EXHIBIT 1.1
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BALLY TOTAL FITNESS HOLDING CORPORATION
a Delaware corporation
$75,000,000
9-7/8% Series C Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
Dated December 9, 1998
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PURCHASE AGREEMENT
December 9, 1998
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Xxxxx Xxxxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
XXXXXXXXX & COMPANY, INC.
00000 Xxxxx Xxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Bally Total Fitness Holding Corporation, a Delaware corporation
(the "Company"), confirms its agreement with Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated ("Xxxxxxx Xxxxx") and Xxxxxxxxx & Company,
Inc. ("the "Initial Purchasers") with respect to the issue and sale by the
Company and the purchase by the Initial Purchasers of $75,000,000 aggregate
principal amount of the Company's 9-7/8% Series C Senior Subordinated Notes due
2007 (the "Securities"). The Securities are to be issued pursuant to an
Indenture to be dated as of the Closing Time (the "Indenture") between the
Company and U.S. Bank Trust National Association, as trustee (the "Trustee").
Securities issued in book-entry form will be issued to Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated
as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among
the Company, the Trustee and DTC.
The Company understands that the Initial Purchasers propose to
make an offering of the Securities on the terms and in the manner set forth
herein and agrees that the Initial Purchasers may resell, subject to the
conditions set forth herein, all or a portion of the Securities to purchasers
("Subsequent Purchasers") at any time after the date of this Agreement. The
Securities are to be offered and sold through the Initial Purchasers without
being registered under the United States Securities Act of
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1933, as amended (the "Securities Act"), in reliance upon exemptions therefrom.
Pursuant to the terms of the Securities and the Indenture, investors that
acquire Securities may only resell or otherwise transfer such Securities if such
Securities are hereafter registered under the Securities Act or if an exemption
from the registration requirements of the Securities Act is available
(including, without limitation, the exemption afforded by Rule 144A ("Rule
144A") promulgated under the Securities Act by the Securities and Exchange
Commission (the "SEC")).
The holders of the Securities will be entitled to the benefits of
a Registration Rights Agreement (the "Registration Rights Agreement"), between
the Company and the Initial Purchasers pursuant to which the Company will file a
registration statement (the "Registration Statement") with the SEC registering
the Securities or the Exchange Securities referred to in the Registration Rights
Agreement under the Securities Act.
The Company is preparing and will deliver to the Initial
Purchasers on December 14, 1998 copies of a final offering memorandum dated the
date hereof (the "Offering Memorandum"), for use by the Initial Purchasers in
connection with their solicitation of purchases of or offering of, the
Securities. "Offering Memorandum" means, with respect to any date or time
referred to in this Agreement, the Offering Memorandum (or any amendment or
supplement to such document), including exhibits thereto and any documents
incorporated therein by reference, which has been prepared and delivered by the
Company to the Initial Purchasers in connection with their solicitation of
purchases of, or offering of, the Securities.
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Offering Memorandum (or other references of like import) shall be deemed to
mean and include all such financial statements and other information which are
included in the Offering Memorandum.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Initial Purchaser as of the date hereof, and as
of the Closing Time referred to in Section 2(b) hereof, and agrees with each
Initial Purchaser as follows:
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(i) Similar Offerings. The Company has not, directly or
indirectly, solicited any offer to buy or offered to sell, and will not,
directly or indirectly, solicit any offer to buy or offer to sell, in the United
States or to any United States citizen or resident, any security which is or
would be integrated with the sale of the Securities in a manner that would
require the Securities to be registered under the Securities Act.
(ii) Offering Memorandum. As of the date hereof, the Offering
Memorandum does not, and at the Closing Time the Offering Memorandum will not,
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that this
representation, warranty and agreement shall not apply to statements in or
omissions from the Offering Memorandum made in reliance upon and in conformity
with information furnished to the Company in writing by any Initial Purchaser
through Xxxxxxx Xxxxx expressly for use in the Offering Memorandum.
(iii) Independent Accountants. Ernst & Young LLP is an
independent certified public accountant with respect to the Company and its
subsidiaries (each a "Subsidiary" and, collectively, the "Subsidiaries") within
the meaning of Rule 2-01 of Regulation S-X under the Securities Act.
(iv) Financial Statements. The financial statements, together
with the related schedules and notes, included in the Offering Memorandum
present fairly the financial position of the Company and its consolidated
Subsidiaries at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
Subsidiaries for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as
otherwise described in such financial statements). The selected financial data
and the summary financial information included in the Offering Memorandum
present fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Offering Memorandum.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Offering Memorandum,
except as otherwise stated therein, (A) there has been no material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business
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prospects of the Company and its Subsidiaries considered as one enterprise (a
"Material Adverse Effect"), whether or not arising in the ordinary course of
business, (B) there have been no transactions entered into by the Company or any
of its Subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its Subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware and has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations under this
Agreement. The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each Subsidiary has been
duly organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum. Each Significant Subsidiary (as defined
below) is duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect. Except as otherwise disclosed in the
Offering Memorandum, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and, except as set forth on Schedule B attached hereto, is wholly
owned by the Company, directly or through Subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of
the outstanding shares of capital stock of the Subsidiaries was issued in
violation of any preemptive or other rights of any security holder of such
Subsidiary. Attached hereto as Schedule B is a true and complete list of the
Subsidiaries of the Company. As used herein, "Significant Subsidiary" means any
subsidiary designated by the Company as a Significant Subsidiary in Schedule B
attached hereto. The assets of the Significant Subsidiaries (i) constitute at
least 95% of the total assets
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of the Company and its Subsidiaries considered as one enterprise and (ii)
produced at least 95% of the operating income of the Company and its
Subsidiaries considered as one enterprise in each of the last three fiscal
years, in each case determined in accordance with GAAP.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Offering Memorandum in the
column entitled "Actual" under the caption "Capitalization," except for
subsequent issuances pursuant to reservations, agreements, or employee benefits
plans of the Company or pursuant to the exercise of outstanding warrants, stock
options or convertible securities.
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company, and constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof may be by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other laws of general applicability
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law).
(x) Authorization of Registration Rights Agreement. The
Registration Rights Agreement has been duly authorized by the Company, and when
executed and delivered by the Company will constitute a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other laws of general applicability
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
(xi) Authorization of the Indenture and the DTC Agreement. Each
of the Indenture and the DTC Agreement has been duly authorized by the Company,
and when executed and delivered by the Company will constitute a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other laws of general applicability
relating to or
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affecting enforcement of creditors' rights generally, or by general principles
of equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(xii) Authorization of the Securities. The Securities have been
duly authorized for issuance and sale to the Initial Purchasers pursuant to this
Agreement and, at the Closing Time, will have been duly executed by the Company
and, when authenticated in the manner provided for in the Indenture and
delivered against payment of the purchase price therefor as provided in this
Agreement, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers) reorganization,
moratorium or other laws of general applicability relating to or affecting
enforcement of creditors' rights generally, or by general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law), and will be in the form contemplated by, and entitled to the benefits of,
the Indenture.
