The Guarantors listed on
Schedule B hereto
Second Priority Senior Secured
Floating Rate Notes due 2012
RBC Capital Markets
Corporation
RBC Capital
Markets Corporation
1211 Avenue of the Americas, 32 nd Floor
New York, NY 10036
As Initial Purchaser
Introductory. Geokinetics Inc., a Delaware corporation (the
“Company”), on the terms and subject to the condition
set forth herein, proposes to issue and sell to RBC Capital Markets
Corporation (the “Initial Purchaser”) $110,000,000
aggregate principal amount of the Company’s Second Priority
Senior Secured Floating Rate Notes due 2012 (the
“Notes”). RBC Capital Markets Corporation has agreed to
act as the Initial Purchaser in connection with the offering and
sale of the Notes.
The Securities (as
defined below) will be issued pursuant to an indenture, to be dated
as of December 15, 2006 (the “Indenture”), between
the Company and Wells Fargo Bank, National Association, as trustee
(the “Trustee”). Notes issued in book-entry form will
be issued in the name of Cede & Co., as nominee of The
Depository Trust Company (the “Depositary”).
The
Company’s payment of principal of, premium and interest and
Additional Interest (as defined in the Indenture), if any, under
the Notes, the Exchange Notes (as defined below) and the Indenture
will be unconditionally guaranteed (the “Guarantees,”
and together with the Notes, the “Securities”), jointly
and severally, on a senior secured basis, by (i) each of the
Company’s domestic subsidiaries as of the date hereof, which
are listed on Schedule B hereto, and (ii) any domestic
subsidiary of the Company formed or acquired on or after the
Closing Date (as defined below) that executes a supplemental
indenture setting forth an additional guarantee in accordance with
the terms of the Indenture, and their respective successors and
assigns (collectively, the “Guarantors”). The Exchange
Notes (as defined below) and the Guarantees thereof are herein
collectively referred to as the “Exchange
Securities.”
The holders of the
Securities will be entitled to the benefits of a registration
rights agreement, to be dated as of December 15, 2006 (the
“Registration Rights Agreement”), among the Company and
the Initial Purchaser, pursuant to which the Company and each of
the
Guarantors will
agree to file with the Securities and Exchange Commission (the
“Commission”) a registration statement under the
Securities Act of 1933 (as amended, the “Securities
Act,” which term, as used herein, includes the rules and
regulations of the Commission promulgated thereunder), relating to
an offer (the “Exchange Offer”) to exchange another
series of debt securities of the Company with terms substantially
identical to the Notes (the “Exchange Notes”) and to
have it declared effective by the Commission on or prior to
270 days after the Closing Date, and, to the extent required
by the Registration Rights Agreement, a shelf registration
statement pursuant to Rule 415 of the Securities Act relating
to the resale by certain holders of the Notes.
The Company
understands that the Initial Purchaser proposes to make an offering
of the Securities on the terms and in the manner set forth herein
and in the Pricing Disclosure Package (as defined below) and the
Final Offering Memorandum (as defined below) and agrees that the
Initial Purchaser may resell, subject to the conditions set forth
herein, all or a portion of the Securities to purchasers (the
“Subsequent Purchasers”) at any time after the date of
this Agreement. The “Time of Execution” means 3:48 p.m.
(New York City time) on December 11, 2006, which is the time
of the first sale of the Notes by the Initial Purchaser to the
public. The Securities are to be offered and sold to or through the
Initial Purchaser without being registered with the Commission
under the Securities Act, in reliance upon exemptions therefrom.
The terms of the Securities and the Indenture will require that
investors that acquire Securities expressly agree that Securities
may only be resold or otherwise transferred, after the date hereof,
if such Securities are registered for sale under the Securities Act
or if an exemption from the registration requirements of the
Securities Act is available (including the exemptions afforded by
Rule 144A (“Rule 144A”) or Regulation S
(“Regulation S”) thereunder).
