J.P. MORGAN SECURITIES LTD. Purchase Agreement

 

J.P. MORGAN SECURITIES LTD.

 

Central European Media Enterprises Ltd.

 

370,000,000 Euro

 

245,000,000 Euro 8.25% Senior Notes due 2012

 

125,000,000 Euro Senior Floating Rate Notes due 2012

 

Purchase Agreement

 

April 29, 2005

 

J.P. Morgan Securities Ltd.

125 London Wall

London EC2Y 5AJ

 

Lehman Brothers International (Europe)

25 Bank Street

London, E14 5LE, England

 

ING Bank N.V. London Branch

60 London Wall

London, EC2M 5TQ

Ladies and Gentlemen:

 

Central European Media Enterprises Ltd., a Company organized under the laws of Bermuda (the “ Company ”), proposes to issue and sell to the several Initial Purchasers listed in Schedule 1 hereto (the “ Initial Purchasers ”), for whom J.P. Morgan Securities Ltd. is acting as representative (the “ Representative ”), (i) 245,000,000 Euro 8.25% Senior Notes and (ii) 125,000,000   Euro principal amount of its floating rate notes, each due 2012 (the “ Notes ”). The Notes will be issued pursuant to an Indenture to be dated as of May   5, 2005 (the “ Indenture ”) among the Company, and Central European Media Enterprises N.V. ( “ CME N.V. ”) and CME Media Enterprises B.V. ( “ CME B.V . ” ) (collectively, the “ Guarantors ”), JPMorgan Chase Bank, N.A., London Branch as security agent (the “ Security Agent ”),   and   JPMorgan Chase Bank, N.A., London Branch as trustee (the “ Trustee ”), and will be guaranteed on a senior basis (the “ Guarantees ”) by the Guarantors.

 

The obligations of the Issuer under the Notes will be secured by (a) a first priority pledge of the shares of CME N.V. and CME B.V. and (b) a first priority assignment of the Issuer’s rights under the framework agreement by and between the Issuer and PPF (Cyprus) Ltd. (“ PPF ”) dated as of December 13, 2004 (the “ Framework Agreement ”) and the agreement among the Company, PPF, and certain other members of the TV Nova Group to be entered into on the date of the closing of the Acquisition (the “ TV Nova Group Agreement ”).

 

The shares of CME N.V. and CME B.V. are collectively referred to as the Pledged Shares, and the Pledged Shares and the first priority assignment of rights under the Framework Agreement and the TV Nova Group Agreement are collectively referred to as the “ Collateral ”. The share pledges in respect of the Pledged Shares are referred to as the “ Share Pledges ” and, together with the assignment agreements evidencing the first priority assignment of rights under the Framework Agreement and the TV Nova Group Agreement, the “ Security Documents ”.

The Notes will be sold to the Initial Purchasers without being registered under the U.S. Securities Act of 1933, as amended (the “ Securities Act ”), in reliance upon exemptions therefrom. The Company has prepared a preliminary offering memorandum dated   April 15, 2005 (the “ Preliminary Offering Memorandum ”) and will prepare an offering memorandum dated the date hereof (the “ Offering Memorandum ”) setting forth information concerning the Company and its subsidiaries, the Notes and the Guarantees. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the Company to the Initial Purchasers pursuant to the terms of this purchase agreement (this “ Agreement ”). The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Notes by the Initial Purchasers in the manner contemplated by this Agreement. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum. References herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to refer to and include any document incorporated by reference therein.

 

The Company will use the net proceeds of the Notes to finance the acquisition of the TV Nova Group (as defined in the Framework Agreement) pursuant to the Framework Agreement. Slovenska Televizna Spolocnost s.r.o and Markiza-Slovakia Splocnost s.r.o is a non-consolidated subsidiary of the Company. For the purposes of this Agreement, references to the Company and its subsidiaries shall be deemed to include all companies in the TV Nova Group, even if the closing of the acquisition happens or is deemed to happen on or after the date hereof, Slovenska Televizna Spolocnost s.r.o and Markiza-Slovakia Splocnost s.r.o.