(xiii) Description of the Securities and the Indenture. The
Securities, the Indenture and the Registration Rights Agreement will conform in
all material respects to the respective statements relating thereto contained in
the Offering Memorandum and will be in substantially the respective forms
previously delivered to the Initial Purchasers.
(xiv) Absence of Defaults and Conflicts. Neither the Company nor
any of its Subsidiaries is in violation of its charter or by-laws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company or any of its
Subsidiaries is subject (collectively, "Agreements and Instruments") except for
such defaults that would not result in a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the Registration Rights Agreement,
the DTC Agreement, the Indenture and the Securities and any other agreement or
instrument entered into or issued or to be entered into or issued by the Company
in connection with the transactions contemplated hereby or thereby or in the
Offering Memorandum, and the consummation of the transactions contemplated
herein and in the Offering Memorandum (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Offering Memorandum under the caption "Use of
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Proceeds") and compliance by the Company with its obligations hereunder and
thereunder have been duly authorized by all necessary corporate action and do
not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default or a Repayment
Event (as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
of its Subsidiaries pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that, singly
or in the aggregate, would not result in a Material Adverse Effect), nor will
such action result in any violation of (A) the provisions of the charter or
by-laws of the Company or any of its Subsidiaries or (B) any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its Subsidiaries or any of their assets or
properties, in the case of this clause (B), except for such violation that would
not result in a Material Adverse Effect. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any of its Subsidiaries.
(xv) Absence of Default on Senior Indebtedness. No event of
default exists under any contract, indenture, mortgage, loan agreement, note,
lease or other Agreement or Instrument constituting Senior Indebtedness (as
defined in the Indenture).
(xvi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any of its Subsidiaries exists or, to the knowledge
of the Company, has been threatened, and the Company is not aware of any
existing or threatened labor disturbance by the employees of any of its, or any
Subsidiary's, principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Affect.
(xvii) Absence of Proceedings. Except as disclosed in the Offer-
ing Memorandum, there is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company, threatened, against
or affecting the Company or any Subsidiary which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets of the Company or any
of its Subsidiaries or
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the consummation of this Agreement or the performance by the Company of its
obligations hereunder, thereunder or under the Securities. The aggregate of all
pending legal or governmental proceedings to which the Company or any Subsidiary
is a party or of which any of their respective property or assets is the subject
which are not described in the Offering Memorandum, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xviii) Possession of Intellectual Property. The Company and its
Subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names or other intellectual property (collectively, "Intellectual
Property"), necessary to carry on the business now operated by them, and
neither the Company nor any of its Subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or inadequate
to protect the interest of the Company or any of its Subsidiaries therein, and
which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xix) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency (other than (A) under
the Securities Act and the rules and regulations thereunder with respect to the
Registration Statement to be filed pursuant to the Registration Rights
Agreement and the transactions contemplated thereunder, and (B) under the
securities or "blue sky" laws of the various states) is necessary or required
for the performance by the Company of its obligations hereunder, in connection
with the offering, issuance or sale of the Securities hereunder or the
consummation of the transactions contemplated by this Agreement.
(xx) Possession of Licenses And Permits. The Company and
its Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them, except where the failure
to possess such Governmental Licenses would not, singly or in the aggregate,
have a Material Adverse Effect. The Company
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and its Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not, singly
or in the aggregate, have a Material Adverse Effect. All of the Governmental
Licenses are valid and in full force and effect, except when the invalidity of
such Governmental Licenses or the failure of such Governmental Licenses to be in
full force and effect would not have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Governmental Licenses
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xxi) Title to Property. The Company and its Subsidiaries have
good and marketable title to all real property owned by the Company and its
Subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Offering Memorandum, (b) are listed on Schedule C hereto or (c)
do not, singly or in the aggregate, materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company or any of its Subsidiaries; and all of the leases and subleases
material to the business of the Company and its Subsidiaries, considered as one
enterprise, and under which the Company or any of its Subsidiaries holds
properties described in the Offering Memorandum, are in full force and effect,
and neither the Company nor any of its Subsidiaries has any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any of its subsidiaries under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the Company
or such Subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease, which in either case, may be expected
to result in a Material Adverse Effect.
(xxii) Environmental Laws. Except as described in the Offering
Memorandum and except such matters as would not, singly or in the aggregate,
result in a Material Adverse Effect, (A) neither the Company nor any of its
Subsidiaries is in violation of any statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent,
decree or judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife (collectively,
"Environmental Laws"), including, without limitation, laws and regulations
relating to the release or threatened release of chemicals, pollutants,
contaminants,
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wastes, toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, (B) the Company and its Subsidiaries have all Governmental
Authorizations required under any applicable Environmental Laws and are each in
compliance with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation or
proceedings relating to any Environmental Law against the Company or any of its
Subsidiaries and (D) there are no events or circumstances that might reasonably
be expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or agency,
against or affecting the Company or any of its Subsidiaries relating to
Hazardous Materials or the violation of any Environmental Laws.
(xxiii) Tax Returns. All United States federal income tax returns
of the Company and its consolidated Subsidiaries required by law to be filed
have been filed and all taxes shown by such returns or otherwise assessed, which
are due and payable, have been paid, except taxes or charges that are being
contested in good faith or assessments against which appeals have been or will
be promptly taken. All United States federal income tax returns of Bally
Entertainment Corporation ("Entertainment") and its consolidated subsidiaries,
including the Company, for tax periods prior to January 9, 1996, required by law
to be filed have been filed and all taxes shown by the said returns or otherwise
assessed which are due and payable have been paid, except assessments against
which appeals have been or will be promptly taken. The United States federal
income tax returns of Entertainment and its consolidated Subsidiaries, including
the Company and its Subsidiaries, through the fiscal year ended 1986 have been
settled and no assessment in connection therewith has been made against the
Company or Entertainment in connection with the business of the Company. The
Company and its Significant Subsidiaries have filed all other tax returns that
are required to have been filed by them pursuant to applicable foreign, state,
local or other law except insofar as the failure to file such returns would not
result in a Material Adverse Effect, and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Company and its
Subsidiaries, except for such taxes or charges that are being contested in good
faith or assessments against which appeals have been or will promptly be taken
and as to which adequate reserves have been provided and other than those the
nonpayment of which would not have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company in respect of any income and
corporation tax liability for any years not finally determined are adequate to
meet any assessments or reassessments for
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additional income tax for any years not finally determined, except to the extent
of any inadequacy that would not result in a Material Adverse Effect.