Pursuant to the
Notes Security Documents (as defined in the Indenture) to be
entered into between the Company, the Guarantors and the Trustee,
the obligations of the Company under the Securities and of each
Guarantor under its Guarantee will be secured by Second Priority
Liens (as defined in the Indenture) over substantially all assets
of the Company and the Guarantors over which any First Priority
Lien (as defined in the Indenture) exists, subject to certain
exceptions (all assets subject to the Second Priority Liens,
hereinafter collectively referred to as the
“Collateral”). The Second Priority Liens will be junior
to the First Priority Liens and to any other liens having priority
or otherwise ranking senior to the Second Priority Liens. The
Collateral has been pledged to PNC Bank, National Association, as
agent (the “Collateral Agent”), for the benefit of the
lenders under the Revolving Credit, Term Loan and Security
Agreement, dated as of June 12, 2006, between the Agent, the
Company and certain of its subsidiaries as borrowers, as amended by
Joinder and Amendment No. 1, dated as of September 8,
2006 (the “PNC Credit Facility”), as holders of the
First Priority Liens, and will be granted to the Trustee for the
benefit of the holders of the Securities as holders of the Second
Priority Liens. The Trustee will enter into an intercreditor
agreement (the “Intercreditor Agreement”) with the
Agent with respect to the Collateral, which will govern the
relative ranking of the Second Priority Liens and the First
Priority Liens.
As used herein,
the term “Operative Documents” refers to this
Agreement, the Registration Rights Agreement, the Indenture, the
Notes Security Documents (as defined below), the Securities, the
Exchange Securities and the Intercreditor Agreement.
2
The Company has
prepared and delivered to the Initial Purchaser copies of a
preliminary offering memorandum, dated December 1, 2006 (the
“Preliminary Offering Memorandum”), and have prepared
and delivered to the Initial Purchaser copies of a pricing
supplement, dated December 11, 2006 (in the form attached
hereto as Exhibit A, the “Pricing Supplement”),
describing the terms of the Securities, each for use by the Initial
Purchaser in connection with its solicitation of offers to purchase
the Securities. The Preliminary Offering Memorandum and the Pricing
Supplement are herein referred to as the “Pricing Disclosure
Package.” Promptly after the Time of Execution, the Company
will prepare and deliver to the Initial Purchaser a final offering
memorandum dated the date hereof (the “Final Offering
Memorandum”).
The Company and
the Guarantors hereby confirm their agreements with the Initial
Purchaser as follows:
SECTION 1.
Representations and Warranties. The Company and the
Guarantors, jointly and severally, hereby represent, warrant and
covenant to the Initial Purchaser as follows:
(a)
No Registration Required. Subject to compliance by the
Initial Purchaser with the representations and warranties set forth
in Section 2 hereof and with the procedures set forth in
Section 7 hereof, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchaser
and to each Subsequent Purchaser in the manner contemplated by this
Agreement, the Pricing Disclosure Package and the Final Offering
Memorandum to register under the Securities Act the offer and sale
of the Securities hereunder or the initial resale of Securities to
Subsequent Purchasers or, until such time as the Exchange
Securities are issued pursuant to an effective registration
statement, to qualify the Indenture under the Trust Indenture Act
of 1939 (the “Trust Indenture Act,” which term, as used
herein, includes the rules and regulations of the Commission
promulgated thereunder).