 

The Company and each of the Guarantors hereby confirm their agreement with the several Initial Purchasers concerning the purchase and resale of the Notes, as follows:

 

1.       Purchase and Resale of the Notes . (a) The Company agrees to issue and sell the Notes to the several Initial Purchasers as provided in this Agreement, and each Initial Purchaser, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, agrees, severally and not jointly, to purchase from the Company the respective principal amount of Notes set forth opposite such Initial Purchaser's name in Schedule 1 hereto at a price equal to 361,153,241 Euro plus accrued interest, if any, from May 5, 2005 to the Closing Date. The Company will not be obligated to deliver any of the Notes except upon payment for all the Notes to be purchased as provided herein.

 

(b)     Each of the Company and the Guarantors understands that the Initial Purchasers intend to offer the Notes for resale on the terms set forth in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that:

 

(c)     Each Initial Purchaser acknowledges and agrees that each of the Company and the Guarantors and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 5(f) and 5(g), counsel for the Company and the Guarantors and counsel for the Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers, and compliance by the Initial Purchasers with their agreements, contained in paragraph (b) above (including Annex A hereto), and each Initial Purchaser hereby consents to such reliance.

 

(d)     Each of the Company and the Guarantors acknowledges and agrees that the Initial Purchasers may offer and sell Notes to or through any affiliate of an Initial Purchaser and that any such affiliate may offer and sell Notes purchased by it to or through any Initial Purchaser.

 

2.       Payment and Delivery . (b) The closing of the purchase of the Notes by the several Initial Purchasers will occur at the offices of Simpson Thacher &Bartlett LLP, One Ropemaker Street, London EC2Y 9HU at 9:00 A.M., London time, on May 5, 2005, or at such other time or place on the same or such other date, not later than the fifth business day thereafter, as the Representative and the Company may agree upon in writing. The time and date of such payment and delivery is referred to herein as the “ Closing Date ”.

 

(b)     The Notes sold within the United States to QIBs in reliance on Rule 144A will be represented by one or more global notes in registered form without interest coupons attached (the “ 144A Global Note ”). The Notes sold outside the United States in reliance on Regulation S under the Securities Act (“ Regulation S ”) will be represented by one or more global notes in registered form without interest coupons attached (together with the Rule 144A Global Note, the “ Global Notes ”). The Global Notes will be made available for inspection by the Representative not later than 1:00 P.M., London time, on the business day prior to the Closing Date.

 

(c)     Payment for the Notes shall be made by the Representative on behalf of the several Initial Purchasers in immediately available funds to a common depositary (the “ Common Depositary ”) for Euroclear Bank S.A./N.V. (“ Euroclear ”) and Clearstream Banking, société anonyme (“ Clearstream ”) against delivery to the Common Depositary, for the account of the Initial Purchasers, of the Global Notes, with any transfer taxes payable in connection with the sale of the Notes duly paid by the Company.

 

3.       Representations and Warranties of the Company and the Guarantors . The Company, and the Guarantors jointly and severally represent and warrant to each Initial Purchaser that:

 

(a)     O ffering Memorandum . The Preliminary Offering Memorandum, as of its date, did not, and the Offering Memorandum, in the form first used by the Initial Purchasers to confirm sales of the Notes and as of the Closing Date, will not, contain any 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 the Company and the Guarantors make no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Initial Purchaser furnished to the Company in writing by such Initial Purchaser through the Representative expressly for use in the Preliminary Offering Memorandum and the Offering Memorandum, it being understood and agreed that the only such information is that described in Section 6(b) hereof. No order or decree preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act or any other securities laws has been issued, and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company or any of the Guarantors, is contemplated.

