Exhibit 10.1
Execution Version
PURCHASE AGREEMENT
$500,000,000
TERRESTAR NETWORKS INC.
15% Senior Secured PIK Notes due
2014
Purchase Agreement
February 8, 2007
J.P. Morgan Securities
Inc.
Lehman Brothers Inc.
UBS Securities LLC
As Representatives of the
several Initial Purchasers listed
in Schedule 1 hereto
c/o J.P. Morgan Securities Inc.
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
TerreStar Networks Inc., a Delaware
corporation (the “Company”), proposes to issue and sell
to the several initial purchasers listed in Schedule 1 hereto (the
“Initial Purchasers”), for whom you are acting as
representatives (the “Representatives”), $500,000,000
principal amount of its 15% Senior Secured PIK Notes due 2014 (the
“Securities”). The Securities will be issued pursuant
to an Indenture to be dated as of February 14, 2007 (the
“Indenture”) among the Company, the guarantors listed
in Schedule 2 hereto (the “Guarantors”) and U.S. Bank
National Association, as trustee (the “Trustee”), and
will be guaranteed on a senior secured basis by each of the
Guarantors (the “Guarantees”).
The Securities will be secured on a
first priority basis by the security documents listed in Schedule 3
hereto (collectively, the “Security
Documents”).
The Securities will be sold to the
Initial Purchasers without being registered under the Securities
Act of 1933, as amended (the “Securities Act”), in
reliance upon an exemption therefrom. The Company has prepared a
Canadian preliminary offering memorandum dated January 29,
2007, as supplemented by the Canadian Supplement to the Canadian
Preliminary Offering Memorandum dated February 8, 2007, used
in connection with offers and sales in Canada (collectively, the
“Canadian Preliminary Offering Memorandum”) and a
preliminary
offering memorandum dated January 29, 2007,
as supplemented by the Supplement to the Preliminary Offering
Memorandum dated February 8, 2007 (collectively, the
“Preliminary Offering Memorandum”) and will prepare a
Canadian offering memorandum dated the date hereof to be used in
connection with offers and sales in Canada (the “Canadian
Offering Memorandum”) and an offering memorandum dated the
date hereof (the “Offering Memorandum”) setting forth
information concerning the Company, the Guarantors and the
Securities. Copies of the Canadian Preliminary Offering Memorandum
and the Preliminary Offering Memorandum have been, and copies of
the Canadian Offering Memorandum and the Offering Memorandum will
be, delivered by the Company to the Initial Purchasers pursuant to
the terms of this Agreement. The Company hereby confirms that it
has authorized the use of the Canadian Preliminary Offering
Memorandum, the Preliminary Offering Memorandum, the other Time of
Sale Information (as defined below), the Canadian Offering
Memorandum and the Offering Memorandum in connection with the
offering and resale of the Securities 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 Preliminary Offering Memorandum.
At or prior to the time when sales
of the Securities were first made (the “Time of Sale”),
the following information shall have been prepared (collectively,
the “Time of Sale Information”): the Preliminary
Offering Memorandum, as supplemented and amended by the written
communications listed on Annex A hereto.
The Company hereby confirms its
agreement with the several Initial Purchasers concerning the
purchase and resale of the Securities, as follows:
1. Purchase and Resale of the
Securities . (a) The Company agrees to issue and sell the
Securities 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 Securities set forth opposite such Initial
Purchaser’s name in Schedule 1 hereto at a price equal to
97.5% of the principal amount thereof plus accrued interest, if
any, from February 8, 2007 to the Closing Date. The Company
will not be obligated to deliver any of the Securities except upon
payment for all the Securities to be purchased as provided
herein.