(b)
No Integration of Offerings or General Solicitation. Neither
the Company nor any Guarantor has, 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. None of the Company, the
Guarantors, their respective affiliates (as such term is defined in
Rule 501 under the Securities Act (each, an
“Affiliate”), or any person acting on its or any of
their behalf (other than the Initial Purchaser, as to whom neither
the Company nor any Guarantor makes any representation or warranty)
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 under the
Securities Act. With respect to those Securities sold in reliance
upon Regulation S, (i) none of the Company, the
Guarantors, their respective Affiliates or any person acting on its
or their behalf (other than the Initial Purchaser, as to whom
neither the Company nor any Guarantor makes any representation or
warranty) has engaged or will engage in any directed selling
efforts within the meaning of Regulation S and (ii) each
of the Company, the Guarantors and their respective Affiliates and
any person acting on its or their behalf (other than the Initial
Purchaser, as to whom neither the Company nor any Guarantor makes
any representation or warranty) has complied and will comply with
the offering restrictions set forth in Regulation S and, in
connection therewith, the Pricing Disclosure Package and the Final
Offering Memorandum will contain the disclosure required by
Rule 902 of the Securities Act, and (iii) the sale of the
Securities
3
pursuant to
Regulation S is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
(c)
Eligibility for Resale under Rule 144A. The Securities
are eligible for resale pursuant to Rule 144A and will not be,
at the Closing Date, of the same class as securities listed on a
national securities exchange registered under Section 6 of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or quoted in a U.S. automated interdealer quotation
system.
(d)
The Pricing Disclosure Package and the Final Offering
Memorandum. Neither the Pricing Disclosure Package (as defined
below), as of the Time of Execution, nor the Final Offering
Memorandum, as of its date or (as amended or supplemented in
accordance with Section 3(a), as applicable) as of the Closing
Date, contains or will contain an untrue statement of a material
fact or omits or will 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 Pricing Disclosure Package, the
Final Offering Memorandum or any amendment or supplement thereto
made in reliance upon and in conformity with information furnished
to the Company in writing by the Initial Purchaser expressly for
use in the Pricing Disclosure Package, the Final Offering
Memorandum or any amendment or supplement thereto, as the case may
be. The Pricing Disclosure Package contains, and the Final Offering
Memorandum will contain, all the information specified in, and
meeting the information requirements of, Rule 144A(d)(4). The
Company has not distributed and will not distribute, prior to the
later of the Closing Date and the completion of the Initial
Purchaser’s distribution of the Securities, any offering
material in connection with the offering and sale of the Securities
other than the Pricing Disclosure Package and the Final Offering
Memorandum or any amendment or supplement thereto in accordance
with Section 3(a).
(e)
The Purchase Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company and each Guarantor, enforceable in
accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general
equitable principles.
(f)
The Registration Rights Agreement. At the Closing Date, the
Registration Rights Agreement will be duly authorized, executed and
delivered by, and will be a valid and binding agreement of, the
Company and each Guarantor, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights and remedies of creditors
or by general equitable principles covered by equity and except as
rights to indemnification under the Registration Rights Agreement
may be limited by applicable law.
(g)
The Intercreditor Agreement. At the Closing Date, the
Intercreditor Agreement will be duly authorized, executed and
delivered by, and will be a valid and binding agreement of, the
Company and each Guarantor, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization,
4
moratorium or
other similar laws relating to or affecting the rights and remedies
of creditors or by general equitable principles covered by
equity.
(h)
Authorization of the Securities and the Exchange Securities.
The Notes to be purchased by the Initial Purchaser from the Company
are in the form contemplated by the Indenture, have been duly
authorized for issuance and sale pursuant to this Agreement and the
Indenture and, at the Closing Date, 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, will constitute valid and binding agreements of the
Company, enforceable in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general
equitable principles and will be entitled to the benefits of the
Indenture. The Exchange Notes have been duly and validly authorized
for issuance by the Company, and when issued and authenticated in
accordance with the terms of the Indenture, the Registration Rights
Agreement and the Exchange Offer, 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,
or similar laws relating to or affecting enforcement of the rights
and remedies of creditors or by general principles of equity and
will be entitled to the benefits of the Indenture. The Guarantees
of the Notes are in the form contemplated by the Indenture, have
been duly authorized for issuance and sale pursuant to this
Agreement and the Indenture and, at the Closing Date, will have
been duly executed by each of the Guarantors and, when the Notes
have been authenticated in the manner provided for in the Indenture
and delivered against payment of the purchase price therefor, will
constitute valid and binding agreements of the Guarantors,
enforceable in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general
equitable principles and will be entitled to the benefits of the
Indenture. The Guarantees of the Exchange Notes are in the form
contemplated by the Indenture, have been duly authorized for
issuance and sale pursuant to this Agreement and the Indenture and,
at the time the Exchange Notes are authenticated in the manner
provided for in the Indenture and delivered against payment of the
purchase price therefor, will have been duly executed by each of
the Guarantors and will constitute valid and binding agreements of
the Guarantors, enforceable in accordance with their terms, except
as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles and will be entitled to the benefits
of the Indenture.
