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or the Holding Company substantially
similar to the Notes and the Guarantee (other than (i) the Notes and the
Guarantee and (ii) commercial paper issued in the ordinary course of business),
without the prior written consent of the Initial Purchasers.
9
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes and the Guarantee thereof by the Holding Company
registered pursuant to the Act to be offered in exchange for the Series A Notes
and the Guarantee, to comply with all of its other agreements set forth in the
Registration Rights Agreement and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(p) 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 Series A Notes and the Guarantee.
6. Representations and Warranties of the Company and the Holding Company.
As of the date hereof, each of the Company and the Holding Company represents
and warrants to each Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do
not, and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. The Company
acknowledges for all purposes under this Agreement that the statements with
respect to price and discount and the last paragraph on the cover page of the
Offering Memorandum, the information contained in the first, third, fourth,
ninth and tenth paragraphs under the caption "Plan of Distribution" in the
Preliminary Offering Memorandum and the
10
Offering Memorandum, and the information regarding stabilization on the inside
front cover of the Preliminary Offering Memorandum and the Offering Memorandum
(or any amendment or supplement thereto) constitute the only written information
furnished to the Company by or on behalf of any Initial Purchaser expressly for
use in the Preliminary Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto) and that the Initial Purchasers shall not be
deemed to have provided any other information (and therefore are not responsible
for any such statement or omission) pertaining to any arrangement or agreement
with respect to any party other than the Initial Purchasers. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company and the Holding Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the power and authority to
carry on its business as described in the Preliminary Offering Memorandum and
the Offering Memorandum and to own, lease and operate its properties, and each
is duly qualified and is in good standing as a foreign corporation authorized to
do business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not (i) have a material adverse effect on the
business, business prospects, financial condition or results of operations of
the Company and the Holding Company, taken as a whole, (ii) materially interfere
with or materially adversely affect the issuance or marketability of the Series
A Notes pursuant hereto or (iii) in any manner draw into question the validity
of this Agreement or the other Operative Documents (the events referred to in
clauses (i) through (iii), a "Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company and the
Holding Company have been duly authorized and validly issued and are fully paid
and non-assessable, and were not issued in violation of any preemptive or
similar rights of securityholders of the Company or the Holding Company, as
applicable.
(d) All of the outstanding shares of capital stock of the Company are
owned by the Holding Company, free and clear of any security interest, claim,
lien encumbrances or adverse interest of any nature (each, a "Lien") and, except
for the ownership by the Holding Company of the capital stock of the Company,
neither the Holding Company nor the Company has any equity or other ownership
11
interest in any other entity.
(e) This Agreement has been duly authorized, executed and delivered by
the Company and the Holding Company.
(f) The Indenture has been duly authorized by the Company and the
Holding Company and, on the Closing Date, will have been validly executed and
delivered by the Company and the Holding Company. When the Indenture has been
duly executed and delivered by the Company and the Holding Company, the
Indenture will be a valid and binding agreement of the Company and the Holding
Company, enforceable against the Company and the Holding Company in accordance
with its terms (assuming the due execution and delivery of the Indenture by the
Trustee) 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"), and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by the Company. When the
Series A Notes have been issued, executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability. On the Closing Date, the Series A
Notes will conform as to legal matters to the description thereof contained in
the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly
authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of
12
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(i) The Guarantee to be endorsed on the Series A Notes by the Holding
Company has been duly authorized by the Holding Company and, on the Closing
Date, will have been duly executed and delivered by the Holding Company. When
the Series A 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, the Guarantee of the Holding
Company endorsed thereon will be entitled to the benefits of the Indenture and
will be the valid and binding obligation of the Holding Company, enforceable
against the Holding Company in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability. On the Closing Date, the Guarantee to be endorsed on the
Series A Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(j) The Guarantee to be endorsed on the Series B Notes by the Holding
Company has been duly authorized by the Holding Company and, when issued, will
have been duly executed and delivered by the Holding Company. When the Series B
Notes have been issued, executed and authenticated in accordance with the terms
of the Exchange Offer and the Indenture, the Guarantee of the Holding Company
endorsed thereon will be entitled to the benefits of the Indenture and will be
the valid and binding obligation of the Holding Company, enforceable against the
Holding Company in accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability. When the Series B Notes are issued, authenticated and delivered,
the Guarantee to be endorsed on the Series B Notes will conform as to legal
matters to the description thereof contained in the Offering Memorandum.