(xxiv) Internal Controls. The Company and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance with
management's general or specific authorization, (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxv) Solvency. The Company is, and immediately after the
Closing Time will be, Solvent. As used herein, the term "Solvent" means, with
respect to the Company on a particular date, that on such date (A) the fair
market value of the assets of the Company is greater than the total amount of
liabilities (including contingent liabilities) of the Company, (B) the present
fair salable value of the assets of the Company is greater than the amount that
will be required to pay the probable liabilities of the Company on its debts as
they become absolute and matured, (C) the Company is able to realize upon its
assets and pay its debts and other liabilities, including contingent
obligations, as they mature, and (D) the Company does not have unreasonably
small capital.
(xxvi) Stabilization. Neither the Company nor any of its
officers, directors or controlling persons has taken, directly or indirectly,
any action designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities.
(xxvii) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Offering Memorandum will not
be, an "investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
(xxviii) Rule 144A Eligibility. At the Closing Time, assuming
the Initial Purchasers are not Affiliates (as defined herein) of the Company,
the Securities
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will be eligible for resale by the Initial Purchasers pursuant to Rule 144A and
will not be, at the Closing Time, of the same class as United States Securities
listed on a national securities exchange registered under Section 6 of the
United States Exchange Act of 1934, as amended (the "Exchange Act"), or quoted
in a U.S. automated interdealer quotation system.
(xxix) No General Solicitation. None of the Company, its affili-
ates, as such term is defined in Rule 501(b) under the Securities Act
("Affiliates"), or any person acting on its or any of their behalf (other than
the Initial Purchasers, as to whom the Company makes no representation) has
engaged or will engage, in connection with the offering of the Securities, in
any form of general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act.
(xxx) No Registration Required. Subject to compliance by the
Initial Purchasers with the representations and warranties set forth in Section
2 and the procedures set forth in Section 6 hereof, it is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchasers and to each Subsequent Purchaser in the manner contemplated by this
Agreement and the Offering Memorandum to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended (the "1939 Act").
(xxxi) Registration Rights. There are no holders of securities
(debt or equity) of the Company, or holders of rights (including, without
limitation, preemptive rights), warrants or options to obtain securities of the
Company, who in connection with the issuance, sale and delivery of the
Securities and the execution, delivery and performance of this Agreement and the
Registration Right Agreement, have the right to request the Company to register
securities held by them under the Securities Act.
(xxxii) Compliance With Laws. The Company and its Subsidiaries
have conducted and are conducting their business in compliance with all
applicable federal, state and local laws, rules, regulations, decisions,
directives and orders, except where the failure to do so would not have a
Material Adverse Effect.
(b) Officer's Certificates. Each certificate signed by any officer of
the Company delivered to the Initial Purchasers or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
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SECTION 2. SALE AND DELIVERY TO INITIAL PURCHASER; CLOSING.
(a) Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Initial Purchaser, severally and not jointly, and
each Initial Purchaser agrees to purchase from the Company the Securities set
forth in Schedule A opposite the name of such Initial Purchaser, plus any
additional principal amount of Securities which such Initial Purchaser may
become obligated to purchase pursuant to the provisions of Section 11 hereof.
The purchase price to be paid by the Initial Purchasers for the Securities shall
be 96.001% of the principal amount thereof, plus accrued interest from October
15, 1998.
(b) Payment. Payment of the purchase price for, and delivery of certifi-
xxxxx for, the Initial Securities shall be made at the office of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 or at
such other place as shall be agreed upon by Xxxxxxx Xxxxx and the Company, at
10:00 a.m. (Eastern time) on the fifth business day after the date hereof
(unless postponed in accordance with the provisions of Section 11) or such other
time not later than ten business days after such date as shall be agreed upon by
Xxxxxxx Xxxxx and the Company (such time and date of payment and delivery being
herein called the "Closing Time"). Payment shall be made to the Company by wire
transfer of immediately available funds to a bank account designated by the
Company, against delivery to Xxxxxxx Xxxxx for the respective accounts of the
Initial Purchasers of certificates for the Securities to be purchased by them.
The certificates representing the Securities shall be registered in the name of
Cede & Co. pursuant to the DTC Agreement and shall be made available for
examination and packaging by the Initial Purchasers in The City of New York not
later than 10:00 a.m. (Eastern Time) on the last business day prior to the
Closing Time.
(c) Qualified Institutional Buyer. The Initial Purchasers represent and
warrants to, and agrees with, the Company that it is a "qualified institutional
buyer" within the meaning of Rule 144A (a "Qualified Institutional Buyer").
(d) Denominations; Registration. Except for certificates for any
securities to be issued to an Initial Purchaser, certificates for the Securities
shall be in such denominations (minimum denominations of $100,000 and integral
multiples of $1,000, except in the case of Securities issued to an Initial
Purchaser at the Closing
14
Time) and registered in such names as the Initial Purchasers may request in
writing at least one full business day before the Closing Time.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Initial Purchaser as follows:
(a) Delivery of Offering Memorandum. The Company, as promptly as
possible, will furnish to each Initial Purchaser, without charge, such number of
copies of the Offering Memorandum and any amendments and supplements as each
Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Company will immediately
notify each Initial Purchaser, and confirm such notice in writing, of (x) any
filing made by the Company of information relating to the offering of the
Securities with any Securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers as evidenced by a notice
in writing from Xxxxxxx Xxxxx to the Company, any material changes in or
affecting the earnings, business affairs or business prospects of the Company
and its Subsidiaries which (i) make any statement in the Offering Memorandum
false or misleading or (ii) are not disclosed in the Offering Memorandum. In
such event or if during such time any event shall occur as a result of which it
is necessary, in the reasonable opinion of the Company, its counsel, Xxxxxxx
Xxxxx or counsel for the Initial Purchasers, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in the light of the circumstances
then existing, the Company will forthwith amend or supplement the Offering
Memorandum by preparing and furnishing to each Initial Purchaser an amendment
or amendments of, or a supplement or supplements to, the Offering Memorandum
(in form and substance satisfactory to counsel for the Initial Purchasers) so
that, as so amended or supplemented, the Offering Memorandum will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to a Subsequent Purchaser, not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Company will
advise each Initial Purchaser promptly of any proposal to amend or supplement
the Offering Memorandum and will not effect such amendment or supplement without
the consent of Xxxxxxx Xxxxx, provided that Xxxxxxx Xxxxx shall
15
object to the Company within three business days after receipt of a copy of any
such proposed amendment or supplement. Neither the consent of Xxxxxxx Xxxxx, nor
the Initial Purchasers' delivery of any such amendment or supplement, shall
constitute a waiver of any of the conditions set forth in Section 5 hereof.