(i)
Authorization of the Indenture. The Indenture has been duly
authorized by the Company and each Guarantor and, at the Closing
Date, will have been duly executed and delivered by the Company and
will constitute a valid and binding agreement of the Company,
enforceable against the Company and each Guarantor in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights and remedies of creditors
or by general equitable principles.
(j)
Authorization of the Notes Security Documents. The Notes
Security Documents have been duly authorized by the Company and
each of the Guarantors and, on the
5
Closing Date,
will have been duly executed and delivered by the Company and each
of the Guarantors. When the Notes Security Documents have been duly
executed and delivered by each of the parties thereto, the Notes
Security Documents will (i) create a valid, binding and
enforceable security interest in the Collateral in favor of the
Trustee for the benefit of the holders of the Securities, and all
material agreements which are part of the Collateral and to which
the Company or any Guarantor is a party or by which it is bound
will be valid, binding and enforceable against the Company or such
Guarantor and (ii) be valid and binding obligations of the
Company and each of the Guarantors, enforceable against the Company
and each Guarantor in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors’ rights and to general equity principles
and except that any rights to indemnity and contributions may be
limited by applicable laws and public policy considerations. On the
Closing Date, the Notes Security Documents and the Collateral will
conform in all material respects to the statements relating thereto
contained in the Pricing Disclosure Package and the Final Offering
Memorandum.
(k)
Collateral. The Company and the Guarantors own the
Collateral free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects
(“Liens”), other than Permitted Liens.
(l)
Perfection of the Collateral . Upon the filing of all
necessary Uniform Commercial Code (“UCC”) financing
statements in the proper filing offices and all other actions
necessary or desirable to perfect a security interest in the
Collateral (to the extent a security interest in the Collateral is
capable of being perfected by filing), the security interests in
the Collateral granted to the Trustee, for the benefit of the
holders of the Securities, will constitute valid and perfected
second priority security interests in the Collateral, securing the
obligations of the Company and the Guarantors under the Indenture,
subject only to Permitted Liens and other Liens expressly permitted
under the Indenture. As of the Closing Date, the filing of all
necessary Uniform Commercial Code financing statements in the
proper filing offices and other filings and actions contemplated by
the Notes Security Documents and the Indenture, and all other
filings and other actions necessary or desirable to perfect the
security interest in the Collateral will have been duly made or
taken and will be in full force and effect.
(n)
Description of the Operative Documents. The Operative
Documents will conform in all material respects to the respective
statements relating thereto contained in the Pricing Disclosure
Package and the Final Offering Memorandum.
(o)
No Material Adverse Change. Except as disclosed in the
Pricing Disclosure Package and the Final Offering Memorandum,
subsequent to the respective dates as of which information is given
in the Pricing Disclosure Package: (i) there has been no
material adverse change, or any development that could reasonably
be expected to result in a material adverse change, in the
condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions
in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change is called a
“Material Adverse Change”); (ii) the Company and
its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent,
not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary
6
course of
business; and (iii) there has been no dividend or distribution
of any kind declared, paid or made by the Company or, except for
dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class
of capital stock.
(p)
Independent Accountants. Fitts Roberts & Co., P.C., UHY,
LLP and UHY Mann Frankfort Stein & Lipp CPAs, LLP, which have
expressed their opinions with respect to the financial statements
(which term as used in this Agreement includes the related notes
thereto) filed with the Commission included in the Pricing
Disclosure Package and the Final Offering Memorandum are each a
registered public accounting firm and independent public or
certified public accountants, within the meaning of
Regulation S-X under the Securities Act and the Exchange
Act.
