Execution Copy
STELLEX INDUSTRIES, INC.
$100,000,000
9.50% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
October 23, 1997
SOCIETE GENERALE SECURITIES CORPORATION
BT ALEX. XXXXX INCORPORATED
XXXXXXXXX & COMPANY, INC.
c/o Societe Generale Securities Corporation
1221 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Stellex Industries, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell $100,000,000 principal amount of its
9.50% Senior Subordinated Notes due 2007 (the "Securities"). The Securities are
to be issued pursuant to an Indenture dated as of the Closing Date (as defined
below) (the "Indenture") to be entered into between the Company, each subsidiary
of the Company existing on the Closing Date (collectively, the "Guarantors") and
Marine Midland Bank, as trustee (the "Trustee"). This is to confirm the
agreement concerning the purchase of the Securities from the Company by Societe
Generale Securities Corporation ("SGSC"), BT Alex. Xxxxx Incorporated and
Xxxxxxxxx & Company, Inc. (the "Initial Purchasers"). Payment of principal and
interest on the Securities will be unconditionally guaranteed, jointly and
severally, on a senior subordinated basis (the "Guarantees") by the Guarantors.
For all purposes of this Agreement, the terms "subsidiary" and
"Guarantor", when used with reference to the Company, shall refer collectively
to each of the corporations listed on Annex B hereto assuming the X-X
Acquisition (as defined in the Offering Memorandum) has been consummated;
provided that none of Stellex Microwave Systems, Inc. or any of its subsidiaries
to be acquired in the X-X Acquisition shall be a signatory to this Agreement
until the Closing Date, on which date each of Stellex Microwave Systems, Inc.
and its subsidiaries shall become a party to this Agreement; provided further
that (i) all representations and warranties pertaining to Stellex Microwave
Systems, Inc. and its subsidiaries contained in Section 1 made as of the date
hereof shall be deemed to have been made to the best knowledge of the Company
and (ii) all such representations and warranties made on the Closing Date shall
not be subject to such knowledge qualification except as expressly provided in
such representations and warranties.
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The Securities will be offered and 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 preliminary offering memorandum dated October 8, 1997 (the
"Preliminary Offering Memorandum") and will prepare an offering memorandum dated
the date hereof (the "Offering Memorandum") setting forth information concerning
the Company and the Securities. 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 Agreement. Any
references herein to the Preliminary Offering Memorandum and the Offering
Memorandum shall be deemed to include all amendments and supplements thereto,
unless otherwise noted. 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 Securities by the Initial
Purchasers in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers
and their direct and indirect transferees) will be entitled to the benefits of
an Exchange and Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to
which the Company and the Guarantors will agree to file with the Securities and
Exchange Commission (the "Commission") (i) a registration statement under the
Securities Act (the "Exchange Offer Registration Statement") registering an
issue of subordinated notes of the Company (the "Exchange Securities") which are
identical in all material respects to the Securities (except that the Exchange
Securities will not contain terms with respect to transfer restrictions) and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
GUARANTORS. The Company and the Guarantors represent and warrant to and agree,
jointly and severally, with the several Initial Purchasers that:
(a) Accurate Information. Each of the Preliminary Offering
Memorandum and the Offering Memorandum, as of its respective date, did
not, and on the Closing Date the Offering Memorandum will not, contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided that neither the Company nor any
Guarantor makes any representation or warranty as to information
contained in or omitted from the Preliminary Offering Memorandum or the
Offering Memorandum in reliance upon and in conformity with written
information relating to the Initial Purchasers furnished to the Company
and the Guarantors by or on behalf of any Initial Purchaser
specifically for use therein (the "Initial Purchasers' Information").
(b) Compliance with Securities Act. The Offering Memorandum,
as of its date, contains all of the information that, if requested by
a prospective purchaser of the
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Securities, would be required to be provided to such prospective
purchaser pursuant to Rule 144A(d)(4) under the Securities Act.
(c) No Registration Required. Assuming the accuracy of the
representations and warranties of the Initial Purchasers contained in
Section 2 and their compliance with the agreements set forth therein,
it is not necessary, in connection with the issuance and sale of the
Securities to the Initial Purchasers, to register the Securities under
the Securities Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) Corporate Existence; Compliance with Law. The Company and
each of its subsidiaries (as defined in Section 14 and subject to the
second paragraph of this Agreement) have been duly incorporated and are
validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign corporations 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 so qualify or have such
power or authority would not reasonably be expected to have, singularly
or in the aggregate, a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects
of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect").
(e) Corporate Power; Authorization. Each of the Company and
the Guarantors has full right, power and authority to execute and
deliver (to the extent a party thereto) this Agreement, the
Registration Rights Agreement, the Indenture, the Securities, the New
Credit Facility (as defined in the Offering Memorandum) and the Stock
Purchase Agreement, dated as of August 29, 1997, by and among TSMD
Acquisition Corp., Xxxxxxx-Xxxxxxx Company and Stellex Microwave, Inc.
(formerly X-X TSMD Inc.) (collectively, the "Transaction Documents")
and to perform its respective obligations hereunder and thereunder; and
all corporate 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 by this
Agreement and the Indenture have been duly and validly taken.
(f) Enforceable Obligations. The Indenture, when duly executed
by the proper officers of the Company and each Guarantor and delivered
by the Company and each Guarantor, assuming due authorization,
execution and delivery thereof by the Trustee, will constitute a valid
and binding agreement of the Company and each Guarantor enforceable
against the Company and each Guarantor in accordance with its terms,
except that enforcement may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing and
except that rights to indemnification and contribution may be limited
by
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applicable law or public policy considerations; the Registration Rights
Agreement, when duly executed by the proper officers of the Company and
each Guarantor and delivered by the Company and each Guarantor,
assuming due authorization, execution and delivery thereof by the
Initial Purchasers, will constitute a valid and binding agreement of
the Company and each Guarantor, respectively, enforceable against them
in accordance with its terms, except that enforcement may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing and except that rights to indemnification and
contribution may be limited by applicable law or public policy
considerations; the Securities, when duly executed, authenticated,
issued and delivered as provided in the Indenture and upon payment and
delivery in accordance with this Agreement, will be duly and validly
issued and outstanding and will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture
and enforceable in accordance with their terms, except that enforcement
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing and except that rights to
indemnification and contribution may be limited by applicable law or
public policy considerations; the Guarantees, when duly executed by the
proper officers of each of the Guarantors, will constitute a valid and
binding agreement of each Guarantor enforceable against each Guarantor
in accordance with its terms, except that enforcement may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing, except that rights to indemnification and
contribution may be limited by applicable law or public policy
considerations; and the Indenture, the Registration Rights Agreement,
the New Credit Facility and the Securities, when executed and
delivered, will conform in all material respects to the descriptions
thereof contained in the Offering Memorandum.
(g) Capitalization of the Company. The Company has an
authorized capitalization as set forth in the Offering Memorandum, and
all of the issued shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and non-assessable
and conform to the description thereof contained in the Offering
Memorandum.
(h) Capitalization of Subsidiaries. All the outstanding shares
of capital stock of each subsidiary of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and,
except to the extent set forth in the Offering Memorandum, are owned by
the Company directly or indirectly through one or more wholly-owned
subsidiaries, free and clear of any claim, lien, encumbrance, security
interest, restriction upon voting or transfer or any other claim of any
third party
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(except for restrictions imposed by the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions).
(i) No Legal Bar. The execution, delivery and performance of
each of the Transaction Documents by the Company and each Guarantor and
the consummation of the transactions contemplated hereby and thereby
will not conflict with or result in a breach or violation of (I) any of
the terms or provisions of, or constitute a default under, 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 (except under any such agreement that is
expected to be terminated on the Closing Date as set forth in the
Offering Memorandum), (II) the provisions of the charter or by-laws of
the Company or any of its subsidiaries or (III) any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their properties or assets, except, in the case of clauses (I), (II)
and (III), for such conflicts, breaches and violations which would not
reasonably be expected to have a Material Adverse Effect.