(d) Blue Sky Qualification of Securities for Offer and Sale. The Com-
pany, in cooperation with the Initial Purchasers, will endeavor to qualify the
Securities for offering and sale under the applicable securities laws of such
jurisdictions as Xxxxxxx Xxxxx may designate and will maintain such
qualifications in effect as long as required for the sale of the Securities;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for so long as may be required to complete the
distribution of the Securities contemplated by this Agreement.
(e) Rating of Securities. The Company shall take all reasonable action
necessary to enable Standard & Poor's Ratings Group ("S&P"), a division of
McGraw Hill, Inc., Xxxxx'x Investors Service, Inc. ("Moody's"), and Duff &
Xxxxxx to provide their respective credit ratings of the Securities.
(f) DTC and PORTAL. The Company will cooperate with the Initial
Purchasers and use its best efforts to (i) permit the Securities to be eligible
for clearance and settlement through the facilities of DTC and (ii) include
quotation of the Securities on the Private Offerings, Resales and Trading
through Automatic Linkages (PORTAL) System of The National Association of
Securities Dealers, Inc.
(the "NASD").
(g) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds."
(h) Restriction of Sale of Securities. During a period of 120 days from
the date of the Offering Memorandum, the Company will not, without the prior
written consent of Xxxxxxx Xxxxx, directly or indirectly, issue, sell, offer or
agree to sell, grant any option for the sale of, or otherwise dispose of, (i)
any other debt securities of the
16
Company, except for the modification or replacement of the Senior Indebtedness
(as defined in the Offering Memorandum) currently outstanding or the issuance of
debt securities (other than debt securities issued under an indenture) in
connection with the acquisition of fitness centers or fitness center operators
in an aggregate principal amount not to exceed $50 million, which debt
securities may not be offered or resold during such 120 day period, or (ii)
securities of the Company that are convertible into, or exchangeable for, the
Securities or such other debt securities, other than the Exchange Securities
referred to in the Registration Rights Agreement.
SECTION 4. PAYMENT OF EXPENSES.
(a) Expenses. The Company will pay all expenses incident to the perfor-
xxxxx of its obligations under this Agreement, including (i) the preparation,
printing, delivery to the Initial Purchasers and any filing of the Offering
Memorandum (including financial statements and exhibits) and of each amendment
or supplement thereto, (ii) the preparation, printing and delivery to the
Initial Purchasers of this Agreement, the Registration Rights Agreement, the
Indenture and such other documents as may be required in connection with the
offering, purchase, sale and delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the Initial
Purchasers, including any charges of DTC in connection therewith, (iv) the fees
and disbursements of the Company's counsel, accountants and other advisors, (v)
the qualification of the Securities under securities laws in accordance with
the provisions of Section 3(d) hereof, including filing fees and the reasonable
fees and disbursements of counsel for the Initial Purchasers in connection
therewith and in connection with the preparation of the blue sky survey and any
supplement thereto and delivery to the Initial Purchasers of copies thereof,
(vi) the reasonable fees and expenses of the Trustee, including the reasonable
fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Securities, (vii) any fees payable in connection with the
rating of the Securities, and (viii) any fees payable to the NASD in connection
with the initial and continued designation of the Securities as PORTAL
Securities under the PORTAL Market Rules pursuant to NASD Rule 5322.
(b) Termination of Agreement. If this Agreement is terminated by Xxxxxxx
Xxxxx in accordance with the provisions of Section 5(j) or Section 10(a)(i)
hereof, the Company shall reimburse the Initial Purchasers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers.
17
SECTION 5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS.
The obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company delivered
pursuant to the provisions hereof, to the performance by the Company of its
covenants and other obligations hereunder, and to the following further
conditions:
(a) Opinion of Counsel for Company. At the Closing Time, the Initial
Purchasers shall have received the favorable opinion, dated as of the Closing
Time, of Benesch, Friedlander, Xxxxxx & Xxxxxxx LLP, counsel for the Company, in
form and substance satisfactory to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, to
the effect set forth in Exhibit A hereto and to such further effect as Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP may reasonably request. It is understood that
the opinions set forth in paragraphs (i) (as to due incorporation), (iii), (v),
(xiv) and (xvii) of Exhibit A may be delivered by Xxxx X. Gaan, Esq., on behalf
of the Company, rather than by Benesch, Friedlander, Xxxxxx & Xxxxxxx LLP.
(b) Opinion of Counsel for Initial Purchasers. At the Closing Time, the
Initial Purchasers shall have received the favorable opinion, dated as of the
Closing Time, of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, counsel for the
Initial Purchasers, with respect to the matters as are customarily covered in
such opinions.
(c) Officers' Certificate. At the Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Initial Purchasers shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of the Closing Time, to the effect that (i) there has
been no such material adverse change, (ii) the representations and warranties in
Section l(a) hereof are true and correct with the same force and effect as
though expressly made at and as of the Closing Time, except for any
representations and warranties which are made as of a specific date, which were
true and correct as of such date, and (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Time.
(d) Accountant's Comfort Letter. Prior to the Closing Time, the
Initial Purchasers shall have received from Ernst & Young LLP a letter dated the
date
18
hereof, in form and substance satisfactory to Xxxxxxx Xxxxx, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to Initial Purchasers with respect to the financial statements
and certain financial information contained in the Offering Memorandum.
(e) Bring-down Comfort Letter. At the Closing Time, the Initial Purchas-
ers shall have received from Ernst & Young LLP a letter, dated as of the Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (d) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to the
Closing Time.
(f) Maintenance of Rating. At the Closing Time, the Securities shall be
rated at least "B3" by Moody's, "B-" by S & P and "B+" by Duff & Xxxxxx, and the
Company shall have delivered to the Initial Purchasers a letter dated the
Closing Time, from each such rating agency, or other evidence satisfactory to
Xxxxxxx Xxxxx, confirming that the Securities have such ratings; and since the
date of this Agreement, there shall not have occurred a downgrading in the
rating assigned to the securities or any of the Company's other debt securities
by any nationally recognized securities rating agency, and no such securities
rating agency shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of the Securities or any
of the Company's other debt securities.
(g) PORTAL and DTC. At the Closing Time, the Securities shall have been
designated for trading on PORTAL and accepted for settlement through the
facilities of DTC.