(q)
Preparation of the Financial Statements. The historical
financial statements, together with the related schedules and
notes, included in the Pricing Disclosure Package and the Final
Offering Memorandum present fairly the consolidated financial
position of the Company and its subsidiaries and Grant Geophysical,
Inc. and its subsidiaries, as applicable, as of and at the dates
indicated and the results of their operations and cash flows for
the periods specified. Such financial statements have been prepared
in conformity with generally accepted accounting principles, as
applied in the United States, applied on a consistent basis
throughout the periods involved, except as may be expressly stated
in the related notes thereto. The financial data set forth in the
Pricing Disclosure Package and the Final Offering Memorandum under
the captions “Offering Memorandum Summary – Summary
Historical Consolidated and Pro Forma Combined Financial
Information” and “Selected Historical Consolidated
Financial Information” and elsewhere in the Pricing
Disclosure Package and the Final Offering Memorandum fairly present
the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Pricing
Disclosure Package and the Final Offering Memorandum. The pro forma
consolidated financial statements of the Company and its
subsidiaries and the related notes thereto included under the
caption “Offering Memorandum Summary – Summary
Historical Consolidated and Pro Forma Combined Financial
Information”, “Unaudited Pro Forma Combined Financial
Information” and elsewhere in the Pricing Disclosure Package
and the Final Offering Memorandum present fairly the information
contained therein, have been prepared in accordance with the
Commission’s rules and guidelines with respect to pro forma
financial statements and have been properly presented on the bases
described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances
referred to therein.
(r)
Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been
duly incorporated or organized and is validly existing as a
corporation or limited liability company in good standing under the
laws of the jurisdiction of its incorporation or organization and
has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Pricing
Disclosure Package and the Final Offering Memorandum and, in the
case of the Company and the Guarantors, to enter into and perform
its obligations under each of the Operative Documents. Each of the
Company and its subsidiaries is duly qualified as a foreign
corporation or limited liability company to transact business and
is in good standing in each jurisdiction in which such
7
qualification
is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions
where the failure to so qualify or to be in good standing would
not, individually or in the aggregate, result in a Material Adverse
Change. All of the issued and outstanding capital stock or
membership interests of each subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable and is owned by
the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance or claim
except for Liens under the PNC Credit Facility (“Permitted
Liens”). The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than
the subsidiaries listed in Schedule B hereto.
(s)
Capitalization and Other Capital Stock Matters. At
September 30, 2006, on a consolidated basis, after giving pro
forma effect to the issuance and sale of the Securities pursuant
hereto, the Company would have an authorized and outstanding
capitalization as set forth in the Pricing Disclosure Package and
the Final Offering Memorandum under the caption
“Capitalization” (other than for subsequent issuances
of capital stock, if any, pursuant to employee benefit plans
described in the Pricing Disclosure Package and the Final Offering
Memorandum or upon exercise of outstanding options or warrants
described in the Pricing Disclosure Package and the Final Offering
Memorandum). All of the outstanding shares of Common Stock have
been duly authorized and validly issued, are fully paid and
nonassessable and have been issued in compliance with federal and
state securities laws. None of the outstanding shares of Common
Stock were issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase
securities of the Company. There are no authorized or outstanding
options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the
Company or any of its subsidiaries other than those accurately
described in the Pricing Disclosure Package and the Final Offering
Memorandum. The description of the Company’s stock option,
stock bonus and other stock plans or arrangements, and the options
or other rights granted thereunder, set forth in the Pricing
Disclosure Package and the Final Offering Memorandum accurately and
fairly describes such plans, arrangements, options and
rights.