(j) No Further Requirements. Except for such consents,
approvals, authorizations, registrations or qualifications (i) which
shall have been obtained or made prior to the Closing Date, (ii) as may
be required to be obtained under the Securities Exchange Act of 1934
(the "Exchange Act") and applicable state securities laws or the laws
of any foreign jurisdiction in connection with the purchase and
distribution of the Securities by the Initial Purchasers, (iii) which
are described in the Offering Memorandum, (iv) as may be required by
the National Association of Securities Dealers, Inc., (v) in the case
of the Registration Rights Agreement and the transactions contemplated
thereby, that are required under the Securities Act and the Trust
Indenture Act and (vi) the failure of which to obtain would not
reasonably be expected to have a Material Adverse Effect, no consent,
approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the
execution, delivery and performance of each of the Transaction
Documents by the Company or the Guarantors and the consummation of the
transactions contemplated hereby and thereby.
(k) Financial Statements. Deloitte & Touche LLP are
independent certified 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 ("AICPA") and its interpretations and rulings thereunder.
Coopers & Xxxxxxx LLP are independent certified public accountants with
respect to Xxxxxxxx (as defined in the Offering Memorandum) within the
meaning of Rule 101 of the Code of Professional Conduct of the AICPA
and its interpretations and rulings thereunder. The historical
financial statements of Xxxxxxxx (including the related notes)
contained in the Offering Memorandum comply as to form in all material
respects with the requirements applicable to a registration statement
on Form S-1 under the Securities Act (except that certain supporting
schedules are omitted); the historical
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financial statements of TSMD (as defined in the Offering Memorandum)
(including the related notes) contained in the Offering Memorandum
comply as to form in all material respects with such requirements,
except that they include only two years of audited income statements;
such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods covered thereby, except as otherwise indicated
therein, and fairly present in all material respects the financial
position of the entities purported to be covered thereby at the
respective dates indicated and the results of their operations and
their cash flows for the respective periods indicated; and the
financial information contained in the Offering Memorandum under the
headings "Summary--Summary Historical Financial Data",
"Capitalization", "Selected Historical Financial Data" and
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" are derived from the accounting records of the
Company and its subsidiaries or their respective predecessors and
fairly present in all material respects the information purported to be
shown thereby. The pro forma financial information contained in the
Offering Memorandum gives effect to assumptions made on a reasonable
basis, have been prepared in accordance with the applicable
requirements of the Securities Act and fairly presents in all material
respects the pro forma financial information included in the Offering
Memorandum at the respective dates and for the respective periods
indicated. The other historical financial and statistical information
and data included in the Offering Memorandum are, in all material
respects, fairly presented.
(l) No Material Adverse Change. Neither the Company nor any of
its subsidiaries has sustained, since the date of the latest audited
financial statements included in the Offering Memorandum, any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than (I) as set forth or contemplated in the Offering Memorandum and
(II) any such loss or interference that would not be reasonably
expected to have a Material Adverse Effect; and, since such date, there
has not been any material adverse change, or any development involving
a prospective material adverse change, in or affecting the business,
general affairs, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries taken as a
whole, otherwise than as set forth or contemplated in the Offering
Memorandum.
(m) No Material Litigation. Except as set forth in the
Offering Memorandum, there is no legal or governmental proceeding
pending to which the Company or any of its subsidiaries is a party or
of which any property or assets of the Company or any of its
subsidiaries is the subject which, singularly or in the aggregate,
would reasonably be expected to have a Material Adverse Effect; and to
the best of the Company's and the Guarantors' knowledge, no such
proceedings are threatened by governmental authorities or threatened by
others.
(n) No Defaults. Neither the Company nor any of its
subsidiaries (i) is in violation of its charter or by-laws, (ii) is in
default in any respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default,
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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 it is a party or by which it is
bound or to which any of its property or assets is subject or (iii) is
in violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject, except, in the case of clauses (i), (ii) and (iii) any
violations or defaults which, singularly or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(o) Possession of Licenses and Permits. Except as described in
the Offering Memorandum, the Company and each of its subsidiaries
possess all material licenses, certificates, authorizations and permits
issued by, and have made all declarations and filings with, the
appropriate state, federal or foreign regulatory agencies or bodies
which are necessary or desirable for the ownership of their respective
properties or the conduct of their respective businesses as described
in the Offering Memorandum, except where any failures to possess or
make the same, singularly or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, and the Company has not
received notification of any revocation or modification of any such
material license, authorization or permit and has no reason to believe
that any such material license, certificate, authorization or permit
will not be renewed.
(p) No Lending Relationships. Except as disclosed in the
Offering Memorandum, the Company (i) does not have any material lending
or other relationship with any bank or lending affiliate of any Initial
Purchaser and (ii) does not intend to use any of the proceeds from the
sale of the Securities hereunder to repay any outstanding debt owed to
any affiliate of any Initial Purchasers.
(q) Investment Company Act. Neither the Company nor any of its
subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), and the rules and regulations of the Commission thereunder.
(r) No Stabilization. Neither the Company, nor to the
Company's or the Guarantors' best knowledge, any of its affiliates, has
taken or may take, directly or indirectly, any action designed to cause
or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price
of the Securities to facilitate the sale or resale of the Securities.
(s) Possession of Intellectual Property. The Company and each
of its subsidiaries own or possess adequate rights to use all material
patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service xxxx registrations, copyrights,
licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) (collectively, the "Intellectual Property") necessary for
the conduct of their respective businesses, except where the absence of
which would not reasonably be expected to have a Material Adverse
Effect. Except as set forth in the Offering
8
Memorandum, neither the Company nor any of its subsidiaries has been
charged with infringement of any Intellectual Property, which
infringement would reasonably be expected to have a Material Adverse
Effect.
(t) Title to Property. The Company and each of its
subsidiaries have good title to, or have valid rights to lease or
otherwise use, all items of real or personal property, the absence of
which would reasonably be expected to have a Material Adverse Effect,
in each case free and clear of all liens, encumbrances, claims and
defects except Permitted Liens (as defined in the Offering Memorandum
under "Description of Notes" and such other exceptions as would not
reasonably be expected to have a Material Adverse Effect).
(u) No Labor Dispute. No labor disturbance by the employees
of the Company or any of its subsidiaries exists or, to the best of
the Company's knowledge, is imminent which might be expected to have a
Material Adverse Effect.
(v) Employee Benefit Plans. No "prohibited transaction" (as
defined in Section 406 of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code")) or
"accumulated funding deficiency" (as defined in Section 302 of ERISA)
or any of the events set forth in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with respect to any
employee benefit plan which could have a Material Adverse Effect; each
employee benefit plan is in compliance in all material respects with
applicable law, including ERISA and the Code; the Company has not
incurred and does not expect to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from, any "pension
plan"; and each "pension plan" (as defined in ERISA) for which the
Company would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which
could cause the loss of such qualification.
(w) No Material Environmental Liabilities. Except as set forth
in the Offering Memorandum, there has been no storage, generation,
transportation, handling, treatment, disposal, discharge, emission, or
other release of any kind of toxic or other wastes or other hazardous
substances by, due to, or caused by the Company or any of its
subsidiaries (or, to the best of the Company's knowledge, any other
entity for whose acts or omissions the Company or any of its
subsidiaries is or may be liable) upon any of the property now or (to
the best knowledge of the Company) previously owned or leased by the
Company or any of its subsidiaries, or upon any other property, in
violation of any statute or any ordinance, rule, regulation, order,
judgment, decree or permit or which would, under any statute or any
ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any
violation or liability which would not reasonably be expected to have,
singularly or in the aggregate with all such violations and
liabilities,
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a Material Adverse Effect. Except as set forth in the Offering
Memorandum, there has been no disposal, discharge, emission or other
release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other
hazardous substances with respect to which the Company or any of its
subsidiaries have knowledge, except for any such disposal, discharge,
emission, or other release of any kind which would not reasonably be
expected to have, singularly or in the aggregate with all such
discharges and other releases, a Material Adverse Effect.