(b) The Company understands that the
Initial Purchasers intend to offer the Securities for resale on the
terms set forth in the Time of Sale Information. Each Initial
Purchaser, severally and not jointly, represents, warrants and
agrees that:
(i) it is a qualified institutional
buyer within the meaning of Rule 144A under the Securities Act (a
“QIB”) and an accredited investor within the meaning of
Rule 501(a) under the Securities Act;
(ii) it has not solicited offers
for, or offered or sold, and will not solicit offers for, or offer
or sell, the Securities by means of any form of general
solicitation or general advertising within the meaning of Rule
502(c) of Regulation D under the Securities Act
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(“Regulation D”) or in
any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act; and
(iii) it has not solicited offers
for, or offered or sold, and will not solicit offers for, or offer
or sell, the Securities as part of their initial offering
except:
(A) within the United States to
persons whom it reasonably believes to be QIBs in transactions
pursuant to Rule 144A under the Securities Act (“Rule
144A”) and in connection with each such sale, it has taken or
will take reasonable steps to ensure that the purchaser of the
Securities is aware that such sale is being made in reliance on
Rule 144A; or
(B) in accordance with the
restrictions set forth in Annex C hereto.
(c) Each Initial Purchaser
acknowledges and agrees that the Company and, for purposes of the
opinions to be delivered to the Initial Purchasers pursuant to
Sections 6(f), 6(i) and 6(j), counsel for the Company 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
C hereto), and each Initial Purchaser hereby consents to such
reliance.
(d) The Company acknowledges and
agrees that the Initial Purchasers may offer and sell Securities to
or through any affiliate of an Initial Purchaser and that any such
affiliate may offer and sell Securities purchased by it to or
through any Initial Purchaser.
(e) The Company acknowledges and
agrees that the Initial Purchasers are acting solely in the
capacity of an arm’s length contractual counterparty to the
Company with respect to the offering of Securities contemplated
hereby (including in connection with determining the terms of the
offering) and not as financial advisors or fiduciaries to, or
agents of, the Company or any other person. Additionally, neither
the Representatives nor any other Initial Purchaser is advising the
Company, the Guarantors or any other person as to any legal, tax,
investment, accounting or regulatory matters in any jurisdiction.
The Company shall consult with its own advisors concerning such
matters and shall be responsible for making its own independent
investigation and appraisal of the transactions contemplated
hereby, and neither the Representatives nor any other Initial
Purchaser shall have any responsibility or liability to the Company
with respect thereto. Any review by the Representatives or any
Initial Purchaser of the Company, the Guarantors, and the
transactions contemplated hereby or other matters relating to such
transactions will be performed solely for the benefit of the
Representatives or such Initial Purchaser, as the case may be, and
shall not be on behalf of the Company, the Guarantors or any other
person.
2. Payment and Delivery .
(a) Payment for and delivery of the Securities will be made at
the offices of Simpson Thacher & Bartlett LLP, 425
Lexington Avenue, New York, New York at 9:30 A.M., New York City
time, on February 14, 2007, or at such other time or place on
the same or such other date, not later than the fifth business day
thereafter, as the Representatives 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.”
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(b) Payment for the Securities shall
be made by wire transfer in immediately available funds to the
account(s) specified by the Company to the Representatives against
delivery to the nominee of The Depository Trust Company
(“DTC”), for the account of the Initial Purchasers, of
one or more global notes representing the Securities (collectively,
the “Global Note”), with any transfer taxes payable in
connection with the sale of the Securities duly paid by the
Company. The Global Note will be made available for inspection by
the Representatives not later than 1:00 P.M., New York City time,
on the business day prior to the Closing Date.
3. Representations and Warranties
of the Company . The Company represents and warrants to each
Initial Purchaser that:
(a) Preliminary Offering
Memorandum, Time of Sale Information and Offering Memorandum.
Each of the Preliminary Offering Memorandum and the Canadian
Preliminary Offering Memorandum, as of its date, did not, the Time
of Sale Information, at the Time of Sale, did not, and at the
Closing Date, will not, and the Canadian Offering Memorandum and
the Offering Memorandum, in the form first used by the Initial
Purchasers to confirm sales of the Securities 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
makes 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
Representatives expressly for use in the Preliminary Offering
Memorandum, the Canadian Preliminary Offering Memorandum, the Time
of Sale Information, the Canadian Offering Memorandum or the
Offering Memorandum.