(h) Registration Rights Agreement and Indenture. The Company shall have
duly authorized, executed and delivered the Registration Rights Agreement and
the Indenture, in each case in form and substance reasonably satisfactory to
Xxxxxxx Xxxxx and counsel to the Initial Purchasers.
(i) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably
19
satisfactory in form and substance to Xxxxxxx Xxxxx and counsel for the Initial
Purchasers.
(j) Termination of Agreement. If any condition specified in this Section
5 shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by Xxxxxxx Xxxxx by notice to the Company at any
time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 7 and 8 shall survive any such termination and remain in
full force and effect.
(k) Amendment to Bank Credit Facility. The Bank Credit Facility shall
have been amended to permit the transactions contemplated by this Agreement, the
Securities, the Indenture and the Registration Rights Agreement, which amendment
shall be reasonably satisfactory in form and substance to Xxxxxxx Xxxxx and
counsel for the Initial Purchasers.
SECTION 6. SUBSEQUENT OFFERS AND RESALES OF THE SECURITIES.
(a) Offer and Sale Procedures. Each of the Initial Purchasers and the
Company hereby establish and agree to observe the following procedures in
connection with the offer and sale of the Securities:
(i) Offers and Sales Only to Qualified Institutional Buyers.
Offers and sales of the Securities will be made only by the Initial Purchasers
or Affiliates thereof qualified to do so in the jurisdictions in which such
offers or sales are made. Each such offer or sale shall only be made to persons
whom the offeror or seller reasonably believes to be Qualified Institutional
Buyers at a price per Security of not less than 98.001% of the principal amount
thereof, plus accrued interest from October 15, 1998.
(ii) No General Solicitation. The Securities will be offered by
the Initial Purchasers only by approaching prospective Subsequent Purchasers on
an individual basis. No general solicitation or general advertising (within the
meaning of Rule 502(c) under the Securities Act) will be used in the United
States in connection with the offering of the Securities.
(iii) Purchases by Non-bank Fiduciaries. In the case of a
non-bank Subsequent Purchaser of a Security acting as a fiduciary for one or
more
20
third parties, in connection with an offer and sale to such purchaser pursuant
to clause (a) above, each third party shall, in the judgment of the applicable
Initial Purchaser, be a Qualified Institutional Buyer.
(iv) Subsequent Purchaser Notification. The Initial Purchasers
will take reasonable steps to inform, and cause its Affiliates in the United
States to take reasonable steps to inform, persons acquiring Securities from
such Initial Purchaser or Affiliate, as the case may be, in the United States
that the Securities (A) have not been and will not be registered under the
Securities Act, (B) are being sold to them without registration under the
Securities Act in reliance on Rule 144A or in accordance with another exemption
from registration under the Securities Act, as the case may be, and (C) may not
be offered, sold or otherwise transferred except (1) to the Company, (2)
pursuant to a registration statement which has been declared effective under the
Securities Act, (3) for so long as the Securities are eligible for resale
pursuant to Rule 144A, to a person it reasonably believes is a Qualified
Institutional Buyer that purchases for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that the transfer is being
made in reliance on Rule 144A, (4) outside the United States, pursuant to offers
and sales to non-U.S. persons in an Offshore Transaction within the meaning of
Regulation S, (5) an institutional "accredited investor" within the meaning of
subparagraph (a) (1), (2), (3) or (7) of Rule 501 under the Securities Act
("Institutional Accredited Investor") that is acquiring the Securities for its
own account or for the account of another Institutional Accredited Investor, 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, or (6) pursuant to
any other available exemption from the registration requirements of the
Securities Act, subject in each of the foregoing cases to any requirement of law
that the disposition of its property or the property of such investor account or
accounts be at all times within its or their control and in compliance with any
applicable state securities laws.
(v) Minimum Principal Amount. Except in the case of any sale
of the Securities by one Initial Purchaser to another Initial Purchaser, no sale
of the Securities to any one Subsequent Purchaser will be for less than $200,000
principal amount and no Security will be issued in a smaller principal amount.
If the Subsequent Purchaser is a non-bank fiduciary acting on behalf of others,
each person for whom it is acting must purchase at least $200,000 principal
amount of the Securities.
(vi) Restrictions on Transfer. The transfer restrictions
and the other provisions set forth in Section 2.2 of the Indenture, including
the legend
21
required thereby, shall apply to the Securities except as otherwise agreed by
the Company and Xxxxxxx Xxxxx. Following the sale of the Securities by the
Initial Purchaser to Subsequent Purchasers pursuant to the terms hereof, the
Initial Purchasers shall not be liable or responsible to the Company for any
losses, damages or liabilities suffered or incurred by the Company, including
any losses, damages or liabilities under the Securities Act, arising from or
relating to any resale or transfer of any Security.
(vii) Delivery of Offering Memorandum. Each Initial Purchaser
will deliver to each purchaser of the Securities from such Initial Purchaser, in
connection with its original distribution of the Securities, a copy of the
Offering Memorandum, as amended and supplemented at the date of such delivery.
(b) Covenants of the Company. The Company covenants with the Initial
Purchaser as follows:
(i) Due Diligence. In connection with the original
distribution of the Securities, the Company agrees that, prior to any offer or
resale of the Securities by the Initial Purchasers, the Initial Purchasers and
counsel for the Initial Purchasers shall have the right to make reasonable
inquiries into the business of the Company and its Subsidiaries. The Company
also agrees to provide answers to each prospective Subsequent Purchaser of
Securities who so requests concerning the Company and its Subsidiaries and the
terms and conditions of the offering of the Securities, as provided in the
Offering Memorandum.
(ii) Integration. The Company agrees that it will not and will
cause its Affiliates not to make any offer or sale of securities of the Company
of any class if, as a result of the of "integration" referred to in Rule 502
under the Securities Act, such offer or sale would render invalid (for the
purpose of (i) the sale of the Securities by the Company to the Initial
Purchasers, (ii) the resale of the Securities by the Initial Purchasers to
Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent
Purchasers to others) the exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof or by Rule 144A or by Regulation
S thereunder or otherwise.
(iii) Rule 144A Information. The Company agrees that, in order
to render the Securities eligible for resale pursuant to Rule 144A under the
Securities Act, while any of the Securities remain outstanding, it will make
available, upon request, to any holder of Securities or prospective purchasers
of Securities the
22
information specified in Rule 144A(d)(4), unless the Company furnishes
information to the SEC pursuant to Section 13 or 15(d) of the Exchange Act (such
information, whether made available to holders or prospective purchasers or
furnished to the SEC, is herein referred to as "Additional Information").