(k) The Registration Rights Agreement has been duly authorized by the
Company and the Holding Company and, on the Closing Date, will have been duly
executed and delivered by the Company and the Holding Company. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company and the Holding Company, enforceable against the Company and the Holding
Company in accordance with its terms, except as (i) the enforceability thereof
may be
13
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 or
(iii) as to any indemnification or contribution provision thereof,
enforceability thereof may be limited by any applicable securities laws, rules
or regulations or by public policy. On the Closing Date, the Registration Rights
Agreement will conform as to legal matters to the description thereof contained
in the Offering Memorandum.
(l) Neither the Company nor the Holding Company is (i) in violation of
its respective charter or by-laws or (ii) 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 Company and the Holding Company, taken as a whole, to which the Company or
the Holding Company is a party or by which the Company or the Holding Company or
their respective property is bound, except for such defaults under clause (ii)
that would not have a Material Adverse Effect.
(m) The execution, delivery and performance of this Agreement, the
Indenture, the Series A Notes, the Series B Notes, the Guarantee and the
Registration Rights Agreement by the Company and the Holding Company and
compliance by the Company and the Holding Company with all provisions hereof and
thereof and the consummation of the transactions contemplated hereby and thereby
will not require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws of the various states) and
will not conflict with or constitute a breach of any of the terms or provisions
of, or a default under, (i) the charter or by-laws of the Company or the Holding
Company or (ii) any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and the Holding Company,
taken as a whole, to which the Company or the Holding Company is a party or by
which the Company or the Holding Company or their respective property is bound
(except for, in the case of clause (ii), any such conflicts, breaches or
defaults as would not have a Material Adverse Effect), or violate or conflict
with any material applicable law or any material rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over the Company, the Holding Company or their respective property
or result in the imposition or creation of (or the obligation to create or
impose) a material Lien under, any agreement or instrument to which the Company
or the Holding Company is a party or by which either of them is bound, or to
which any property of the Company or the Holding Company is or may be subject,
or result in the termination or revocation of any material Authorization (as
defined below) of the Company or the Holding Company
14
or result in any other material impairment of the rights of the holder of any
such Authorization.
(n) Except as described in the Offering Memorandum or as would not
have a Material Adverse Effect, any real property and buildings held under lease
by the Company are held by it under valid, subsisting and enforceable leases
with such exceptions as do not interfere with the use made and proposed to be
made of such property and buildings by the Company.
(o) There are no legal or governmental proceedings pending or
threatened to which the Company or the Holding Company is bound or could be a
party or to which any of their respective property is or could be subject, which
might result, singly or in the aggregate, in a Material Adverse Effect.
(p) No action has been taken and no law, statute, rule or regulation
or order has been enacted, adopted or issued by any governmental agency or body
which prevents the execution, delivery and performance of any of the Operative
Documents, the issuance of the Series A Notes or the Guarantee, or suspends the
sale of the Series A Notes or the Guarantee in any jurisdiction referred to in
Section 5(e) hereof; and no injunction, restraining order or other or relief of
any nature by a federal or state court or other tribunal of competent
jurisdiction has been issued with respect to the Company or the Holding Company
which would prevent or suspend the issuance or sale of the Series A Notes or
the Guarantee in any jurisdiction referred to in Section 5(e) hereof.
(q) Neither the Company nor the Holding Company has violated any
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or waste,
pollutants or contaminants ("Environmental Laws") or any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder, except for such violations which, singly or
in the aggregate, would not have a Material Adverse Effect.