(b) Additional Written
Communications . The Company (including its agents and
representatives, other than the Initial Purchasers in their
capacity as such) has not prepared, made, used, authorized,
approved or referred to and will not prepare, make, use, authorize,
approve or refer to any written communication that constitutes an
offer to sell or solicitation of an offer to buy the Securities
(each such communication by the Company or its agents and
representatives (other than a communication referred to in clauses
(i), (ii) and (iii) below) an “Issuer Written
Communication”) other than (i) the Preliminary Offering
Memorandum and the Canadian Preliminary Offering Memorandum,
(ii) the Offering Memorandum and the Canadian Offering
Memorandum, (iii) the documents listed on Annex A hereto,
including a term sheet substantially in the form of Annex B hereto,
which constitute part of the Time of Sale Information and
(iv) any electronic road show or other written communications,
in each case used in accordance with Section 4(c). Each such
Issuer Written Communication, when taken together with the Time of
Sale Information, did not, and at 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 makes no
representation and warranty with respect to any statements or
omissions made in each such Issuer Written Communication 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 Representatives expressly for use in
any Issuer Written Communication.
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(c) Financial Statements. The
financial statements and the related notes thereto included in each
of the Time of Sale Information and the Offering Memorandum present
fairly in all material respects the financial position of the
Company and its subsidiary as of the dates indicated and the
results of their operations and their cash flows for the periods
specified; (subject, in the case of quarterly financial statements,
to the absence of footnotes and normal year-end audit adjustments);
such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby (except as otherwise
disclosed in the Time of Sale Information); and the other financial
information included in each of the Time of Sale Information and
the Offering Memorandum has been derived from the accounting
records of the Company and its subsidiaries and presents fairly the
information shown thereby (except as otherwise disclosed in the
Time of Sale Information).
(d) No Material Adverse
Change. Since the date of the most recent financial statements
of the Company included in each of the Time of Sale Information and
the Offering Memorandum (i) there has not been any change in
the capital stock or long-term debt of the Guarantors or the
Company, 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
involving a prospective material adverse change, in or affecting
the business, properties, management, financial position, results
of operations of the Company; (ii) the Company has not entered
into any transaction or agreement that is material to the Company
or incurred any liability or obligation, direct or contingent, that
is material to the Company; and (iii) the Company has not
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 Time of Sale Information.
(e) Organization and Good
Standing; Investments. Each of the Guarantors and the Company
has been duly organized and is validly existing and in good
standing under the laws of its respective jurisdiction of
organization, is duly qualified to do business and is in good
standing in each jurisdiction in which its respective ownership or
lease of property or the conduct of its respective business
requires such qualification, and has all power and authority
necessary to own or hold its respective properties and to conduct
the businesses in which it is engaged, except where the failure to
be so qualified or in good standing or have such power or authority
would not, individually or in the aggregate, have a material
adverse effect on the business, properties, management, financial
position, results of operations, ability of each of the Guarantors
or the Company to perform its obligations under the Transaction
Documents (defined below) or prospects of the Company or on the
performance by the Company and the Guarantors of their obligations
under the Securities and the Guarantees (a “Material Adverse
Effect”). The Company does not own or control, directly or
indirectly, any corporation, association or other entity and the
Company (i) does not have or hold, either directly or
indirectly, any capital or any other equity securities or interest
in, or control (whether by the ownership or control or direction of
any securities or any other voting or participating interest or by
contract) of, any other person (other than TerreStar Networks
Holdings (Canada) Inc. and TerreStar Networks (Canada) Inc.) and
(ii) is not obligated to make and is not bound by any
agreement, contract or understanding of any nature as of the date
hereof under which it may become obligated to make any
future
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investment in, or capital contribution to, any
other person (other than TerreStar Networks Holdings (Canada) Inc.
and TerreStar Networks (Canada) Inc.).