(b)     Financial Statements . The financial statements and the related notes thereto included in the Preliminary Offering Memorandum and the Offering Memorandum present fairly the financial position of the Company and its subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“ GAAP ”) applied on a consistent basis throughout the periods covered thereby; the other financial information and data included in the Preliminary Offering Memorandum and the Offering Memorandum has been derived from the accounting records or operating systems of the Company and its subsidiaries and presents fairly the information shown thereby; and the pro forma financial information and the related notes thereto included in the Preliminary Offering Memorandum and the Offering Memorandum (i) present fairly the information shown therein, (ii) have been prepared in accordance with GAAP on a basis consistent with the financial statements and related notes included in the Preliminary Offering Memorandum and the Offering Memorandum (except for the pro forma adjustments specified therein) and represent fairly the transactions described in the Preliminary Offering Memorandum and the Offering Memorandum, (iii) except as set forth in the Offering Memorandum, include all material adjustments to the financial statements included in the Preliminary Offering Memorandum and the Offering Memorandum necessary to give effect to the transactions referred to therein and (iv) the assumptions underlying such pro forma financial information are reasonable and are set forth in the Preliminary Offering Memorandum and the Offering Memorandum.

 

(c)     No Material Adverse Change . Since the date of the most recent financial statements of the Company and its subsidiaries included in the Offering Memorandum, (i) there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock, or any material adverse change, or any development in the business, properties, financial position, results of operations, shareholders’ equity, cashflow or prospects of the Company and its subsidiaries taken as a whole, (ii) other than the Underwriting Agreement between the Company and the Initial Purchasers or their affiliates, dated April 28, 2005 neither the Company nor any of its subsidiaries has entered into any transaction or material agreement, that is of a type which would be required to be disclosed as an exhibit to a registration statement filed in connection with an offering of securities under the U.S. federal securities laws, to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole and (iii) neither the Company nor any of its subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Offering Memorandum.

(d)     Organization and Good Standing . The Company and each of its subsidiaries have been duly organized and are validly existing and, where applicable, in good standing under the laws of their respective jurisdictions of organization, are duly qualified to do business and, where applicable, are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to be so qualified or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the business, properties, financial position, results of operations, shareholders’ equity, cashflow or prospects of the Company and its subsidiaries taken as a whole, or on the performance by the Company and its subsidiaries of its obligations under the Notes and the Guarantees (a “ Material Adverse Effect ”). Except as disclosed in the notes to the financial statements included in the Offering Memorandum, none of the Company or any of its material subsidiaries is in bankruptcy, liquidation or receivership or subject to any similar proceeding. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in the notes to the financial statements included in the Offering Memorandum.

 

(e)     Capitalization . The Company has capitalization as set forth in the Preliminary Offering Memorandum and the Offering Memorandum under the heading “Capitalization”; and all the outstanding shares of capital stock or other equity interests of the Company and of each direct and indirect subsidiary of the Company, which, in the case of shares of subsidiaries that are owned by the Company, have been duly and validly authorized and issued, are fully paid and non-assessable and, in the case of shares of subsidiaries, are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party, except as otherwise disclosed in the Offering Memorandum. Except as otherwise disclosed in the Offering Memorandum there are no outstanding options, warrants or other rights to purchase or acquire any shares of the Company or any shares of its subsidiaries owned by the Company or one of its subsidiaries @Ë"B.

 

(f)     Due Authorization . The Company and each of the Guarantors, as applicable, have full right, power and authority to execute and deliver this Agreement, the Notes, the Indenture (including the Guarantees set forth therein), the Security Documents and any other agreement or instrument entered into with respect to the offering of the Notes (collectively, the “ Transaction Documents ”) and to perform their respective obligations hereunder and thereunder; and all action (corporate or other) required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby has been duly and validly taken.

 

(g)     The Indenture . The Indenture has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, fraudulent conveyance, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (collectively, the “ Enforceability Exceptions ”).

(h)     The Notes and the Guarantees . The Notes have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, subject to the Enforceability Exceptions, and will be entitled to the benefits of the Indenture; and the Guarantees have been duly authorized by each of the Guarantors and, when the Notes have been duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be valid and legally binding obligations of each of the Guarantors, enforceable against each of the Guarantors in accordance with their terms, subject to the Enforceability Exceptions, and will be entitled to the benefits of the Indenture.

 

(i)     The Purchase Agreement . This Agreement has been duly executed and delivered by the Company and each of the Guarantors, and when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, subject to the Enforceability Exceptions.

 

(j)     The Security Documents. Each of the Security Documents has been duly executed and delivered by the pledgors, and when duly executed and delivered in accordance with their respective terms by each of the other parties thereto, will constitute valid and legally binding agreements of each of the pledgors enforceable against each of the pledgors in accordance with their terms.