(r) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
15
(s) Each of the Company and the Holding Company has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
("Authorizations") of, and has made all filings with and notice to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such permit or to make any such filing or notice would not, singly or
in the aggregate, have a Material Adverse Effect. Each such Authorization is
valid and in full force and effect and each of the Company and the Holding
Company is in compliance with all the terms and conditions thereof and with the
rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including the
receipt of any notice from any authority or governing body) which allows or,
after notice or elapse of time or both, would allow revocation, suspension or
termination of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of the holder
of any such Authorization and such Authorizations contain no restrictions that
are burdensome to the Company or the Holding Company, 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, have a Material Adverse Effect.
(t) The accountants, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
that have certified the financial statements and supporting schedules included
in the Preliminary Offering Memorandum and the Offering Memorandum are
independent public accountants with respect to the Company and the Holding
Company, as required by the Act and the Exchange Act. The historical financial
statements, together with related schedules and notes, set forth in the
Preliminary Offering Memorandum and the Offering Memorandum comply as to form in
all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(u) The historical financial statements, together with related
schedules and 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 the Company and the
Holding Company 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 schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except
16
as disclosed therein; and the other financial and statistical information and
data set forth in the Offering Memorandum (and any amendment or supplement
thereto) is, in all material respects, accurately presented and, if applicable
(to the exclusion of such general information and data relating to the
industry), prepared on a basis consistent with such financial statements and the
books and records of the Company.
(v) The pro forma financial data included in the Preliminary Offering
Memorandum and the Offering Memorandum have been prepared on a basis consistent
with the historical financial statements of the Company and the Holding Company
and give effect to assumptions made 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 data has been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial information. The other pro forma
financial and statistical information included in the Offering Memorandum are,
in all material respects, accurately presented and prepared on a basis
consistent with the pro forma financial data.
(w) Each of the Company and the Holding Company is not and, after
giving effect to the offering and sale of the Series A Notes and the application
of the net proceeds thereof as described in the Offering Memorandum, will not
be, an "investment company," as such term is defined in the Investment Company
Act of 1940, as amended.
(x) There are no contracts, agreements or understandings between the
Company or the Holding Company and any person granting such person the right to
require the Company or the Holding Company to include securities held by such
person in any Registration Statement other than any that have been waived.
(y) Neither the Company nor the Holding Company nor any agent thereof
acting on the behalf of them has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Series A Notes to
violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.R.F. 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.
(z) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or
has informed the Company or the Holding Company that it is considering imposing)
any condition (financial or otherwise) on the Company's or the
17
Holding Company's retaining any rating assigned to the Company, the Holding
Company, or any securities of the Company or the Holding Company or (ii) has
indicated to the Company or the Holding Company that it is considering (a) the
downgrading, suspension or withdrawal of, or any review for a possible change
that does not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company or the
Holding Company or any securities of the Company of the Holding Company.
(aa) Since the respective dates as of which the 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 reasonably foreseeable prospective material adverse
change in the condition, financial or otherwise, or the earnings, business,
management or operations of the Company and the Holding Company, taken as a
whole, (ii) there has not been any material adverse change or any development
involving a prospective material adverse change in the capital stock or in the
long-term debt of the Company or the Holding Company and (iii) neither the
Company nor the Holding Company has incurred any material liability or
obligation, direct or contingent.
(bb) 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.
(cc) When the Series A Notes and the Guarantee are issued and
delivered pursuant to this Agreement, neither the Series A Notes nor the
Guarantee will be of the same class (within the meaning of Rule 144A under the
Act) as any security of the Company or the Holding Company that is listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that is quoted in a United States automated inter-dealer quotation system.
(dd) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company, the Holding
Company or any of their respective representatives (other than the Initial
Purchasers and their representatives, as to whom the Company and the Holding
Company make no representation) in connection with the offer and sale of the
Series A Notes contemplated hereby, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
No securities of the
18
same class as the Series A Notes have been issued and sold by the Company within
the six-month period immediately prior to the date hereof.