(t)
Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws
or is in default (or, with the giving of notice or lapse of time,
would be in default) (“Default”) under any indenture,
mortgage, loan or credit agreement, note, contract, franchise,
lease or other 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 (each, an “Existing
Instrument”), except for such Defaults as would not,
individually or in the aggregate, result in a Material Adverse
Change. The Company’s and each Guarantor’s execution,
delivery and performance of the Operative Documents, and the
issuance and delivery of the Securities or the Exchange Securities,
and consummation of the transactions contemplated hereby and
thereby and by the Pricing Disclosure Package and the Final
Offering Memorandum (i) have been duly authorized by all
necessary corporate or limited liability company action and will
not result in any violation of the provisions of the charter or
by-laws or organization documents of the Company or any subsidiary,
(ii) will not conflict with or constitute a breach of, or
Default or a Debt Repayment Triggering Event (as defined below)
under, or result in the creation or imposition of any
lien,
8
charge or
encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, or require the consent of any other
party to, any Existing Instrument, except for such conflicts,
breaches, Defaults, liens, charges or encumbrances as would not,
individually or in the aggregate, result in a Material Adverse
Change and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree
applicable to the Company or any subsidiary. No consent, approval,
authorization or other order of, or registration or filing with,
any court or other governmental or regulatory authority or agency,
is required for the Company’s or each Guarantor’s
execution, delivery and performance of the Operative Documents, or
the issuance and delivery of the Securities or the Exchange
Securities, or consummation of the transactions contemplated hereby
and thereby and by the Pricing Disclosure Package and the Final
Offering Memorandum, except such as have been obtained or made by
the Company or the Guarantors and are in full force and effect
under the Securities Act, applicable state securities or blue sky
laws and except such as may be required by federal and state
securities laws with respect to the Company’s obligations
under the Registration Rights Agreement, and filings necessary to
perfect the secured interests in the Collateral. As used herein, a
“Debt Repayment Triggering Event” means any event or
condition which gives, or with the giving of notice or lapse of
time would give, 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.
(u)
No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best
of the Company’s and each Guarantor’s knowledge,
threatened (i) against or affecting the Company or any of its
subsidiaries, (ii) which has as the subject thereof any
property owned or leased by the Company or any of its subsidiaries,
where in any such case any such action, suit or proceeding, if
determined adversely, would reasonably be expected to result in a
Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor
dispute with the employees of the Company or any of its
subsidiaries, or with the employees of any principal supplier of
the Company, exists or, to the best of the Company’s
knowledge, is threatened or imminent.
(v)
Intellectual Property Rights. The Company and its
subsidiaries own or possess sufficient trademarks, trade names,
patent rights, copyrights, licenses, approvals, trade secrets and
other similar rights (collectively, “Intellectual Property
Rights”) reasonably necessary to conduct their businesses as
now conducted; and the expected expiration of any of such
Intellectual Property Rights, if not renewed or replaced, would not
result in a Material Adverse Change. Neither the Company nor any of
its subsidiaries has received any notice of infringement or
conflict with asserted Intellectual Property Rights of others,
which infringement or conflict, if the subject of an unfavorable
decision, would result in a Material Adverse Change.
(w)
All Necessary Permits, etc. The Company and each subsidiary
possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct their respective
businesses, and neither the Company nor any subsidiary has received
any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate,
authorization or
9
permit which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse
Change.
(x)
Title to Properties. The Company and each of its
subsidiaries has good and marketable title to all the properties
and assets reflected as owned in the financial statements referred
to in Section 1(q) above (or elsewhere in the Pricing Disclosure
Package and the Final Offering Memorandum), in each case free and
clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do
not materially interfere with the current or currently proposed use
of such property by the Company or such subsidiary and Permitted
Liens. The real property, improvements, equipment and personal
property held under lease by the Company or any subsidiary are held
under valid and enforceable leases, with such exceptions as are not
material and do not materially interfere with the current or
currently proposed use of such real property, improvements,
equipment or personal property by the Company or such
subsidiary.
(y)
Tax Law Compliance. The Company and its consolidated
subsidiaries have filed all necessary federal, state and foreign
income and franchise tax returns and have paid all taxes required
to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them. The
Company has made adequate charges, accruals and reserves in the
applicable financial statements referred to in Section 1(q) above
in respect of all federal, state and foreign income and franchise
taxes for all periods as to which the tax liability of the Company
or any of its consolidated subsidiaries has not been finally
determined.