(iv) Restriction on Repurchases. Until the expiration of two
years after the original issuance of the Securities, the Company will not, and
will cause its Affiliates not to, purchase or agree to purchase or otherwise
acquire any Securities which are "restricted securities" (as such term is
defined under Rule 144(a)(3) under the Securities Act), whether as beneficial
owner or otherwise (except as agent acting as a Securities broker on behalf of
and for the account of customers in the ordinary course of business in
unsolicited broker's transactions) unless, immediately upon any such purchase,
the Company or any Affiliate shall submit such Securities to the Trustee for
cancellation.
SECTION 7. INDEMNIFICATION.
(a) Indemnification of Initial Purchaser. The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum or the Final Offering Memorandum (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 7(d) below) any such
settlement is effected with the written consent of the Company; and
23
(iii) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by Xxxxxxx
Xxxxx), reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Xxxxxxx Xxxxx expressly for use in any Preliminary
Offering Memorandum or the Offering Memorandum (or any amendment or supplement
thereto) shall not inure to the benefit of any Initial Purchaser (or to the
benefit of any person controlling such Initial Purchaser) from whom the person
asserting any such losses, liabilities, claims, damages or expenses purchased
Securities if such untrue statement or omission or alleged untrue statement or
omission made in any Preliminary Offering Memorandum or the Offering Memorandum
(or any amendment or supplement thereto) is identified in writing at such time
to such Initial Purchaser and is eliminated or remedied in the Offering
Memorandum as most recently amended or supplemented (copies of such amendments
and supplements having been delivered to such Initial Purchaser in sufficient
quantity at least three business days prior to the written confirmation of the
sale of such Securities to such person) and it shall be established that a copy
of the Offering Memorandum as most recently amended or supplemented had not been
furnished to such person at or prior to the written confirmation of the sale of
such Securities to such person.
(b) Indemnification of Company, Directors and Officers. The Initial
Purchasers severally agree to indemnify and hold harmless the Company, its
direc tors, each of its officers and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Offering Memorandum in reliance upon
and in conformity with written information furnished to the Company by the
Initial Purchasers through Xxxxxxx Xxxxx expressly for use in the Offering
Memorandum.
(c) Actions Against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any
24
action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by Xxxxxxx Xxxxx, and, in
the case of parties indemnified pursuant to Section 7(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7 or Section
8 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for reasonable fees and expenses of counsel,
such indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 7(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
25
SECTION 8. CONTRIBUTION. If the indemnification provided for in Section
7 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Initial Purchasers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Initial Purchasers on
the other hand in connection with the offering of the Securities pursuant to
this Agreement shall be deemed to be in the same respective proportions as the
total proceeds from the offering of the Securities pursuant to this Agreement
(before deducting expenses) received by the Company and the total underwriting
discount received by the Initial Purchasers, bear to the aggregate initial
offering price to investors of the Securities as set forth on the cover page of
the Offering Memorandum. The relative fault of the Company on the one hand and
the Initial Purchasers on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact necessary to make the statements made in the Offering Memorandum
not misleading or omission or alleged omission to state a material fact relates
to information supplied by the Company or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation or by any
other method of allocation (even if the Initial Purchasers were treated as one
entity for such purpose) which does not take account of the equitable
considerations referred to above in this Section 8. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 8 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 8, no Initial Purchaser shall be
26
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such Initial
Purchaser 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 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, if
any, who controls an Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Initial Purchaser, and each director of the Company, each
officer of the Company and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Company. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 8 are
several in proportion to the principal amount of Securities set forth opposite
their respective names in Schedule A hereto and not joint.
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Initial Purchaser or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Initial Purchasers.
SECTION 10. TERMINATION OF AGREEMENT.
(a) Termination; General. Xxxxxxx Xxxxx may terminate this Agreement, by
notice to the Company, at any time at or prior to the Closing Time (i) if there
has been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Offering Memorandum, any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its Subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of Xxxxxxx Xxxxx, impracticable to market the Securities or to
27
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or limited by the SEC or if trading
generally on the American Stock Exchange or The New York Stock Exchange, Inc. or
in the NASDAQ National Market System has been suspended or limited, or minimum
or maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
SEC, NASD or any other governmental authority, or (iv) if a banking moratorium
has been declared by either United States Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7 and 8 shall survive such termination and remain in fall force and effect.
SECTION 11. DEFAULT BY ONE OF THE INITIAL PURCHASERS. If
one of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it is obligated to purchase under this Agreement (the
"Defaulted Securities"), the non-defaulting Initial Purchaser shall have the
right, but not the obligation, within 24 hours thereafter, to make arrangements
for such non-defaulting Initial Purchaser, or any other Initial Purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
non-defaulting Initial Purchaser shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, the non-defaulting Initial
Purchaser shall be obligated to purchase the full amount thereof, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement shall terminate without
liability on the part of any non-defaulting Initial Purchaser. No action
pursuant to this Section shall relieve any defaulting Initial Purchaser from
liability in respect of its default. In the event of any such default which does
not result in a termination of this Agreement, either the non-defaulting Initial
Purchaser or the Company shall have the right to postpone the Closing Time for a
period not exceeding seven days in order to effect any required changes in the
Offering Memorandum or in any other documents or arrangement. As used herein,
the term Initial Purchaser includes any person substituted for an Initial
Purchaser under this Section 11.
28
SECTION 12. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to Xxxxxxx Xxxxx at Xxxxx Xxxxx, Xxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, facsimile no.: (000) 000-0000, Attention
of Xxx Xxxxxxxx, with a copy to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, facsimile no.:
(000) 000-0000, Attention of Xxxxxxx X. Xxxxxxxx; notices to the Company shall
be directed to it at 0000 Xxxx Xxxx Xxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000,
facsimile no.: (000) 000-0000, Attention of Xxx X. Xxxxxxx, with a copy to
Benesch, Friedlander, Xxxxxx & Xxxxxxx LLP, 0000 XX Xxxxxxx Xxxxxxxx, 000 Xxxxxx
Xxxxxx, Xxxxxxxxx, Xxxx 00000, facsimile no.: (000) 000-0000, Attention of Xxx
Xxxxxxxx.
SECTION 13. PARTIES. This Agreement shall each inure to the benefit of
and be binding upon the Initial Purchasers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 7 and 8
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Initial Purchasers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of the Securities
from any Initial Purchaser shall be deemed to be a successor by reason merely of
such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
SECTION 16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and when a counterpart has been executed by each party, all such
counterparts taken together shall constitute one and the same agreement.