(ee) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(ff) None of the Company, the Holding Company nor any of their
respective affiliates (as such term is defined in Rule 501(b) under the Act) or
any person acting on behalf of any of them (other than the Initial Purchasers,
as to whom the Company and the Holding Company 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 Series A Notes
or the Guarantee.
(gg) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme on the part of the Company, the Holding Company or any
of their respective representatives (other than the Initial Purchasers, as to
whom the Company and the Holding Company makes no representations) to evade the
registration provisions of the Act.
(hh) No registration under the Act of the Series A Notes or the
Guarantee is required for the sale of the Series A Notes and the Guarantee 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 and, in the case of Exempt Resales,
compliance with the terms of the Notes.
(ii) All indebtedness of the Company and the Holding Company that will
be repaid with the proceeds of the issuance and sale of the Series A Notes was
incurred, and the indebtedness represented by the Series A Notes is being
incurred, for proper purposes and in good faith and each of the Company and the
Holding Company was, at the time of the incurrence of such indebtedness that
will be repaid with the proceeds of the issuance and sale of the Series A Notes,
and will be on the Closing Date (after giving effect to the application of the
proceeds from the issuance of the Series A Notes) solvent, and had at the time
of the incurrence of such indebtedness that will be repaid with the proceeds of
the issuance and sale of the Series A Notes and will have on the Closing Date
(after giving effect to the application of the proceeds from the issuance of the
Series A Notes) sufficient capital for carrying on its business and was, at the
time of the incurrence of such indebtedness that will be repaid with the
proceeds of the issuance and sale of the Series A Notes, and will be on the
Closing Date (after giving effect to the application of the proceeds from the
19
issuance of the Series A Notes) able to pay its debts as they mature.
(jj) Each certificate signed by any officer of the Company or the
Holding Company and delivered to the Initial Purchasers or counsel for the
Initial Purchasers pursuant to the terms of this Agreement shall be deemed to be
a representation and warranty of the Company or the Holding Company, as
applicable, to the Initial Purchasers as to the matters covered thereby.
The Company acknowledges 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 Company and the Holding Company and counsel to the
Initial Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consent to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to the Company
and the Holding Company, and agrees that:
(a) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the
Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) No form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) has been or will be used by such Initial
Purchaser or any of its representatives in connection with the offer and sale of
the Series A Notes pursuant hereto, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
(d) In connection with Exempt Resales, such Initial Purchaser will
solicit offers to buy the Series A Notes only from, and will offer to sell
20
the Series A Notes only to, Eligible Purchasers. Each Initial Purchaser further
agrees that it will offer to sell the Series A Notes only to, and will solicit
offers to buy the Series A Notes only from (1)(A) QIBs who, in purchasing the
Series A Notes will be deemed to have represented and agreed that (x) they are
purchasing the Series A Notes for their own accounts or accounts with respect to
which they exercise sole investment discretion and that they or such accounts
are QIBs and (y) they acknowledge that the seller of such Series A Notes may be
relying on the exemption from the provisions of Section 5 of the Act provided by
Rule 144A thereunder and that such Series A Notes will not have been registered
under the Act and (B) Regulation S Purchasers who, in purchasing the Series A
Notes, will be deemed to have represented and agreed that their purchase of
Series A Notes pursuant to Regulation S is not part of a plan or a scheme to
evade the registration provisions of the Act and (2) without expanding the
foregoing, Eligible Purchasers that agree that (x) Series A Notes purchased by
them may be resold, pledged or otherwise transferred within the time period
referred to under Rule 144(k) (taking into account the provisions of Rule 144(d)
under the Act, if applicable) under the Act, as in effect on the date of the
transfer of such Series A Notes, only (I) to the Company or the Holding Company,
(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 903 or 904
of the Act, (IV) in a transaction meeting the requirements of Rule 144 under the
Act, (V) to an institutional "accredited investor," as defined in Rule
501(a)(1), (2), (3) or (7) under the Act that, prior to such transfer, furnishes
the Trustee a signed letter containing certain representations and agreements
relating to the registration of transfer of such Series A Note (the form of
which can be obtained from the Trustee) and, if such transfer is in respect of
an aggregate principal amount of Series A Notes less than $250,000, an opinion
of counsel acceptable to the Company that such transfer is in compliance with
the Act, (VI) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel acceptable to the
Company) or (VII) pursuant to an effective registration statement under the Act
and, in each case, in accordance with the applicable securities laws of any
state of the United States or any other acceptable jurisdiction and (y) they
will deliver to each person to whom such Series A Notes or an interest therein
is transferred a notice substantially to the effect of the foregoing.