 

(k)     Creation, Enforceability and Perfection of Security Interests. The applicable pledging entity under each Security Document owns the relevant collateral covered by such Security Document (the “ Collateral ”), free and clear of any security interest, mortgage, pledge, lien, encumbrance, restrictions on transfer or any other similar claim of any other third party. All filings and other actions necessary or desirable to perfect and protect the security interest in the Collateral to be created under the Security Documents have been or will be at or prior to the Closing Date duly made or taken and are or will be at or prior to the Closing Date in full force and effect and, together with the execution and delivery of the Security Documents by the Company and each Guarantor, will create a valid and enforceable first ranking security interest in the Collateral securing the obligations of the Company and each Guarantor under the Indenture.

 

(l)     Descriptions and Fair Summaries . The descriptions in the Offering Memorandum of statutes, legal, governmental and regulatory proceedings and contracts and other documents are accurate in all material respects; the statements in the Offering Memorandum under the headings “Description of other indebtedness”, “Material Bermuda and United States federal income tax considerations”,” “Risk factors ¾ Enforcement of civil liabilities and judgments may be difficult”, and “Risk factors ¾ Risks relating to the TV Nova Acquisition and the Krsak Agreement” “ ¾ Enforcement of Civil Liabilities and Judgments may be difficult” fairly summarize the matters therein described in all material respects; and each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum.

 

(m)     No Violation or Default . Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws or similar organizational documents, (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject or (iii) in violation of any license, authorization, law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

(n)     No Conflicts . The authorization, execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance and sale of the Notes (including the Guarantees) and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default 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 indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws or similar organizational documents of the Company or any of its subsidiaries or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except in the case of clauses (i) and (iii) above, for any such conflict, breach or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

 

(o)     No Consents Required . No consent, approval, authorization, order, filing, registration or qualification of or with any court or arbitrator or governmental or regulatory authority is required for the execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance and sale of the Notes (including the Guarantees) and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, orders and registrations or qualifications as may be required under applicable securities laws in connection with the purchase and resale of the Notes by the Initial Purchasers.

 

(p)     Legal Proceedings . Except as described in the Offering Memorandum, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Company or any of its subsidiaries is or may be a party or to which any property of the Company or any of its subsidiaries is or may be the subject that, individually or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect; and to the best knowledge of the Company and each of the Guarantors no such investigations, actions, suits or proceedings are threatened by any governmental or regulatory authority or by others.

 

(q)     Independent Accountants . Deloitte & Touche LLP, who have certified certain financial statements of the Company and its subsidiaries, with the exception of the companies of the TV Nova Group, and KPMG Ceska republika, s.r.o. who have certified certain financial statements of the TV Nova Group, are each independent public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants and its interpretations and rulings thereunder and applicable accounting rules and regulations. The report of Deloitte & Touche LLP on the audited financial statements of the Company included in the Preliminary Offering Memorandum and the Offering Memorandum does not contain any limitation or restriction on the ability of the Initial Purchasers or the purchasers of the Notes to rely upon such report. The report of KPMG Ceska republika, s.r.o. on the audited financial statements of TV Nova Group included in the Preliminary Offering Memorandum and the Offering Memorandum does not contain any limitation or restriction on the ability of the Initial Purchasers or the purchasers of the Notes to rely upon such report.

(r)     Title to Real and Personal Property . The Company and its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property that are material to the respective businesses of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except those that (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

(s)     Title to Intellectual Property . The Company and its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, computer software and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses except where the failure to possess, or own such rights would not have a Material Adverse Effect; and to the knowledge of the Company the conduct of their respective businesses will not conflict in any material respect with any such rights of others, and the Company and its subsidiaries have not received any notice of any claim of infringement of or conflict with any such rights of others and are unaware of any facts which would form a reasonable basis for any such claim, except as to such conduct or infringement which would not have a Material Adverse Effect.

 

(t)     Investment Company Act . The Company is not, and after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Offering Memorandum will not be, an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “ Investment Company Act ”).