(x) Taxes. The Company and its subsidiaries each (i) have
filed all necessary federal, state and foreign income and franchise tax
returns, (ii) have paid all federal, state, local and foreign taxes due
and payable for which it is liable, including, but not limited to,
withholding taxes and amounts payable under the Code, and has furnished
all information returns it is required to furnish pursuant to the Code,
(iii) have established adequate reserves for all such taxes which are
not yet due and payable and (iv) do not have any tax deficiency or
claims outstanding or assessed or, to the best of the Company's
knowledge, proposed against it, except in the case of the foregoing
clauses (i) through (iv) which would reasonably be expected to have a
Material Adverse Effect.
(y) Insurance Policies. Each of the Company and its
subsidiaries carries insurance (including self insurance) in such
amounts and covering such risks as in its reasonable determination is
adequate for the conduct of its business and the value of its
properties. To the best of the Company's knowledge, there are no facts
or circumstances under any insurance policy or surety bond maintained
by the Company or its subsidiaries which would relieve any insurer of
its obligation to satisfy in full any valid claim of the Company or any
of its subsidiaries, which claim, if unpaid, would reasonably be
expected to have a Material Adverse Effect.
(z) Transactions with Management and Others. No relationship,
direct or indirect, exists between or among the Company or the
Guarantors on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or the Guarantors on the other
hand, which is required to be described in the Offering Memorandum and
which is not so described, other than those relationships the failure
of which to disclose would not make the Offering Memorandum misleading
in any material respect.
(aa) No outstanding Subscriptions. Except as described in the
Offering Memorandum, there are no outstanding subscriptions, rights,
warrants, calls or options to acquire, or instruments convertible into
or exchangeable for, or agreements or understandings with respect to
the sale or issuance of, any shares of capital stock of or other equity
or other ownership interest in the Company or any of its subsidiaries.
(bb) Solvency. On and immediately after the Closing Date, the
Company (after giving effect to the issuance of the Securities and to
the other transactions related thereto as described in the Offering
Memorandum) will be Solvent. As used in this paragraph, the term
"Solvent" means, with respect to a particular date, that on such
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date (i) the present fair market value (or present fair saleable value)
of the assets of the Company on a consolidated basis is not less than
the total amount required to pay the probable liabilities of the
Company on a consolidated basis on its total existing debts and
liabilities (including contingent liabilities) as they become absolute
and matured, (ii) the Company is able to pay its debts and other
liabilities, contingent obligations and commitments as they mature and
become due in the normal course of business, (iii) assuming the sale of
the Securities as contemplated by this Agreement and the Offering
Memorandum, the Company is not incurring debts or liabilities beyond
its ability to pay as such debts and liabilities mature and (iv) the
Company is not engaged in any business or transaction, and is not about
to engage in any business or transaction, for which its property would
constitute unreasonably small capital. In computing the amount of such
contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in the light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
(cc) No Margin Securities. Neither the Company nor any of its
subsidiaries owns any "margin securities" as that term is defined in
Regulations G and U of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), and none of the proceeds of the
sale of the Securities will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the purpose
of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which
might cause any of the Securities to be considered a "purpose credit"
within the meanings of Regulation G, T, U or X of the Federal Reserve
Board.
(dd) No Brokerage Fees. Except for this Agreement, neither the
Company nor any of its subsidiaries is a party to any contract,
agreement or understanding with any person that would give rise to a
valid claim against the Company or the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with
the offering and sale of the Securities.
(ee) Compliance with 144A(d)(3). The Securities satisfy the
eligibility requirements of Rule 144A(d)(3) under the Securities Act.
(ff) No Offers to Buy. Neither the Company nor, to its
knowledge, any of its affiliates has, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated
in respect of, any security (as such term is defined in the Securities
Act), which is or will be integrated with the sale of the Securities in
a manner that would require registration of the Securities under the
Securities Act.
(gg) No General Solicitation. None of the Company or, to the
Company's knowledge, any of its affiliates or any other person acting
on its or their behalf (other than the Initial Purchasers, as to which
no representation is given) has engaged, in connection with the
offering of the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act.
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(hh) No Registered Securities. There are no securities of the
Company registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or listed on a national securities
exchange or quoted in a U.S. automated inter-dealer quotation system.
(ii) Compliance with Regulation M. The Company has not taken
and will not take, directly or indirectly, any action prohibited by
Regulation M under the Exchange Act in connection with the offering of
the Securities.
(jj) No Forward-Looking Statement. No forward-looking
statement (within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act) contained in the Preliminary Offering
Memorandum or the Offering Memorandum has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good
faith.
(kk) No Commerce with Cuba. None of the Company or any of its
subsidiaries does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning of Florida
Statutes Section 517.075.
2. PURCHASE AND RESALE OF THE SECURITIES. (a) On the basis of
the representations, warranties and agreements contained herein, and subject to
the terms and conditions set forth herein, the Company agrees to issue and sell
to each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Company, the principal amount of Securities set forth opposite the name of such
Initial Purchaser in Schedule 1 hereto at a purchase price equal to 97% of the
principal amount thereof. The Company shall not be obligated to deliver any of
the Securities except upon payment for all the Securities to be purchased as
provided herein.
(b) The Initial Purchasers have advised the Company that they
propose to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum as soon as
practicable after this Agreement is entered into. Each Initial Purchaser,
severally and not jointly, represents and warrants to, and agrees with, the
Company that (i) it is purchasing the Securities pursuant to a private sale
exempt from registration 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 ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act, (iii) it has solicited
and will solicit offers for the Securities only from, and has offered or sold
and will offer, sell or deliver the Securities, as part of its initial offering,
only to (A) persons whom it reasonably believes to be qualified institutional
buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the
Securities Act, or if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to it that each such account is a Qualified Institutional
Buyer to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A and in each case, in transactions in accordance with Rule
144A and (B) a limited number of other accredited investors
12
("Accredited Investors") as defined in Rule 501(a)(1), (2), (3) or (7) under
Regulation D that are institutional investors in private sales exempt from
registration under the Securities Act and (iv) it has not taken and will not
take, directly or indirectly, any action prohibited by Regulation M under the
Exchange Act in connection with the offering of the Securities. Each Initial
Purchaser, severally and not jointly, agrees that, prior to or simultaneously
with the confirmation of sale by such Initial Purchaser to any purchaser of any
of the Securities purchased by such Initial Purchaser from the Company pursuant
hereto, such Initial Purchaser shall furnish to that purchaser a copy of the
Offering Memorandum (and any amendment or supplement thereto that the Company
shall have furnished to such Initial Purchaser prior to the date of such
confirmation of sale). In addition to the foregoing, 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 5(d) and (e), counsel
for the Company and for the Initial Purchasers, respectively, may rely upon the
accuracy of the representations and warranties of the Initial Purchasers and
their compliance with their agreements contained in this Section 2, and each
Initial Purchaser hereby consents to such reliance.
(c) The Company acknowledges and agrees that the Initial
Purchasers may sell Securities to any affiliate of an Initial Purchaser and that
any such affiliate may sell Securities purchased by it to an Initial Purchaser.
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of and
payment for the Securities shall be made at the offices of Xxxxxxx Xxxxxxx &
Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX, or at such other place as shall be
agreed upon by the Initial Purchasers and the Company, at 10:00 A.M., New York
City time, on October 31, 1997, or at such other date or time, not later than
seven full business days thereafter, as shall be agreed upon by the Initial
Purchasers and the Company (the time and date of such delivery and payment being
referred to herein as the "Closing Date").
The Securities to be purchased by the Initial Purchasers
hereunder and sold to Qualified Institutional Buyers shall be represented by one
global security in book-entry form which will be deposited by or on behalf of
the Company with The Depository Trust Company or its designated custodian.