(z)
Company and Guarantors Each Not an “Investment
Company”. The Company has been advised of the rules and
requirements under the Investment Company Act of 1940, as amended
(the “Investment Company Act”). Neither the Company nor
any Guarantor is, and after receipt of payment for the Securities
and the use of proceeds thereof as described in the Pricing
Disclosure Package and the Final Offering Memorandum each will not
be, an “investment company” within the meaning of
Investment Company Act and the Company and each Guarantor intends
to conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(aa)
Insurance. Each of the Company and its subsidiaries are
insured by recognized, financially sound institutions with policies
in such amounts and with such deductibles and covering such risks
as are generally deemed adequate and customary for their businesses
including, but not limited to, policies covering real and personal
property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and
earthquakes. The Company has no reason to believe that it or any
subsidiary will not be able (i) to renew its existing
insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be
necessary or appropriate to conduct its business as now conducted
and at a cost that would not result in a Material Adverse Change.
Neither of the Company nor any subsidiary has been denied any
insurance coverage which it has sought or for which it has
applied.
(bb)
No Price Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action
designed to or that might be reasonably expected
10
to cause or
result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities.
(cc)
Solvency. The Company and each Guarantor is, and immediately
after the Closing Date will be, Solvent. As used herein, the term
“Solvent” means, with respect to the Company and each
Guarantor on a particular date, that on such date (i) the fair
market value of its assets is greater than the total amount of its
liabilities (including contingent liabilities), (ii) the
present fair salable value of its assets is greater than the amount
that will be required to pay the probable liabilities on its debts
as they become absolute and matured, (iii) it is able to
realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature and (iv) it
does not have unreasonably small capital to carry on its business
as conducted and as proposed to be conducted, as set forth in the
Pricing Disclosure Package and the Final Offering
Memorandum.
(dd)
No Unlawful Contributions or Other Payments. Neither the
Company nor any of its subsidiaries nor, to the best of the
Company’s knowledge, any employee or agent of the Company or
any subsidiary, has made any contribution or other payment to any
official of, or candidate for, any federal, state or foreign office
in violation of any law or of the character necessary to be
disclosed in the Pricing Disclosure Package and the Final Offering
Memorandum in order to make the statements therein not
misleading.
(ee)
Company’s Internal Control over Financial Reporting.
The Company maintains a system of internal controls over financial
reporting sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s
general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of reliable financial statements
in conformity with generally accepted accounting principles as
applied in the United States and to maintain accountability for
assets; (iii) records are maintained in sufficient detail to
accurately and fairly reflect the transactions and dispositions of
the Company’s assets (iv) access to assets is permitted
only in accordance with management’s general or specific
authorization; and (v) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company is not aware of (a) any significant deficiency in the
design or operation of internal control over financial reporting
which could adversely affect the Company’s ability to record,
process, summarize and report financial data or any material
weaknesses in internal controls or (b) any fraud, whether or
not material, that involves management or other employees who have
a significant role in the Company’s internal controls. There
have been no significant changes in internal controls or in other
factors that could significantly affect internal controls since
December 31, 2005.
(ff)
Compliance with Environmental Laws. Except as would not,
individually or in the aggregate, result in a Material Adverse
Change: (i) neither the Company nor any of its subsidiaries is
in violation of any federal, state, local or foreign law or
regulation relating to pollution or protection of human health or
the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or
wildlife, including without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products
(collectively, “Materials of Environmental Concern”),
or
11
otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern (collectively, “Environmental
Laws”), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or its
subsidiaries under applicable Environmental Laws, or noncompliance
with the terms and conditions thereof, nor has the Company or any
of its subsidiaries received any written communication, whether
from a governmental authority, citizens group, employee or
otherwise, that alleges that the Company or any of its subsidiaries
is in violation of any Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental
authority, no investigation with respect to which the Company has
received written notice, and no written notice by any person or
entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources
damages, property damages, personal injuries, attorneys’ fees
or penalties arising out of, based on or resulting from the
presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased or operated by
the Company or any of its subsidiaries, now or in the past
(collectively, “Environmental Claims”), pending or, to
the best of the Company’s knowledge, threatened against the
Company or any of its subsidiaries or any person or entity whose
liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by
operation of law; and (iii) to the best of the Company’s
knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal
of any Material of Environmental Concern, that reasonably could
result in a violation of any Environmental Law or form the basis of
a potential Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for
any Environmental Claim the Company or any of its subsidiaries has
retained or assumed either contractually or by operation of
law.