(e) Neither such Initial Purchaser nor any of its affiliates or any
person acting on its behalf has engaged in any directed selling efforts within
the meaning of Regulation S with respect to the Series A Notes or the Guarantee.
21
(f) The Series A Notes 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 Series A Notes 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 (1) has not offered or sold and will not
offer or sell any Series A Notes to persons in the United Kingdom prior to the
expiry of the period of six months from the issue date of the Series A Notes,
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (ii) has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Series A Notes in, from or
otherwise involving the United Kingdom and (iii) has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance or the Series A Notes to a person who is of a
kind described in Article 11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the
document may otherwise lawfully be issued or passed on.
(i) Such Initial Purchaser will not offer, sell or deliver any of the
Series A Notes in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and will take at its owns expense whatever action is required to permit its
purchase and resale of the Series A Notes in such jurisdictions. Such Initial
Purchaser understands that no action has been taken to permit a public offering
in any jurisdiction outside the United States where action would be required for
such purpose.
The Initial Purchasers acknowledge that the Company and the Holding Company
and, for purposes of the opinions to be delivered to each Initial Purchaser
pursuant to Section 9 hereof, counsel to the Company and the Holding Company and
counsel to the Initial Purchasers will rely upon the accuracy and truth of the
foregoing representations and the Initial Purchasers hereby consent to such
reliance.
22
8. Indemnification.
(a) The Company and the Holding Company agree, jointly and severally,
to indemnify and hold harmless the Initial Purchasers, their directors, their
officers and each person, if any, who controls an Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any reasonable legal or other expenses actually
incurred in connection with defending and investigating any matter, including
any action that could give rise to any such losses, claims, damages, liabilities
or judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or the Holding Company to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) hereof or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to an Initial Purchaser
furnished in writing to the Company by such Initial Purchaser and except that
the Company and the Holding Company shall not be liable to any such Initial
Purchaser with respect to any untrue statement or alleged untrue state- ment or
omission or alleged omission in the Preliminary Offering Memorandum to the
extent that any such loss, liability, claim, damage or expense of such Initial
Purchaser results from the fact that such Initial Purchaser sold Series A Notes
to a person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Offering Memorandum as then amended or
supplemented if the Company and the Holding Company had previously furnished
copies thereof to such Initial Purchaser and the loss, liability, claim, damage
or expense of such Initial Purchaser results from an untrue statement or
omission of a material fact contained in the Preliminary Offering Memorandum
which was corrected in the Offering Memorandum.