 

(u)     Passive Foreign Investment Company . The Company is not, and does not expect to become, a “passive foreign investment company” as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

(v)     Taxes . Except as would not have a Material Adverse Effect, the Company and its subsidiaries have paid all national, regional, local and other taxes and filed all tax returns required to be paid or filed through the date hereof; and except as otherwise disclosed in the Offering Memorandum, there is no tax deficiency that has been, or could reasonably be expected to be, asserted against the Company or any of its subsidiaries or any of their respective properties or assets.

 

(w)     No Withholding Tax . All payments to be made by the Company under this Agreement and, except as otherwise disclosed in the Offering Memorandum, all interest, principal, premium, if any, additional amounts, if any, and other payments on or under the Notes or the Guarantees may, under the current laws and regulations of Bermuda, the Netherlands Antilles and the Netherlands or any political subdivision or any authority or agency therein or thereof having power to tax, or of any other jurisdiction in which the Company or a Guarantor, as the case may be, is organized or is otherwise resident for tax purposes or any jurisdiction from or through which a payment is made (each, a “ Relevant Taxing Jurisdiction ”), be paid in euro that may be converted into another currency and freely transferred out of the Relevant Taxing Jurisdiction and all such interest on the Notes will not be subject to withholding or other taxes under the current laws and regulations of the Relevant Taxing Jurisdiction and are otherwise payable free and clear of any other tax, withholding or deduction in the Relevant Taxing Jurisdiction and without the necessity of obtaining any governmental authorization in the Relevant Taxing Jurisdiction.

(x)     Stamp Duty . Except as otherwise disclosed in the Offering Memorandum, no stamp, issuance, transfer or other similar taxes or duties are payable by or on behalf of the Initial Purchasers in Bermuda, the Netherlands Antilles and the Netherlands, the United Kingdom or the United States or any political subdivision or taxing authority thereof or therein on (i) the creation, issue or delivery by the Company of the Notes, (ii) the creation, issue or delivery by the Guarantors of the Guarantees, (iii) the purchase by the Initial Purchasers of the Notes in the manner contemplated by this Agreement, (iv) the resale and delivery by the Initial Purchasers of the Notes contemplated by this Agreement or (v) the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

 

(y)     No Labor Disputes . No labor disturbance by or dispute with employees of the Company or any of its subsidiaries exists or, to the best knowledge of the Company and each of the Guarantors, is threatened which could, individually or in the aggregate, have a Material Adverse Effect; to the best knowledge of the Company and each of the Guarantors, no labor disturbance by or dispute with employees or agents of suppliers or customers of the Company or any of its subsidiaries is threatened which could, individually or in the aggregate, have a Material Adverse Effect.

 

(z)     Licenses and Permits . The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate national, regional, local or other governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described the Offering Memorandum, except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and except as described in the Offering Memorandum, neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course, except where receipt of such notice of any revocation or modification of any such license, certificate, permit or authorization would not have a Material Adverse Effect.

 

(aa)         Books and Records . The minute books and records of the Company, each of its subsidiaries relating to proceedings of their respective shareholders, boards of directors and committees of their respective boards of directors made available to counsel for the Initial Purchasers are their original minute books and records or are true, correct and complete copies thereof, with respect to all proceedings of said shareholders, boards of directors and committees since January, 2002, through the date hereof. In the event that definitive minutes have not been prepared with respect to any proceedings of such shareholders, boards of directors or committees, the Company has provided counsel for the Initial Purchasers with originals or true, correct and complete copies of draft minutes, which drafts, if any, reflect all material events that occurred in connection with such proceedings.

 

(bb)        Compliance With Environmental Laws . The Company and its subsidiaries (i) are in compliance with any and all applicable international, national, regional, local and other laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “ Environmental Laws ”), (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses (collectively, “ Environmental Permits ”), and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except in any such case for any such failure to comply with, or failure to receive required permits, licenses or approvals, or liability, as would not, individually or in the aggregate, have a Material Adverse Effect; and the Company and its subsidiaries are not aware of any pending investigation which might reasonably be expected to lead to a claim of such liability, except any such liability as would not, individually or in the aggregate, have a Material Adverse Effect.