(f) Capitalization. The
Company has an authorized capitalization as set forth in each of
the Time of Sale Information and the Offering Memorandum under the
heading “Capitalization”.
(g) Due Authorization. The
Company and each of the Guarantors have full right, power and
authority to execute and deliver this Agreement, the Securities and
the Indenture (including each Guarantee set forth therein)
(together with the Security Documents, the “Transaction
Documents”) and to perform their respective obligations
hereunder and thereunder; and all action 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.
(h) 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, insolvency or similar laws
affecting the enforcement of creditors’ rights generally or
by equitable principles relating to enforceability (collectively,
the “Enforceability Exceptions”); and on the Closing
Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the
“Trust Indenture Act”), and the rules and regulations
of the Commission applicable to an indenture that is qualified
thereunder.
(i) The Securities and the
Guarantees . The Securities 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 Securities 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.
(j) Purchase Agreement. This
Agreement has been duly authorized, executed and delivered by the
Company.
(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 or claim (other than Permitted Liens (as
defined in the Indenture)). 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 that are
required under the Security Documents have been or will be at or
prior to the Closing Date duly made or taken and are or
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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 perfected first-priority security interest in
the Collateral securing the obligations of the Company and each
Guarantor.
(l) The Security Documents .
Each of the Security Documents has been duly authorized by the
Company and each of the Guarantors (as applicable) and, when duly
executed and delivered in accordance with its terms by each of the
other 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.
(m) Descriptions of the
Transaction Documents . Each Transaction Document conforms in
all material respects to the description thereof contained in each
of the Time of Sale Information and the Offering
Memorandum.
(n) No Violation or Default.
Neither any of the Guarantors, nor the Company 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 any of the
Guarantors or the Company is a party or by which any of the
Guarantors or the Company is bound or to which any of the property
or assets of the Guarantors or the Company is subject; or
(iii) in 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 (ii) and (iii) above, for any such default or
violation that would not, individually or in the aggregate, have a
Material Adverse Effect.
(o) No Conflicts. 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 Securities (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 pursuant to,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of
the Company is subject, (ii) result in any violation of the
provisions of the charter or by-laws or similar organizational
documents of the Guarantors or the Company 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, violation or
default that would not, individually or in the aggregate, have a
Material Adverse Effect.
(p) No Consents Required . No
consent, approval, authorization, order, 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 Securities
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(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 (i) such consents, approvals,
authorizations, orders and registrations or qualifications as may
be required under applicable state securities laws in connection
with the purchase and resale of the Securities by the Initial
Purchasers and (ii) such consents, approvals, authorizations,
orders and registrations or qualifications the failure of which to
obtain or make would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
(q) Legal Proceedings. Except
as described in the Time of Sale Information and the Offering
Memorandum, there are no legal, governmental or regulatory
investigations, actions, suits or proceedings pending to which the
Company is or may be a party or to which any property of the
Company is or may be the subject that, individually or in the
aggregate, if determined adversely to the Company, would reasonably
be expected to have a Material Adverse Effect; and, to the best
knowledge of the Company, except as described in the Time of Sale
Information and the Offering Memorandum, no such investigations,
actions, suits or proceedings are threatened or contemplated by any
governmental or regulatory authority or by others.
(r) Independent Accountants.
Friedman LLP, who has certified certain financial statements of the
Company is, to the best knowledge of the Company, a firm of
independent public accountants with respect to the Company within
the applicable rules and regulations adopted by the Commission and
the Public Company Accounting Oversight Board (United States) and
as required by the Securities Act.