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Holding Company, and their
respective directors and officers and each person who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company
or the Holding Company, to the same extent as the foregoing indemnity from the
Company and the Holding Company but only with reference to information relating
to such Initial Purchaser furnished in writing to the Company by such Initial
Purchaser expressly for
23
use in the Preliminary Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) hereof
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party") in
writing (provided, however, that the failure to give such notice shall not
relieve the indemnifying party of its obligations under this Section 8 except to
the extent the indemnifying party is actually prejudiced) 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) hereof, an Initial Purchaser shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of such Initial
Purchaser). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
reasonably 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 more than the reasonable fees and expenses of one separate firm of
attorneys (in addition to any local counsel) actually incurred for all
indemnified parties and all such fees and expenses shall be reimbursed as they
are incurred. Such firm shall be designated in writing by DLJ, in the case of
the parties indemnified pursuant to Section 8(a) and by the Company, in the case
of parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into
24
more than twenty business days after the indemnifying party shall have received
a request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request (provided
that any reimbursement in response to such a request shall be without prejudice
to the other rights and obligations of the indemnifying party under this Section
8). 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 fault,
culpability or 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 is insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Holding Company, on the one hand, and the Initial Purchasers, on
the other hand, from the offering of the Series A Notes or (ii) if the
allocation provided by clause 8(d)(i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company
and the Holding Company, and each Initial Purchaser in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Holding
Company, 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 Series A Notes (before deducting expenses other than discounts
and commissions) received by the Company, and the total discounts and commission
received by the Initial Purchasers bear to the total price to investors of the
Series A Notes, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Holding Company,
on the one hand, and each Initial Purchaser, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
25
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and the Holding
Company, or an Initial Purchaser and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Holding Company 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 sentence. 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 reasonable legal or other
expenses actually incurred by such indemnified party in connection with
investigating or defending any matter that could have given rise to such losses,
claims, damages, liabilities or judgments. Notwithstanding the provisions of
this Section 8, no party indemnified pursuant to Section 8(a) shall be required
to contribute any amount pursuant to this paragraph (d) in excess of the amount
by which the total underwriting discount applicable to the Series A Notes
purchased by the relevant Initial Purchaser exceeds the amount of any damages
which such party has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Series A Notes 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 Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and the
Holding Company contained in this Agreement 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.
26
(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 intended or potential downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that does
not indicate the direction of the possible change, in any rating of the Company
or the Holding Company or any securities of the Company or the Holding Company
(including, without limitation, the placing of any of the foregoing ratings on
credit watch with negative or developing implications or under review with an
uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act, (ii) there shall not have occurred any change, nor shall any notice have
been given of any potential or intended change, in the outlook for any rating of
the Company or the Holding Company or any securities of the Company or the
Holding Company by any such rating organization and (iii) no such rating
organization shall have given notice that it has assigned (or is considering
assigning) a lower rating to the Notes than that on which the Notes were
marketed.
(c) The Initial Purchasers shall have received on the Closing Date a
certificate dated the Closing Date, signed by the President and the Chief
Financial Officer of the Company, confirming the matters set forth in Sections
9(a), 9(b) and 9(d) hereof.
(d) 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 condition, financial or otherwise, or the
earnings, business, management or operations of the Company and the Holding
Company, taken as a whole, (ii) there shall not have been any change or any
development involving a prospective change in the capital stock or in the long-
term debt of the Company or the Holding Company and (iii) neither the Company
nor the Holding Company shall have incurred any liability or obligation, direct
or contingent, the effect of which, in any such case described in clause (i),
(ii) or (iii) of this Section 9(d), in the judgment of the Initial Purchasers,
may be material and adverse or, in the judgment of the Initial Purchasers, makes
it impracticable to market the Series A Notes on the terms and in the manner
contemplated in the Offering Memorandum.
(e) No action shall have been taken (including the issuance of any
stop order) and no statute, rule, regulation or order shall have been enacted,
adopted or issued by any governmental agency which would, as of the Closing
Date,
27
have a Material Adverse Effect.
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of ▇▇▇▇▇▇▇ ▇▇▇▇ LLP, counsel for the Company
and the Holding Company, substantially in the form of Exhibit A.
(g) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇, special regulatory counsel for the
Company and the Holding Company, substantially in the form of Exhibit B.
(h) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP,
special counsel for the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
(i) 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 from Coopers & ▇▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, inde-
pendent 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.
(j) The Series A Notes shall have been approved by the NASD for
trading and duly listed in PORTAL, provided that the Initial Purchasers shall
have reasonably cooperated in obtaining such approval.
(k) The Company, the Holding Company and the Trustee shall have
entered into the Indenture and the Initial Purchasers shall have received a
counterpart, conformed as executed, thereof.
(l) The Company and the Holding Company shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have received
an original copy thereof, duly executed by the Company and the Holding Company.
(m) The Company shall not have failed at or prior to the Closing Date
to perform or comply with any of the agreements herein contained and required to
be performed or complied with by the Company at or prior to the Closing
28
Date.