(cc)         Compliance With Employee Arrangements . Except as would not be reasonably expected to have a Material Adverse Effect, each benefit and compensation plan, agreement, policy and arrangement that is maintained, administered or contributed to by the Company or any of its subsidiaries for current or former employees or directors of, or independent contractors with respect to, the Company or any of its subsidiaries, or with respect to which any of such entities could reasonably be expected to have any current, future or contingent liability or responsibility, has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations; the Company and each of its subsidiaries and each of their respective affiliates have complied with all applicable statutes, orders, rules and regulations in regard to such plans, agreements, policies and arrangements.

 

(dd)          Related Party Transactions . Except as otherwise disclosed in the Offering Memorandum, no material relationship, direct or indirect, exists between or among any of the Company or any of its subsidiaries on the one hand, and any director, officer, shareholder, or other affiliate of the Company or any of its subsidiaries on the other hand, which is material to either entity having an interest in the relationship.

 

(ee)          Insurance . Except as would not be reasonably expected to have a Material Adverse Effect the Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as are adequate to protect the Company and its subsidiaries and except as would not be reasonably expected to have a Material Adverse Effect their respective businesses; and neither the Company nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

 

(ff)           Accounting Controls . Except as otherwise disclosed in the Offering Memorandum, the Company makes and keeps books and records which are accurate in all material respects and maintain systems of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(gg)        No Unlawful Payments . Neither the Company nor any of its subsidiaries nor, to the best knowledge of the Company and each of the Guarantors, any director, officer, agent, employee or other person acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (ii) made any direct or indirect unlawful payment to any government official or employee from corporate funds, (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977 or any applicable law or regulation implementing the OECD convention on Combating Bribery of Foreign Public Officials in International Business Transactions, (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

(hh)        Money Laundering. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial record keeping and reporting requirements of Bermuda and the European Union, so far as the Company and each of the Guarantors are aware, and any related or similar statutes, rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “ Money Laundering Laws ”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company and each of the Guarantors, threatened.

 

(ii)          Solvency . On and immediately after the Closing Date, each of the Company and the Guarantors (after giving effect to the issuance of the Notes, the application of the proceeds therefrom and the other transactions related thereto as described in the Preliminary Offering Memorandum and the Offering Memorandum) will be Solvent. As used in this paragraph, the term “ Solvent ” means, with respect to a particular date, that on such date (i) the present fair market value (or present fair saleable value) of the assets of the Company or any Guarantor is not less than the total amount required to pay the liabilities of the Company or such Guarantor on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (ii) the Company and each Guarantor is able to realize upon its assets and pay its debts, and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (iii) assuming consummation of the issuance of the Notes as contemplated by this Agreement, the Preliminary Offering Memorandum and the Offering Memorandum, none of the Company or any Guarantor is incurring debts or liabilities beyond its ability to pay as such debts and liabilities mature, (v) neither the Company nor any of the Guarantors is over-indebted or otherwise insolvent within the meaning of such insolvency law as may be applicable to the Company or any of the Guarantors; and (vi) no proceedings have been commenced for purposes of, and no judgment has been rendered for, the administration, liquidation, bankruptcy or winding-up of the Company or any of its material subsidiaries.

 

(jj)          No Restrictions on Subsidiaries . Except as would not be reasonably expected to have a Material Adverse Effect, no subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends, from making any other distribution on such subsidiary’s capital stock, from repaying any intercompany loans or advances or from transferring any of such subsidiary’s properties or assets to the Company or any other subsidiary of the Company.

 

(kk)        No Broker’s Fees . Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement, the Underwriting Agreement dated as of April   28, 2005 among the Initial Purchasers, or their affiliates, and the Company, and the Engagement Letter among the Company and the Initial Purchasers dated March 11, 2005) that would give rise to a valid claim against any of them or any Initial Purchaser for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Notes.

(ll)          Rule 144A Eligibility . On the Closing Date, the Notes and the Guarantees will not be of the same class (within the meaning of Rule 144A under the Securities Act) as securities of the Company or any Guarantor that are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in an automated inter-dealer quotation system; and each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains or will contain all