Securities to be resold to Accredited Investors shall be delivered in physical,
certificated form to such Accredited Investors. On the Closing Date, the Company
shall deliver or cause to be delivered the Securities to SGSC for the account of
each Initial Purchaser against payment to or upon the order of the Company of
the purchase price by wire transfer payable in Federal (same day) funds by
causing The Depository Trust Company to credit the Securities to the account of
SGSC at The Depository Trust Company.
Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Initial Purchaser hereunder. The Company shall make the
certificates representing the Securities available for inspection by SGSC, not
later than one full business day prior to the Closing Date.
4. FURTHER AGREEMENTS OF THE COMPANY AND THE GUARANTORS. The
Company and the Guarantors agree with each of the several Initial Purchasers:
13
(a) to advise the Initial Purchasers promptly and, if
requested, confirm such advice in writing, of the happening of any
event which makes any statement of a material fact made in the Offering
Memorandum untrue or which requires the making of any additions to or
changes in the Offering Memorandum (as amended or supplemented from
time to time) in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; to advise
the Initial Purchasers promptly of any order preventing or suspending
the use of the Preliminary Offering Memorandum or the Offering
Memorandum, of any suspension of the qualification of the Securities
for offering or sale in any jurisdiction and of the initiation or
threatening of any proceeding for any such purpose; and to use its best
efforts to prevent the issuance of any such order preventing or
suspending the use of the Preliminary Offering Memorandum or the
Offering Memorandum or suspending any such qualification and, if any
such suspension is issued, use its best efforts to obtain the lifting
thereof at the earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum (and
any amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the
Offering Memorandum on or prior to the Closing Date, to furnish a copy
thereof to each of the Initial Purchasers and counsel for the Initial
Purchasers and not to effect any such amendment or supplement to which
the Initial Purchasers shall reasonably object by notice to the Company
after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of
counsel for the Initial Purchasers or counsel for the Company, to amend
or supplement the Offering Memorandum in order that the Offering
Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Offering Memorandum to comply with applicable
law, to (i) promptly notify the Initial Purchasers (who will thereafter
not use such Offering Memorandum until it is appropriately amended or
supplemented), (ii) to prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission or so that the
Offering Memorandum, as so amended or supplemented, will comply with
applicable law and (iii) to give the Initial Purchasers a reasonable
opportunity to comment thereon and to promptly deliver copies thereof
to the Initial Purchasers;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act and are not freely saleable under Rule 144 under the
Securities Act (or any successor provision), to furnish to holders of
the Securities and prospective purchasers of the Securities designated
by
14
such holders, upon request of such holders or such prospective
purchasers, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act, unless the Company is then subject
to and in compliance with Section 13 or 15(d) of the Exchange Act (the
foregoing agreement being for the benefit of the holders from time to
time of the Securities and prospective purchasers of the Securities
designated by such holders);
(f) for so long as the Securities are outstanding, to furnish
to the Initial Purchasers copies of any annual reports, quarterly
reports and current reports filed by the Company with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be
designated by the Commission, and such other documents, reports and
information as shall be furnished by the Company to the Trustee or to
the holders of the Securities pursuant to the Indenture or the Exchange
Act or any rule or regulation of the Commission thereunder;
(g) to cooperate with the Initial Purchasers and counsel for
the Initial Purchasers in connection with the qualification or
registration of the Securities under the securities or "Blue Sky" laws
of such jurisdictions of the United States as the Initial Purchasers
may reasonably request and to continue such qualification in effect
until the completion of the resale of the Securities by the Initial
Purchasers; provided, however, that neither the Company nor any
Guarantor shall be required in connection therewith to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to service of process in suits or
to taxation in any jurisdiction where it is not now so subject.
(h) to use its best efforts to assist the Initial Purchasers
in arranging for the Securities to be designated Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market
securities in accordance with the rules and regulations adopted by the
National Association of Securities Dealers, Inc. ("NASD") relating to
trading in the PORTAL Market and for the Securities to be eligible for
clearance and settlement through The Depository Trust Company ("DTC");
(i) not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as such term is defined
in the Securities Act) which would reasonably be expected to be
integrated with the sale of the Securities in a manner which would
require registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case
may be, not to, and to cause its subsidiaries not to, solicit any offer
to buy or offer to sell the Securities by means of any form of general
solicitation or general advertising within the meaning of Regulation D
or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act; and not to offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, any securities
under circumstances where such offer, sale, contract or disposition
would cause the exemption afforded by Section 4(2) of the
15
Securities Act to cease to be applicable to the offering and sale of
the Securities to the Initial Purchasers as contemplated by this
Agreement and the Offering Memorandum;
(k) During the period beginning from the date hereof and
continuing to, and including, the Closing Date or such earlier time as
SGSC may notify the Company, not to offer for sale, sell, contract to
sell or otherwise dispose of, directly or indirectly, or file a
registration statement for, or announce any offering of, any securities
of the Company that are substantially similar to the Securities.
(l) not to take and not permit any of its subsidiaries to
take, directly or indirectly, any action designed to, or that would
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or initial resale of the Securities by the Initial Purchasers
in violation of Regulation M under the Exchange Act;
(m) in connection with the initial offering of the Securities,
to make its officers, employees, independent accountants and legal
counsel reasonably available on or prior to the Closing Date upon
request by the Initial Purchasers;
(n) to furnish to each of the Initial Purchasers, or their
counsel, on the date hereof a copy of the report of each of the
independent accountants' included in the Offering Memorandum signed by
the accountants rendering such report;
(o) to do and perform the things required to be done and
performed by it under this Agreement, in all material respects, that
are within its control prior to or after the Closing Date, and to use
its best efforts to satisfy all conditions precedent on its part to the
delivery of the Securities;
(p) except as set forth or contemplated in the Offering
Memorandum, to not take any action prior to the execution and delivery
of the Indenture which, if taken after such execution and delivery,
would have violated any of the covenants contained in the Indenture;
(q) from the date hereof until the Closing Date, not to issue
any press release or other public communication directly or indirectly
or hold any press conference with respect to the Company, its
condition, financial or otherwise, or earnings, business affairs or
business prospects (except for routine oral marketing public
communications in the ordinary course of business and consistent with
the past practices of the Company), without the prior written consent
of the Initial Purchasers, unless in the judgment of the Company and
its counsel, and after notification to the Initial Purchasers, such
press release or communication is required by law; and
(r) to apply the net proceeds from the sale of the Securities
as set forth in the Offering Memorandum under the heading "Use of
Proceeds", with such variances or deviations that would not make the
disclosure set forth therein misleading in any
16
material respect (the parties recognizing that amounts set forth in the
Offering Memorandum under "Use of Proceeds" are estimates).
5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
respective obligations of the several Initial Purchasers' hereunder are subject
to the accuracy in all material respects, when made and on the Closing Date, of
the representations and warranties of the Company and the Guarantors contained
herein, to the accuracy in all material respects of the statements of the
Company and the Guarantors made in any certificates pursuant to the provisions
hereof, to the performance in all material respects by the Company and the
Guarantors of their obligations hereunder, and the satisfaction or waiver of the
following terms and conditions:
(a) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of the Transaction
Documents and all other legal matters relating to the Transaction
Documents and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to counsel for the Initial
Purchasers, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.
(b) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies made available to the
Initial Purchasers as promptly as practicable on or following the date
of this Agreement or at such other date and time as to which the
Initial Purchasers may agree; and no stop order suspend ing the sale of
the Securities in any jurisdiction referred to in Section 4(g) shall
have been issued and no proceeding for that purpose shall have been
commenced or shall be pending or, to the best knowledge of the Company,
threatened.
(c) None of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the reasonable opinion of counsel
for the Initial Purchasers, is material or omits to state any fact
which, in the opinion of such counsel, is material and is required to
be stated therein or is necessary to make the statements therein not
misleading.
(d) Each of Winston & Xxxxxx and O'Melveny & Xxxxx shall have
furnished to the Initial Purchasers such counsel's written opinion,
addressed to the Initial Purchasers and dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchasers, to the
effect set forth in Annex C-1 and C-2 hereto, respectively, with any
further modifications which may be satisfactory to counsel for the
Initial Purchasers.