(n) The Initial Purchasers shall have received an opinion from ▇▇▇▇▇▇,
▇▇▇▇▇▇ & Co., Inc. in form and substance reasonably satisfactory to the Initial
Purchasers that the Offering and the application of the net proceeds therefrom
will not render the Company or the Holding Company insolvent, leave the Company
or the Holding Company with inadequate or unreasonably small capital or result
in the Company or the Holding Company incurring indebtedness beyond its ability
to repay as such indebtedness matures.
10. Effectiveness of Agreement and Termination. This Agreement shall become
effective upon the delivery of this Agreement by the parties hereto.
This Agreement may be terminated at any time prior to the Closing Date by
the Initial Purchasers by written notice to the Company if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and would, in the Initial
Purchasers' judgment, make it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities generally on the New
York Stock Exchange, the American Stock Exchange, the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market, (iii) the suspension of trading of any securities of the
Company or the Holding Company on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in the Initial Purchasers' opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and the
Holding Company, taken as a whole, (v) the declaration of a banking moratorium
by either federal or New York State authorities or (vi) the taking of any action
by any federal, state or local government or agency in respect of its monetary
or fiscal affairs which in the Initial Purchasers' opinion has a material
adverse affect on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers shall fail
or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be,
29
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate principal amount of the Series A Notes to be purchased on such date by
all Initial Purchasers, each non-defaulting Initial Purchaser shall be obligated
severally, in the proportion which the principal amount of the Series A Notes
set forth opposite its name in Schedule A bears to the aggregate principal
amount of the Series A Notes which all the non-defaulting Initial Purchasers, as
the case may be, have agreed to purchase, or in such other proportion as the
Initial Purchasers may specify, to purchase the Series A Notes which such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the aggregate principal amount of the Series A Notes which any Initial Purchaser
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 10 by an amount in excess of one-ninth of such principal amount of
the Series A Notes without the written consent of such Initial Purchaser. If on
the Closing Date any Initial Purchaser or Initial Purchasers shall fail or
refuse to purchase the Series A Notes and the aggregate principal amount of the
Series A Notes with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased by all
Initial Purchasers and arrangements satisfactory to the Initial Purchasers and
the Company for purchase of such Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case which
does result in termination of this Agreement, either the Initial Purchasers or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Offering Memorandum or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Initial
Purchaser from liability in respect of any default of any such Initial Purchaser
under this Agreement.
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or the Holding
Company, to Community Distributors, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, with a copy to
▇▇▇▇▇▇▇ ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, Esq., (ii) if to either Initial Purchaser, c/▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, with a copy to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ LLP at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or (iii) in any case to such other address as the person to be notified may have
requested in writing.
The respective indemnities, contribution agreements, representa-
30
tions, warranties and other statements of the Company, the Holding Company 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 Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of an Initial
Purchaser, the officers or directors of an Initial Purchaser, any person
controlling an Initial Purchaser, the Company, the Holding Company, the officers
or directors of the Company or the Holding Company, or any person controlling
the Company or the Holding Company, (ii) acceptance of the Series A Notes and
payment for them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10 hereof), the Company agrees to reimburse
the Initial Purchasers for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably and actually incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Holding Company,
the Initial Purchasers, the Initial Purchasers' directors and officers, any
controlling persons referred to herein, the directors of the Company and the
Holding Company, and their respective successors and assigns, all as and to the
extent provided in this Agreement, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successors and assigns"
shall not include a purchaser of any of the Series A Notes from the Initial
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.
31
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Holding Company and the several Initial Purchasers.
Very truly yours,
COMMUNITY DISTRIBUTORS, INC.
By: _________________________
Name:
Title:
CDI GROUP, INC.
By: _________________________
Name:
Title:
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
By: ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
By: _______________________________
Name:
Title:
SCHEDULE A
Principal Amount
Initial Purchaser of Notes
----------------- ---------
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation............................... $ 60,000,000
Bear, ▇▇▇▇▇▇▇ & Co. Inc....................................... 20,000,000
............................................. ============
Total........................................ $ 80,000,000