(gg)
ERISA Compliance. The Company and its subsidiaries and any
“employee benefit plan” (as defined under the Employee
Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder (collectively,
“ERISA”)) established or maintained by the Company, its
subsidiaries or their “ERISA Affiliates” (as defined
below) are in compliance in all material respects with ERISA.
“ERISA Affiliate” means, with respect to the Company or
a subsidiary, any member of any group of organizations described in
Sections 414(b), (c), (m), or (o) of the Internal Revenue Code
of 1986, as amended, and the regulations and published
interpretations thereunder (the “Code”) of which the
Company or such subsidiary is a member. No “reportable
event” (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any “employee benefit
plan” established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates. No “employee
benefit plan” established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates, if such
“employee benefit plan” were terminated, would have any
“amount of unfunded benefit liabilities” (as defined
under ERISA). Neither the Company, any of its subsidiaries nor any
of their ERISA Affiliates has incurred or reasonably expects to
incur any liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any “employee benefit
plan” or (ii) Sections 412, 4971, 4975 or 4980B of
the Code. Each “employee benefit plan” established or
maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401
of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such
qualification.
12
(hh)
Regulation S . The Company and its affiliates, the
Guarantors and their respective affiliates and all persons acting
on their behalf (other than the Initial Purchaser, as to whom the
Company and the Guarantors make no representation) have complied
with and will comply with the offering restrictions requirements of
Regulation S in connection with the offering of the Securities
outside the United States and, in connection therewith, the Pricing
Disclosure Package and the Final Offering Memorandum will contain
the disclosure required by Rule 902. The Company is a
“reporting issuer,” as defined in Rule 902 under
the Securities Act.
(ii)
Sarbanes-Oxley Act. The Company is in compliance in all
material respects with provisions of the Sarbanes-Oxley Act of 2002
that are applicable to it.
(jj)
Disclosure Controls and Procedures. Except as disclosed in
the Pricing Disclosure Package and the Final Offering Memorandum,
the Company has established and maintains “disclosure
controls and procedures” (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act) that are reasonably designed to
ensure that all information (both financial and non-financial)
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and regulations thereunder, and that all such information is
accumulated and communicated to the Company’s management as
appropriate to allow timely decisions regarding required disclosure
and to make the certifications of the Chief Executive Officer and
Chief Financial Officer of the Company required under the Exchange
Act with respect to such reports. Without limiting the generality
of the foregoing, as disclosed in the Pricing Disclosure Package
and the Final Offering Memorandum, the Company’s disclosure
controls and procedures are effective to enable it to record,
process, summarize, and report information required to be included
in our SEC filings within the required time period, and to ensure
that such information is accumulated and communicated to its
management, including its Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required
disclosure.
(kk)
Payment of Dividends by Subsidiaries. No subsidiary of the
Company is currently prohibited, directly or indirectly, from
paying any dividends to the Company or any other subsidiary, from
making any other distribution on such subsidiary’s capital
stock, from repaying to the Company or any other subsidiary any
loans or advances to such subsidiary from the Company or any other
subsidiary or from transferring any of such subsidiary’s
property or assets to the Company or any other subsidiary of the
Company, except as described in or contemplated in the Pricing
Disclosure Package and the Final Offering Memorandum
(ll)
Forward-Looking Statements. No forward-looking statement
(within the meaning of Section 27A of the Act and Sec
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