(e) SGSC shall have received from Xxxxxxx Xxxxxxx & Xxxxxxxx,
counsel for the Initial Purchasers, such opinion or opinions, dated the
Closing Date, with respect to such matters as the Initial Purchasers
may reasonably require, and the Company
17
shall have furnished to such counsel such documents as they request for
enabling them to pass upon such matters.
(f) At the time of the execution of this Agreement, SGSC shall
have received from each of Coopers & Xxxxxxx LLP and Deloitte & Touche
LLP, respectively, a letter, addressed to the Initial Purchasers and
dated such date, in form and substance satisfactory to SGSC (i)
confirming that, in the case of Coopers & Xxxxxxx LLP, that they are
independent certified public accountants with respect to Xxxxxxxx
within the meaning of the Securities Act and the applicable published
rules and regulations thereunder and, in the case of Deloitte & Touche
LLP, that they are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Securities Act and the applicable published rules and regulations
thereunder and (ii) stating the conclusions and findings of such firm
with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
References to the Offering Memorandum in this paragraph (f)
and in paragraph (g) below include any supplement thereto at the date
of the letter.
(g) On the Closing Date, SGSC shall have received a letter
(the "bring-down letter") from each of Coopers & Xxxxxxx LLP and
Deloitte & Touche LLP, addressed to the Initial Purchasers and dated
the Closing Date (i) confirming, as of the date of the bring-down
letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information
is given in the Offering Memorandum, as of a date not more than three
business days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by its letter delivered to SGSC
concurrently with the execution of this Agreement pursuant to Section
5(f) above (the "initial letters").
(h) The Company shall have furnished to the Initial Purchasers
a certificate, dated the Closing Date, of its Chairman of the Board,
its President or a Vice President and its chief financial officer
stating that (A) such officers have carefully examined the Offering
Memorandum, (B) in their opinion, the Offering Memorandum, as of its
date, did not include any untrue statement of a material fact and did
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and since the
date of the Offering Memorandum, no event has occurred which should
have been set forth in a supplement or amendment to the Offering
Memorandum and (C) to the best of their knowledge after reasonable
investigation, as of the Closing Date, the representations and
warranties of the Company and the Guarantors in this Agreement are true
and correct in all material respects, each of the Company and the
Guarantors has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date in all material respects, and subsequent to
the date of the most recent financial statements in the Offering
Memorandum, there has been no material adverse change in the financial
position or results of operation of the Company and its subsidiaries
taken
18
as a whole, or any change, or any development including a prospective
change, in or affecting the condition (financial or otherwise), results
of operations, business or prospects of the Company and its
subsidiaries taken as a whole, except as set forth in the Offering
Memorandum.
(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Offering Memorandum any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Memorandum or (ii) since such date there
shall not have been any change, or any development involving a
prospective change, in or affecting the business, general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole,
otherwise than as set forth in the Offering Memorandum, the effect of
which, in any such case described in clause (i) or (ii), is, in the
judgment of SGSC, so material and adverse as to make it impracticable
or inadvisable to proceed with the sale or delivery of the Securities
on the terms and in the manner contemplated in the Offering Memorandum
exclusive of any supplement.
(j) The Initial Purchasers shall have received a counterpart
of the Registration Rights Agreement which shall have been executed and
delivered by a duly authorized officer of each of the Company and the
Guarantors.
(k) The Indenture shall have been duly executed and delivered
by the Company, the Guarantors and the Trustee, and the Securities
shall have been duly executed and delivered by the Company and duly
authenticated by the Trustee.
(l) The Securities shall have been approved by the NASD for
trading in the PORTAL Market.
(m) There shall not have occurred any invalidation of Rule
144A under the Securities Act by any court of competent jurisdiction or
any withdrawal of any rule or regulation under the Securities Act or
the Exchange Act by the Commission or any amendment thereof by the
Commission which in the reasonable judgment of the Initial Purchasers
upon the advice of outside counsel would materially impair the ability
of the Initial Purchasers to purchase, hold or effect resales of the
Securities as contemplated hereby.
(n) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date,
prohibit the issuance or sale of the Securities; and no injunction,
restraining order or order of any other nature by any federal or state
court of competent jurisdiction shall have been issued as of the
Closing Date which would prohibit the issuance or sale of the
Securities.
19
(o) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or any of the Company's other debt securities by any
"nationally recognized statistical rating organization," as that term
is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly
announced that it has under surveillance or review its rating of the
Securities or any of the Company's other debt securities with a view to
possible downgrading.
(p) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared
by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv)
there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in interest
of the several Initial Purchasers, impracticable or inadvisable to
proceed with the sale or delivery of the Securities on the terms and in
the manner contemplated in the Offering Memorandum.
(q) The acquisition by the Company of the tactical subsystems
and microwave devices business of Xxxxxxx-Xxxxxxx Company, through
Stellex Microwave Systems, Inc., as described in the Offering
Memorandum shall have been consummated as of the Closing Date; and the
Company shall have entered into the New Credit Facility as described in
the Offering Memorandum as of the Closing Date.
All opinions, letters, evidence and certificates required by
this Section 5 to be delivered by the Company or the Guarantors shall be deemed
to be in compliance with the provisions hereof only if they are in form and
substance reasonably satisfactory to counsel for the Initial Purchasers.
6. TERMINATION. The obligations of the Initial Purchasers
hereunder may be terminated by SGSC, by notice given to and received by the
Company prior to delivery of and payment for the Securities if, prior to that
time, any of the events described in Sections 5(i), 5(o) and 5(p) shall have
occurred or the acquisition by the Company of Stellex Microwave Systems, Inc.
described in the Offering Memorandum shall not have been completed on or prior
to the Closing Date.
7. DEFAULTING INITIAL PURCHASERS. (a) Obligations of
Non-Defaulting Initial Purchasers. If, on the Closing Date, any Initial
Purchaser or Initial Purchasers default
20
in the performance of its or their obligations under this Agreement, SGSC may
make arrangements for the purchase of such Securities by other persons
satisfactory to the Company and SGSC, including any of the Initial Purchasers,
but if no such arrangements are made by the Closing Date, then each remaining
non-defaulting Initial Purchasers shall be severally obligated to purchase the
Securities which the defaulting Initial Purchaser or Initial Purchasers agreed
but failed to purchase on the Closing Date in the respective proportions which
the principal amount of Securities set forth opposite the name of each remaining
non-defaulting Initial Purchaser in Schedule 1 hereto bears to the aggregate
principal amount of Securities set forth opposite the names of all the remaining
non-defaulting Initial Purchasers in Schedule 1 hereto; provided, however, that
the remaining non-defaulting Initial Purchasers shall not be obligated to
purchase any of the Securities on the Closing Date if the aggregate principal
amount of Securities which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase on such date exceeds one-eleventh of
the aggregate principal amount of the Securities to be purchased on the Closing
Date, and any remaining non-defaulting Initial Purchasers shall not be obligated
to purchase in total more than 110% of the principal amount of the Securities
which it agreed to purchase on the Closing Date pursuant to the terms of Section
2. If the foregoing maximums are exceeded and the remaining Initial Purchasers
or other underwriters satisfactory to Initial Purchasers and the Company do not
elect to purchase the Securities which the defaulting Initial Purchaser or
Initial Purchasers agreed but failed to purchase, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchasers or the
Company, except that the Company will continue to be liable for the payment of
expenses to the extent set forth in Section 11 except that the provisions of
Sections 9 shall not terminate and shall remain in effect. As used in this
Agreement, the term "Initial Purchasers" includes, for all purposes of this
Agreement unless the context otherwise requires, any party not listed in
Schedule 1 hereto who, pursuant to this Section 7, purchases Securities which a
defaulting Initial Purchasers agreed but failed to purchase.
(b) Liability of Defaulting Initial Purchaser; Closing Date.