(s) Title to Real and Personal
Property. The Company has good and marketable title in fee
simple to, or have valid rights to lease or otherwise use, all
items of real property and good and valid title to, or have valid
rights to lease or otherwise use, all items of personal property,
that, in each case, are material to the business of the Company,
except, in each case, as would not reasonably be expected to have a
Material Adverse Effect. Such property rights are 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 or (ii) would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect.
(t) Title to Intellectual
Property. The Company owns or possesses, has the valid right to
use or can acquire on reasonable terms, adequate rights to use all
material patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) necessary for the conduct of
its business; except where the failure to own, possess, have the
valid right to use or have the ability to acquire would not
reasonably be expected to have a Material Adverse Effect; and, to
the Company’s knowledge, the conduct of its business does not
conflict in any material respect with any such rights of others,
and the Company has not received any notice of any claim of
infringement of or conflict with any such rights of others, except
to the extent as would not reasonably be expected to have a
Material Adverse Effect.
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(u) No Undisclosed
Relationships. No relationship, direct or indirect, exists
between or among the Company, on the one hand, and the directors,
officers, stockholders or other affiliates of the Company, on the
other, that would be required by the Securities Act to be described
in a registration statement to be filed with the Securities and
Exchange Commission (the “Commission”) and that is not
so described in each of the Time of Sale Information and the
Offering Memorandum.
(v) Investment Company Act.
The Company is not, and after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof
as described in each of the Time of Sale Information and the
Offering Memorandum will not be, 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”).
(w) Taxes. The Company has
filed all federal, state and foreign income and franchise taxes
required to be filed through the date hereof, except where the
failure to so file such returns would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect
and has paid all taxes shown thereon; and except as otherwise
disclosed in the Time of Sale Information and 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 properties or assets that could reasonably be expected to
result, individually or in the aggregate, in a Material Adverse
Effect.
(x) Licenses and Permits.
Except as described in each of the Time of Sale Information and the
Offering Memorandum, the Company possesses all licenses,
certificates, permits and other authorizations issued by, and has
made all declarations and filings with, the appropriate federal,
state, local or foreign governmental or regulatory authorities that
are necessary for the ownership or lease of its respective
properties or the conduct of its business as described in each of
the Time of Sale Information and 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 each of the Time of Sale Information and
the Offering Memorandum, the Company has not 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.
(y) No Labor Disputes. No
labor disturbance by or dispute with employees of the Company
exists or, to the best knowledge of the Company, is contemplated or
threatened, except as would not have a Material Adverse
Effect.
(z) Compliance With Environmental
Laws. (i) The Company (x) is, and at all prior times
was, in compliance with any and all applicable federal, state,
local and foreign laws, rules, regulations, requirements, decisions
and orders relating to the protection of human health or safety,
the environment, natural resources, hazardous or toxic substances
or wastes, pollutants or contaminants (collectively,
“Environmental Laws”), (y) has received and is in
compliance with all permits, licenses, certificates or other
authorizations or approvals required of them under applicable
Environmental Laws to conduct its business, and (z) has not
received notice of any actual or potential liability under or
relating to any Environmental Laws, including for the
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investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or
contaminants, and has no knowledge of any event or condition that
would reasonably be expected to result in any such notice, and
(ii) there are no costs or liabilities associated with
Environmental Laws of or relating to the Company, except in the
case of each of (i) and (ii) above, for any such failure
to comply, or failure to receive required permits, licenses or
approvals, or cost or liability, as would not, individually or in
the aggregate, have a Material Adverse Effect; and
(iii) except as described in each of the Time of Sale
Information and the Offering Memorandum, (x) there are no
proceedings that are pending, or that are known to be contemplated,
against the Company under any Environmental Laws in which a
governmental entity is also a party, other than such proceedings
regarding which it is reasonably believed no monetary sanctions of
$100,000 or more will be imposed, (y) the Company is not aware
of any issues regarding compliance with Environmental Laws, or
liabilities or other obligations under Environmental Laws or
concerning hazardous or toxic substances or wastes, pollutants or
contaminants, that could reasonably be expected to have a material
effect on the capital expenditures, earnings or competitive
position of the Company, and (z) the Company does not
anticipate material capital expenditures relating to any
Environmental Laws.