29
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
BALLY TOTAL FITNESS HOLDING
CORPORATION
By: /s/ Xxxx X. Xxxxx
-------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Executive Vice President
30
SCHEDULE A
Principal Amount
Initial Purchaser to be Purchased
----------------- ----------------
Xxxxxxx Xxxxx & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated $74,999,000
Xxxxxxxxx & Company, Inc. 1,000
-----------
$75,000,000
===========
31
SCHEDULE B
List of Subsidiaries
A. List of Significant Subsidiaries:
Bally Total Fitness Corporation
Bally's Fitness and Racquet Clubs, Inc.
Bally's Pacwest, Inc.
Holiday Health Clubs and Fitness Centers, Inc.
Holiday Spa Health Clubs of California
Holiday Universal, Inc.
Houston Health Clubs, Inc.
Xxxx XxXxxxx Fitness Centers, Inc.
Scandinavian Health Spa, Inc.
Scandinavian U.S. Swim & Fitness, Inc.
So. Cal Nautilus Fitness Centers, Inc.
Bally Total Fitness International, Inc.
Bally Total Fitness of Missouri, Inc.
Bally Total Fitness of Greater Michigan, Inc.
B. List of all Subsidiaries other than those listed in A above:
Bally Fitness Franchising, Inc.
Bally Franchise RSC, Inc.
Bally Franchising Holdings, Inc.
Bally's S.C. Management, Inc.
BFIT Rehab of Boca Raton, Inc.
BFIT Rehab of Coral Gables, Inc.
BFIT Rehab of Xxxxxxx, Inc.
BFIT Rehab of Sunrise, Inc.
BFIT Rehab of West Palm Beach, Inc.
BFIT Rehabilitation Services, Inc.
C.Z.W. Health Limited
H&T Receivable Funding Corporation
Health & Tennis Corporation of New York, Inc.
Holiday Health Clubs of the East Coast, Inc.
Holiday Health Clubs of the Southeast, Inc.
Holiday/Southeast Holding Corp.
Xxxx XxXxxxx Holding Corp.
32
Lincoln Indemnity Company
Manhattan Sports Clubs, Inc.
Scandinavian Development Company
Tidelands Holiday Health Clubs, Inc.
U.S. Health, Inc.
Vertical Fitness and Racquet Club, Ltd.
Bally Total Fitness of Cleveland, Inc.
Bally Total Fitness of Toledo, Inc.
Bally Total Fitness Clinics, Inc.
BTF of Washington, Inc.
BFIT Acquisition Corporation
BTFCC, Inc.
BFIT Sports Medicine of Boca Raton, Inc.
BFIT Sports Medicine of Xxxxxxx, Inc.
BFIT Sports Medicine of Sunrise, Inc.
BFIT Sports Medicine of West Palm Beach, Inc.
BFIT Sports Medicine of Coral Springs, Inc.
BFIT Sports Medicine of Clearwater, Inc.
BFIT Sports Medicine of Coral Gables, Inc.
BFIT Sports Medicine, Inc.
C. List of Subsidiaries Not Wholly-owned:
Bally Matrix Fitness Centre Ltd.
Connecticut Coast Fitness Centers, Inc.
Connecticut Valley Fitness Centers, Inc.
Greater Philly Xx. 0 Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxx Xx. 0 Holding Company
Health and Tennis (UK) Limited
Holiday Health & Fitness Centers of New York, Inc.
New Fitness Holding Co., Inc.
Nycon Holding Co.
Physical Fitness Centers of Philadelphia
Providence Fitness Centers, Inc.
Rhode Island Holding Company
New Health & Fitness Centers of New York, Inc.
D. Encumbrances
33
1. Except as set forth below, the capital stock of each subsidiary
of the Company is pledged to the Company's principal lenders
pursuant to various Pledge Agreements delivered in connection
with the Bank Credit Facility.
BALLY MATRIX FITNESS CENTER, LTD, AND CZW HEALTH LIMITED. Only
65% of the shares of capital stock of each of these Canadian
subsidiaries are pledged to the Company's lenders under the Bank
Credit Facility.
2. The transfer of encumbrance or the capital stock of Nycon Holding
Co., New Fitness Holding Co., Inc., Connecticut Coast Fitness
Centers, Inc., Connecticut Valley Fitness Centers, Inc., Holiday
Health & Fitness Centers of New York, Inc., Rhode Island Holding
Company, Greater Philly No. 1 Holding Company, Bally Matrix
Fitness Centre Ltd., Providence Fitness Centers, Inc., Greater
Philly No. 2 Holding Company and Physical Fitness Centers of
Philadelphia, Inc. is restricted pursuant to the terms of certain
Shareholders' Agreements dated December 3, 1982 and April 29,
1987, each as amended.
34
Schedule C
BALLY TOTAL FITNESS HOLDING CORPORATION
SUMMARY OF OWNED LOCATIONS WITH MORTGAGES
AS OF SEPTEMBER 30, 1997
Year Mortgage Interest
Club Address Square Opened/ Company Name/Mortgagor Balance Rate
Feet Acquired
Hilltop 000-00 00,000 1987 Nations Bank 2,112,427 9.00%
Bally Health & Racquet of Kansas
0000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, XX 00000
Xxxxxxxx Xxxxxxx 000-00
Xxxxxxxx Xxxxxxx 000-00 00,000 1989 Union Bank & Trust 220,731 9.25%
Chicago Health Clubs II
000 Xxxx Xxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
(includes parking)
Beachwood 819-20
Beachwood 000-00 00,520 1986 Ohio Savings Bank 1,508,736 10.25%
Scandinavian Health Spa
0000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
Maple Heights 819-25
Maple Heights 000-00 00,762 1987 Ohio Savings Bank 2,563,909 10.25%
Scandinavian Health Spa (Note 1) (Note 1)
0000 Xxxxxxxxxxxx Xxxxxx Xxxx
Xxxxx Xxxxxxx XX 00000
Willoughby 819-26
Willoughby 000-00 00,762 1987 Ohio Savings Bank (Note 1) 10.25%
Scandinavian Health Spa
0000 Xxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Brook Park 819-27
Brookpark 000-00 00,672 1987 Ohio Savings Bank (Note 1) 10.25%
Scandinavian Health Spa
00000 Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Xxxx Xxxxx, XX 00000
Xx. Xxxxx Xxxx 000-00
Xx. Xxxxx Xxxx 000-00 00,156 1986 Nat'l City Bank 163,819 9.00%
U.S. Swim & Fitness 289,000 9.00%
0000 Xxxxxxxxx Xxxx.
Xx. Xxxxx Xxxx, XX 00000
Notes:
(1) The mortgage balance for Maple Heights represents the total mortgage on
three clubs: Maple Heights, Willoughby and Brookpark
35
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Delaware.