Nothing contained herein shall relieve a defaulting Initial Purchaser of any
liability it may have for damages caused by its default. If other Initial
Purchasers are obligated or agree to purchase the Securities of a defaulting
Initial Purchaser, either SGSC or the Company may postpone the Closing Date for
up to seven full business days in order to effect any changes that in the
opinion of counsel for the Company or counsel for the Initial Purchasers may be
necessary in the Preliminary Offering Memorandum, the Offering Memorandum or in
any other document or arrangement, and the Company agrees to file promptly any
amendment or supplement to the Preliminary Offering Memorandum, the Offering
Memorandum that effects any such changes.
8. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If (a) this
Agreement shall have been terminated pursuant to Section 6 because of the
occurrence of an event described in Section 5(i), 5(o) or, as to the Company's
securities only, 5(p)(i), (b) the Company shall fail to tender the Securities
for delivery to the Initial Purchasers for any reason permitted under this
Agreement or (c) the Initial Purchasers shall decline to purchase the Securities
because a condition to the obligations of the Initial Purchasers (other than the
condition specified in 5(e)), is not satisfied in any material respect, the
Company shall reimburse the Initial Purchasers for the fees and expenses of
their counsel and for such other
21
out-of-pocket expenses as shall have been reasonably incurred by them in
connection with this Agreement and the proposed purchase and resale of the
Securities, and promptly after demand therefor, the Company shall pay the full
amount thereof to SGSC. If this Agreement is terminated pursuant to Section 7 by
reason of the default of one or more Initial Purchasers, the Company shall not
be obligated to reimburse any defaulting Initial Purchaser on account of those
expenses.
9. INDEMNIFICATION OF INITIAL PURCHASERS AND THE COMPANY.
(a) Indemnification of Initial Purchasers. The Company and each Guarantor,
jointly and severally, shall indemnify and hold harmless each Initial Purchaser,
their respective directors, officers, representatives and agents, and each
person, if any, who controls any Initial Purchaser, within the meaning of
Section 15 of the Securities Act (collectively referred to for the purposes of
this Section 9 as the Initial Purchasers) against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which that
Initial Purchaser may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of or is
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering Memorandum
or in any amendment or supplement thereto or (ii) the omission or alleged
omission to state in the Preliminary Offering Memorandum or the Offering
Memorandum or in any amendment or supplement thereto a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and shall reimburse each Initial Purchaser for any legal or other expenses
reasonably incurred by that Initial Purchaser in connection with investigating
or preparing to defend or defending against or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the foregoing
indemnification agreement with respect to the Preliminary Offering Memorandum
shall not inure to the benefit of any Initial Purchaser from whom the person
asserting any such loss, claim, damage or liability purchased Securities, if (i)
a copy of the Offering Memorandum (as then amended or supplemented) was required
by law to be delivered to such person at or prior to the written confirmation of
the sale of Securities to such person, (ii) a copy of the Offering Memorandum
(as then amended or supplemented) was not sent or given to such person by or on
behalf of such Initial Purchasers and (iii) the Offering Memorandum (as so
amended or supplemented) would have cured the defect giving rise to such loss,
claim, damage or liability; and further provided, however, that the Company and
the Guarantors shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon (i) an
untrue statement or alleged untrue statement in or omission or alleged omission
from the Preliminary Offering Memorandum or the Offering Memorandum or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company and the Guarantors through SGSC by or on
behalf of any Initial Purchaser specifically for use therein, which information
the parties hereto agree is limited to the Initial Purchasers' Information.
(b) Indemnification of Company, Directors and Officers. Each
Initial Purchaser, severally and not jointly, shall indemnify and hold harmless
the Company and each Guarantor, their respective directors, officers,
representatives and agents, and each person, if any, who controls the Company or
Guarantor within the meaning of Section 15 of the Securities Act (collectively
referred to for the purposes of this Section 9 as the Company),
22
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which they or any of them may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum or
the Offering Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through SGSC by or
on behalf of that Initial Purchaser specifically for use therein, and shall
reimburse the Company or such Guarantor for any legal or other expenses
reasonably incurred by the Company or such Guarantor in connection with
investigating or preparing to defend or defending against or appearing as third
party witness in connection with any such loss, claim, damage, liability or
action as such expenses are incurred; provided that the parties hereto hereby
agree that such written information provided by SGSC consists solely of the
Initial Purchasers' Information.
(c) Actions; Notification. Promptly after receipt by an
indemnified party under this Section 9 of notice of any claim or the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under this Section 9,
notify the indemnifying party in writing of the claim or the commencement of
that action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 9 except to the extent it has been materially prejudiced by such
failure; and provided further, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have to an indemnified
party otherwise than under this Section 9. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof; provided, however,
that any indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (ii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, that the
23
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for all indemnified parties, which firm shall be designated in writing by
SGSC, if the indemnified parties under this Section 9 consist of any Initial
Purchaser or any of their respective officers, employees or controlling persons,
or by the Company, if the indemnified parties under this Section 9 consist of
the Company or any of the Company's directors, officers, employees or
controlling persons. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts
to cooperate with the indemnifying party in the defense of any such action or
claim. Subject to the provisions of Section 9(d) below, no indemnifying party
shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) Settlement without Consent if Failure to Reimburse. If at
any time an indemnified party shall have requested that an indemnifying party
reimburse the indemnified party for fees and expenses of counsel payable in
accordance with this Section 9, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by this Section 9 effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the request for reimbursement,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
(e) Contribution. If the indemnification provided for in this
Section 9 is unavailable or insufficient to hold harmless an indemnified party
under Section 9(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the Guarantors on the
one hand and the Initial Purchasers on the other from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Guarantors on the one hand and the Initial
Purchasers on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors on the one hand and the Initial
Purchasers on the other with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by the Company and the Guarantors bear to the total underwriting discounts and
commissions received by the Initial Purchasers with respect to the Securities
purchased under this
24
Agreement, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Guarantors on the one hand or the
Initial Purchasers on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission; provided that the parties hereto agree that the
written information furnished to the Company by the Initial Purchasers for use
in the Preliminary Offering Memorandum, or the Offering Memorandum consists
solely of the Initial Purchasers' Information. The Company and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 9(e) were to be determined by pro rata allocation (even
if the Initial Purchasers were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 9(e) shall be deemed to include, for
purposes of this Section 9(e), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9(e), no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by it and distributed
to the public were offered to the public less the amount of any damages which
such Initial Purchasers has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The Initial Purchasers' obligations to contribute as provided
in this Section 9(e) are several in proportion to their respective underwriting
obligations and not joint.
The obligations of the Company, the Guarantors and the Initial
Purchasers in this Section 9 are in addition to any other liability which the
Company, the Guarantors or the Initial Purchasers, as the case may be, may
otherwise have.
10. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, the
Company, the Guarantors and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Initial Purchasers, the Company, the
Guarantors and their respective successors and the controlling persons and
officers and directors referred to in Section 9 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
11. EXPENSES. The Company and the Guarantors agree with the
Initial Purchasers to pay (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and distribution
of the Preliminary Offering Memorandum the
25
Offering Memorandum any amendments and exhibits thereto the costs of printing,
reproducing and distributing the applicable Transaction Documents by mail, telex
or other means of communications; (c) all expenses and listing fees incurred in
connection with the application for quotation of the Securities on the PORTAL
Market and the approval of the Securities for book-entry transfer by The
Depository Trust Company; (d) any applicable listing or other fees; (e) the
reasonable fees and expenses of qualifying the Securities under the securities
laws of the several jurisdictions as provided in Section 4(g) and of preparing,
printing and distributing Blue Sky Memoranda and Legal Investment Surveys
(including related reasonable fees and expenses of counsel to the Initial
Purchasers); (f) any fees charged by securities rating services for rating the
Securities; (g) all fees and expenses of the Trustee and any agent thereof; and
(h) all other costs and expenses incident to the performance of the obligations
of the Company under this Agreement (including, without limitation, the fees and
expenses of counsel to the Company and the fees and expenses of Coopers &
Xxxxxxx LLP and Deloitte & Touche LLP); provided that, except as otherwise
provided in this Section 11 and in Section 8, the Initial Purchasers shall pay
their own costs and expenses, including the fees and expenses of their counsel,
any transfer taxes on the Securities which they may sell and the expenses of
advertising any offering of the Securities made by the Initial Purchasers.