(aa) Compliance With ERISA.
(i) Each employee benefit plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), for which the Company or
any member of its “Controlled Group” (defined as any
organization which is a member of a controlled group of
corporations within the meaning of Section 414 of the Internal
Revenue Code of 1986, as amended (the “Code”)) would
have any liability (each, a “Plan”) has been maintained
in compliance with its terms and the requirements of any applicable
statutes, orders, rules and regulations, including but not limited
to ERISA and the Code, except to the extent that any non-compliance
could not reasonably be expected to have a Material Adverse Effect;
(ii) no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has
occurred with respect to any Plan excluding transactions effected
pursuant to a statutory or administrative exemption, except to the
extent that any non-compliance could not have a Material Adverse
Effect; (iii) for each Plan that is subject to the funding
rules of Section 412 of the Code or Section 302 of ERISA,
no “accumulated funding deficiency” as defined in
Section 412 of the Code, whether or not waived, has occurred
or is reasonably expected to occur; (iv) the fair market value
of the assets of each Plan exceeds the present value of all
benefits accrued under such Plan (determined based on those
assumptions used to fund such Plan); (v) no “reportable
event” (within the meaning of Section 4043(c) of ERISA)
has occurred or is reasonably expected to occur; and
(vi) neither the Company nor any member of the Controlled
Group has incurred, nor reasonably expects to incur, any liability
under Title IV of ERISA (other than contributions to the Plan or
premiums to the PBGC, in the ordinary course and without default)
in respect of a Plan (including a “multiemployer plan”,
within the meaning of Section 4001(a)(3) of ERISA) that could
reasonably be expected to have a Material Adverse
Effect.
(bb) Accounting Controls. The
Company maintains a system of internal accounting controls
sufficient, to the best knowledge of the Company, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles, including, but not limited to internal accounting
controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with
management’s general or specific authorizations;
(ii) transactions
10
are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. Except as disclosed in
each of the Time of Sale Information and the Offering Memorandum,
there are no material weaknesses or significant deficiencies in the
Company’s internal controls.
(cc) Insurance. The Company
has insurance covering its properties, operations, personnel and
businesses, which insurance is in amounts and insures against such
losses and risks as are adequate to protect the Company and its
business; and the Company has not (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.
(dd) No Unlawful Payments.
Neither the Company nor, to the best knowledge of the Company, any
director, officer, agent, employee or other person associated with
or acting on behalf of the Company 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 foreign or domestic
government official or employee from corporate funds;
(iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment.
(ee) Compliance with Money
Laundering Laws . The operations of the Company are and have
been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all jurisdictions, the rules and regulations
thereunder and any related or similar 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 with respect to the Money Laundering Laws is pending
or, to the best knowledge of the Company, threatened.
(ff) Compliance with OFAC .
None of the Company or, to the knowledge of the Company, any
director, officer, agent, employee or affiliate of the Company is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Department of the Treasury
(“OFAC”); and the Company will not directly or
indirectly use the proceeds of the offering of the Securities
hereunder, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person
or entity, for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by
OFAC.
(gg) Solvency. On and
immediately after the Closing Date, the Company (after giving
effect to the issuance of the Securities and the other transactions
related thereto as described in each of the Time of Sale
Information and the Offering Memorandum) will be Solvent,
provided , however , that the Company’s
liquidity and ability to fund its capital requirements
and
11
operations are subject to the factors
described in the Time of Sale Information and the Offering
Memorandum under “Management’s discussion and analysis
of financial condition and results of operations – Liquidity
and capital resources.” 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 is not
less than the total amount required to pay the liabilities of the
Company on its total existing debts and liabilities (including
contingent liabili