(ii) The Company has corporate power and authority to
own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum and to enter into and
perform its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreement, the DTC Agreement
and the Securities.
(iii) To our knowledge, the Company is duly qualified as
a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a
Material Adverse Effect.
(iv) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Offering Memorandum
in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances pursuant to
reservations, agreements, employee benefit plans of the Company
or the exercise of outstanding warrants, stock options or
convertible securities).
(v) Each Significant Subsidiary has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation,
has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Offering Memorandum and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; all of
the issued and outstanding capital stock of each Significant
Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and, except at disclosed on Schedule B to
the Purchase Agreement, to our knowledge, is owned by the
Company, directly or through one of its Subsidiaries, free and
clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity. Except as set forth on Schedule B
of the Purchase Agreement, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into
or exchangeable for, or agreements or understandings with respect
to the sale or issuance of other equity interest in any
Significant Subsidiary.
(vi) Each of the Purchase Agreement and the
Registration Rights Agreement has been duly authorized, executed
and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Initial Purchasers)
constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except as
36
the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law).
(vii) The DTC Agreement has been duly authorized,
executed and delivered by the Company and (assuming the due
authorization, execution and delivery thereof by any party
thereto other than the Company) constitutes a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws relating to or
affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law).
(viii) The Indenture has been duly authorized, executed
and delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes a
valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law).
(ix) The Securities are in the form contemplated by the
Indenture, have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee in the
manner provided in the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee) and
delivered against payment of the purchase price therefor will
constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms,
except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium (including, without
limitation, all laws relating to fraudulent transfers), or other
similar laws relating to or affecting enforcement of creditor's
rights generally, or by general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or
at law), and will be entitled to the benefits of the Indenture.
(x) The Securities, the Indenture and the Registration
Rights Agreement conform in all material respects to the
descriptions thereof contained in the Offering Memorandum.
(xi) To our knowledge and other than as described in
the Offering Memorandum, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the
Company or any of its Subsidiaries is a party, or to which, to
our knowledge, the property of the Company or any of its
Subsidiaries is subject, before or brought by any court or
governmental agency or body, which might reasonably be expected
to result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the properties or
assets thereof or the consummation of the transactions
contemplated in the Purchase Agreement or the performance by the
Company of its obligations thereunder or under the Securities or
the transactions contemplated by the Offering Memorandum;
37
(xii) The information in the Offering Memorandum under
"Description of the Notes," "Description of Certain Other
Indebtedness, Bank Credit Facility" and "Exchange Offer;
Registration Rights," to the extent that it constitutes matters
of law, summaries of legal matters or legal conclusions, has been
reviewed by us and is correct in all material respects.
(xiii) All descriptions in the Offering Memorandum of
contracts and other documents to which the Company or any of its
Subsidiaries is a party are accurate in all material respects; to
our knowledge, there are no franchises, contracts, indentures,
mortgages, loan agreements, notes, leases or other instruments to
which the Company or any of its Subsidiaries is a party that
would be required to be described in the Offering Memorandum that
are not described in the Offering Memorandum, and the
descriptions thereof or references thereto are correct in all
material respects.
(xiv) To our knowledge, neither the Company nor any of
its Subsidiaries is in violation of its charter or bylaws and, to
our knowledge, no default by the Company or any of its
Subsidiaries exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement, note, lease
or other agreement or instrument that is described in the
Offering Memorandum.
(xv) No authorization, approval, consent or order of
any court or governmental authority or agency, other than such as
may be required under the applicable securities laws of the
various jurisdictions in which the Securities will be offered or
sold (as to which we express no opinion) is required on the part
of the Company in connection with the due authorization,
execution and delivery of the Purchase Agreement by the Company
or the due execution, delivery of the Indenture by the Company or
for the offering, issuance, sale or delivery of the Securities to
the Initial Purchasers or the resale by the Initial Purchasers in
accordance with the Purchase Agreement.
(xvi) Assuming the accuracy of the representations and
warranties of the Initial Purchasers set forth in the Purchase
Agreement, it is not necessary in connection with the offer, sale
and delivery of the Securities to the Initial Purchasers in the
manner contemplated by the Purchase Agreement and the Offering
Memorandum to register the Securities under the Securities Act or
to qualify the Indenture under the 1939 Act.
(xvii) The execution, delivery and performance of the
Purchase Agreement, the Registration Rights Agreement, the DTC
Agreement, the Indenture and the Securities by the Company and
the consummation of the transactions contemplated in the Purchase
Agreement and in the Offering Memorandum (including the use of
the proceeds from the sale of the Securities as described in the
Offering Memorandum under the caption "Use of Proceeds") and
compliance by the Company with its obligations under the Purchase
Agreement, the Registration Rights Agreement, the DTC Agreement,
the Indenture and the Securities will not, whether with or
without the giving of notice or lapse of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(xiv) of the Purchase Agreement) under or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of
its Subsidiaries pursuant to any material contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or
any other material agreement or instrument, known to us, to which
the Company or any of its Subsidiaries is a party or by which
38
it or any of them may be bound, or to which, to our knowledge,
any of the property or assets of the Company or any of its
Subsidiaries is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the
Company or any Significant Subsidiary, or any applicable law,
statute, rule, regulation, judgment, order, writ or decree, known
to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any
Significant Subsidiary or any of their respective properties,
assets or operations.
(xviii) The Company is not an "investment company" or an
entity "controlled" by an investment company as such terms are
defined in the 1940 Act.
In addition, we have participated in conferences with officers
and other representatives of the Company and representatives of the independent
public accountants of the Company and representatives of the Initial Purchasers
at which the contents of the Offering Memorandum were discussed and we have
reviewed certain other documents. Although we are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum (except as set forth in
paragraph (xii) above), and we make no representation that we have independently
verified the accuracy, completeness or fairness of such statements, on the basis
of the foregoing, we confirm to you that no information has come to our
attention that would cause us to believe that the Offering Memorandum, at the
time such Offering Memorandum was issued or as of the date hereof, contained an
untrue statement of a material fact or omitted to state 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. Notwithstanding
the foregoing, we assume no responsibility for, and have not independently
verified, the accuracy, completeness or fairness of the financial and
statistical data included in or excluded from the Offering Memorandum. Although
certain portions of the Offering Memorandum (including financial statements)
have been included therein on the authority of "experts" within the meaning of
the Securities Act, we are not such experts with respect to any portion of the
Offering Memorandum, including, without limitation, such financial statements or
schedules or the other financial or statistical data included therein.
39