12. SURVIVAL. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Company, the
Guarantors and the Initial Purchasers contained in this Agreement or made by or
on behalf on them, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any person controlling any
of them.
13. NOTICES, ETC. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or
sent by mail, telex or facsimile transmission to Societe Generale
Securities Corporation, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: High Yield Capital Markets,
Telephone: (000) 000-0000, Telecopy: (000) 000-0000;
(b) if to the Company or the Guarantors, shall be
delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Offering Memorandum,
Attention: Xxxxxxx X. Xxxxxxxx, Telephone: (000) 000-0000, Telecopy:
(000) 000-0000; with a copy to Winston & Xxxxxx, 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxx.
provided, however, that any notice to an Initial Purchaser pursuant to Section
9(c) shall be delivered or sent by mail, telex or facsimile transmission to such
Initial Purchaser at its address set forth in its acceptance telex to SGSC,
which address will be supplied to any other party hereto by SGSC upon request.
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Company and the Guarantors shall be entitled to act
26
and rely upon any request, consent, notice or agreement given or made on behalf
of the Initial Purchasers by XXXX.
00. DEFINITIONS OF CERTAIN TERMS. For purposes of this
Agreement, (a) "business day" means any day on which the New York Stock
Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning (subject
to the second paragraph of this Agreement) set forth in Rule 405 of the Rules
and Regulations and includes, for the purposes of this Agreement, Stellex
Microwave Systems, Inc. (formerly the tactical subsystems and microwave devices
businesses of Xxxxxxx-Xxxxxxx Company) and its direct and indirect subsidiaries.
15. INITIAL PURCHASERS' INFORMATION. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Initial
Purchasers' Information consists solely of the following information in the
Offering Memorandum: (i) the last paragraph on the front cover page concerning
the terms of the offering by the Initial Purchasers; (ii) the legend on the
inside front cover page concerning over-allotment and trading activities by the
Initial Purchasers; and (iii) the statements concerning the Initial Purchasers
contained in the third, fourth and fifth paragraphs under the heading "Plan of
Distribution."
16. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
17. JOINT AND SEVERAL LIABILITY. Each Guarantor, by its
execution and delivery of a counterpart to this Agreement, agrees that it shall
be joint and severally liable for all obligations and liabilities of the
Company.
18. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
19. HEADINGS. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
27
If the foregoing is in accordance with your understanding of
the agreement between the Company, the Guarantors and the several Initial
Purchasers, kindly indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
STELLEX INDUSTRIES, INC.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
KII HOLDING CORP.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
KII ACQUISITION CORP.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
STELLEX AEROSPACE
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
XXXXX MACHINING INTERNATIONAL
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
28
PARAGON PRECISION PRODUCTS
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
SCANNING ELECTRON ANALYSIS LABORATORIES,
INC.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
GENERAL INSPECTION LABORATORIES, INC.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
TSMD ACQUISITION CORP.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
29
Accepted:
SOCIETE GENERALE SECURITIES CORPORATION
By /s/ Xxxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Managing Director
BT ALEX. XXXXX INCORPORATED
By /s/ Xxxxx Xxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxx
Title: XX
XXXXXXXXX & COMPANY, INC.
By /s/ Xxxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Executive Vice President
30
As of October 31, 1997
STELLEX MICROWAVE SYSTEMS, INC.
By /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
SCHEDULE 1
Principal
Amount
Initial Purchasers of Securities
------------------ -------------
Societe Generale Securities Corporation................... $50,000,000
BT Alex. Xxxxx Incorporated............................... 30,000,000
Xxxxxxxxx & Company, Inc. ................................ 20,000,000
-----------
Total..................................................... $ 100,000,000
=============
Annex A
[Form of Exchange and Registration Rights Agreement]
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
October 31, 1997
SOCIETE GENERALE SECURITIES CORPORATION
BT ALEX. XXXXX INCORPORATED
XXXXXXXXX & COMPANY, INC.
c/o Societe Generale Securities Corporation
1221 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
STELLEX INDUSTRIES, INC., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchasers"), upon the terms set
forth in a purchase agreement dated October 23, 1997 (the "Purchase Agreement"),
$100,000,000 principal amount of its 9 1/2% Senior Subordinated Notes due 2007
(the "Securities"). Payment of principal and interest on the Securities will be
unconditionally guaranteed, jointly and severally, on a senior subordinated
basis by the Guarantors. Capitalized terms used but not specifically defined
herein have the respective meanings ascribed thereto in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase Agreement
and in satisfaction of a condition to your obligations thereunder, the Company
agrees with you, for the benefit of the holders (including the Initial
Purchasers) of the Securities (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall prepare and, not later
than 45 days following the Issue Date (as hereinafter defined), the Company and
the Guarantors (i) shall file with the Commission a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer (the "Registered Exchange
Offer") to the Holders to issue and deliver to such Holders, in exchange for the
Securities, a like aggregate principal amount of senior subordinated notes of
the Company (the "Exchange Securities") substantially identical to the
Securities, except for the transfer restrictions relating to the Securities,
(ii) shall use their reasonable best efforts to cause the Exchange Offer
Registration Statement to become effective under the Securities Act no later
than 120 days after the Issue Date and to be consummated no later than 165 days
after the Issue Date and (iii) shall keep the Registered Exchange Offer open for
a period of not less than 20 business days (or longer, if required by applicable
law) (such period being called the "Exchange Offer Registration Period"). The
Exchange Securities will be issued under the Indenture or an indenture (the
"Exchange Securities Indenture") between the Company, the Guarantors and the
Trustee or such other bank or trust company reasonably satisfactory to you, as
trustee (the "Exchange Securities Trustee"), such indenture to be substantially
identical to the Indenture except for the transfer restrictions relating to the
Securities (as described above).
2
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not (i) an affiliate of the Company within the meaning of the Securities Act or
(ii) an Exchanging Dealer (as defined below) not complying with the requirements
of the next sentence, (b) acquires the Exchange Securities in the ordinary
course of such Holder's business and (c) has no arrangements or understandings
with any person to participate in the distribution of the Exchange Securities)
to trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. The Company, the Initial Purchasers and each Exchanging Dealer (as
defined below) acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, each Holder which is a
broker-dealer electing to exchange Securities, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange offer open for not less than 20
business days (or longer if required by applicable law);
(c) utilize the services of an Exchange Agent for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York;
(d) permit Holders to withdraw tendered Securities at any time prior to
the close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws applicable to the
Registered Exchange Offer.
Promptly after the close of the Registered Exchange Offer, the Company
shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
3
(b) deliver to the Trustee for cancellation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder of Securities,
Exchange Securities equal in principal amount to the Securities of such
Holder so accepted for exchange.
The Company and the Guarantors shall use their reasonable best efforts
to keep the Exchange Offer Registration Statement effective and to amend and
supplement the prospectus contained therein in order to permit such prospectus
to be used by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided that (i) in
the case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer, such period shall be the lesser of 90 days
and the date on which all Exchanging Dealers have sold all Exchange Securities
held by them and (ii) the Company shall make such prospectus and any amendment
or supplement thereto available to any broker-dealer for use in connection with
any resale of any Exchange Securities for a period of not less than 90 days
after the consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may be,
shall provide that the Securities and the Exchange Securities shall vote and
consent together on all matters as one class and that none of the Securities or
the Exchange Securities will have the right to vote or consent as a separate
class on any matter.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Securities surrendered in exchange therefor or, if no interest
has been paid on the Securities, from the date of original issue of the
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company and the Guarantors that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a distribution
of the Securities or the Exchange Securities within the meaning of the
Securities Act, (iii) such Holder is not an affiliate of the Company within the
meaning of the Securities Act, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable and (iv) such Holder is not acting on behalf of any person who
could not make the foregoing representations. Such Holder shall also make such
other representations as may be required to comply with applicable law or
Commission policy with respect to the Registered Exchange Offer.
4
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include, as of the consummation of the Registered
Exchange Offer, an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Holder (A) notifies the Company on or prior to the
consummation of the Registered Exchange Offer that is not eligible to
participate in the Registered Exchange Offer, (B) participates in the Registered
Exchange Offer and does not receive freely transferable Exchange Securities in
exchange for tendered Securities or (C) is a broker-dealer that holds Securities
acquired directly from the Company or one of its affiliates, then the following
provisions shall apply:
(a) (x) The Company and the Guarantors shall use their reasonable best
efforts to cause to be filed with the Commission a Shelf Registration Statement
pursuant to Rule 415 under the Securities Act, which may be an amendment to the
Exchange Offer Registration Statement (a "Shelf Registration Statement," and
together with any Exchange Offer Registration Statement a "Registration
Statement"), on or prior to the earliest to occur of (1) the 30th day after the
Company determines that it is not permitted to effect the Registered Exchange
Offer or (2) the 30th day after the date on which the Company receives notice
from a Holder of Transfer Restricted Securities as contemplated by clause (ii)
above (such earliest date being the "Shelf Filing Deadline") which Shelf
Registration Statement shall provide for resales of Transfer Restricted
Securities; and
(y) The Company and the Guarantors shall use their reasonable best
efforts to cause such Shelf Registration Statement to be declared effective by
the Commission on or prior to the 60th day after the Shelf Filing Deadline.
Notwithstanding the foregoing, the Company shall not be required to file a Shelf
Registration Statement with respect to Securities or Exchange Securities of any
Holder (other than Securities of the Initial Purchasers) on account of such
Holder not being able to make the representations contained in Section 1 in
connection with the Registered Exchange Offer.
(b) The Company and the Guarantors shall use their reasonable best
efforts to keep the Shelf Registration Statement continuously effective in order
to permit the prospectus forming part thereof to be usable by Holders for a
period of two years from the Issue Date or such shorter period that will
terminate when all the Securities and Exchange Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf
5
Registration Statement (in any such case, such period being called the "Shelf
Registration Period"). The Company and the Guarantors shall not be deemed to
have breached its obligations pursuant to the preceding sentence if it shall be
required to amend the Shelf Registration Statement or the effectiveness of the
Shelf Registration Statement shall be suspended, or the prospectus contained in
the Shelf Registration Statement shall not be usable, as a result of a corporate
transaction involving the Company that is not adequately reflected in the Shelf
Registration Statement; provided that the failure to keep the Shelf Registration
Statement effective and usable for such reasons shall last no longer than 45
days in any 12-month period (whereafter Liquidated Damages pursuant to Section 3
shall accrue). Any such period during which the Company and the Guarantors fail
to keep the Shelf Registration Statement effective and usable is referred to as
a "Suspension Period." A Suspension Period shall commence on and include the
date that the Company gives notice that the Shelf Registration Statement is no
longer effective or the prospectus included therein is no longer usable and
shall end on the earlier to occur of (i) the date when each seller of Transfer
Restricted Securities covered by such Shelf Registration Statement either
receives copies of the supplemented or amended prospectus or is advised in
writing by the Company that the use of the prospectus may be resumed and (ii)
the expiration of the 30 days in any 12-month period during which one or more
Suspension Periods has been in effect; provided that the period during which the
Shelf Registration Statement is required to be kept continuously effective shall
be increased by the total number of days of all such Suspension Periods.
(c) Notwithstanding any other provisions hereof, the Company and the
Guarantors will ensure that (i) any Shelf Registration Statement and any
amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any Shelf Registration Statement and any
amendment thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for use
therein (the "Holders' Information")) does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any prospectus forming part of any Shelf Registration
Statement, and any supplement to such prospectus (in either case, other than
with respect to Holders' Information), does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders of
Securities will suffer damages if the Company and the Guarantors fail to fulfill
their obligations under Section 1 or Section 2, as applicable, and that it would
not be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with the Commission on or prior
to the date specified for such filing in this Agreement, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Registered Exchange Offer is not
consummated
6
on or prior to 165 days after the Issue Date, or (iv) the Shelf Registration
Statement is filed and declared effective on or prior to the date specified for
such effectiveness in this Agreement but shall thereafter cease to be effective
(at any time that the Company is obligated to maintain the effectiveness
thereof) without being succeeded within 45 days by an amendment to the
Registration Statement or an additional Shelf Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will generally be obligated to pay
liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted
Securities (as defined below), with respect to the first 90-day period
immediately following the occurrence of such Registration Default, in an amount
equal to $0.05 per week per $1,000 principal amount of the Securities
constituting Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Securities constituting Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages of $.20 per week per
$1,000 principal amount of Transfer Restricted Securities. Following the cure of
all Registration Defaults, the accrual of Liquidated Damages will cease.
"Transfer Restricted Securities" means each Security until the earliest to occur
of (i) the date on which such Security has been exchanged for a freely
transferrable Exchange Security in the Registered Exchange Offer, (ii) the date
on which such Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Securities Act (or any successor provision) or is salable pursuant to
Rule 144(k) (or any successor provision) under the Securities Act.
Notwithstanding anything to the contrary in this Section 3(a), the Company shall
not be required to pay Liquidated Damages to the Holder of Transfer Restricted
Securities if such Holder: (a) failed to comply with its obligations to make the
representations in the second to last paragraph of Section 1; or (b) failed to
provide the information required to be provided by it, if any, pursuant to
Section 4(m).
(b) The Company shall notify the Trustee and the Paying Agent under the
Indenture promptly upon the happening of each and every Registration Default.
The Company shall pay the Liquidated Damages due on the Transfer Restricted
Securities by depositing with the Paying Agent (which may not be the Company for
these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m., New York City time on the next interest payment date specified by
the Indenture and the Securities, sums sufficient to pay the Liquidated Damages
then due. The Liquidated Damages due shall be payable on each interest payment
date specified by the Indenture to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay Liquidated
Damages shall be deemed to accrue from and including the applicable Registration
Default.
(c) The parties hereto agree that the Liquidated Damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement,
7
as the case may be, to be filed, (ii) the Exchange Offer Registration Statement
to be declared effective and the Registered Exchange Offer to be consummated,
(iii) the Shelf Registration Statement to be declared effective or (iv) the
Shelf Registration Statement to again become effective, in each case to the
extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) use its reasonable best efforts to furnish to
Societe Generale Securities Corporation ("SGSC") and its counsel, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use reasonable best efforts to consult with SGSC regarding
such comments as SGSC or its counsel reasonably may propose; and (ii) include
the information (or information substantially to the same effect) set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of the prospectus forming a part
of the Exchange Offer Registration Statement, and include the information (or
information substantially to the same effect) set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered Exchange Offer (in
each case, to the extent such information is required by applicable law or the
Commission's rules and/or interpretations);
(b) The Company shall advise you, each Exchanging Dealer and the
Holders (if applicable) and, if requested by such person, confirm such advice in
writing (which advice pursuant to clauses (iii)-(iv) hereof shall be accompanied
by an instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when any Registration Statement and any amendment thereto has been
filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) prior to the effectiveness of any Registration Statement, of the
receipt of any comment letter or request for information from the
Commission;
(iii) following the effectiveness of any Registration Statement, of any
request by the Commission for amendments or supplements to such Registration
Statement or the prospectus included therein or for additional information;
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any
proceeding for that purpose;
(v) following the effectiveness of any Registration Statement, of the
receipt by the Company of any notification with respect to the suspension of
the qualification
8
of the Securities or the Exchange Securities for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose; and
(vi) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus so that, as of such
date, the statements therein are not misleading in any material respect and
do not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in any material
respect.
The Company will make every reasonable effort to obtain the withdrawal
at the earliest possible time of any order suspending the effectiveness of any
Registration Statement.
(c) The Company will furnish to each Holder of Transfer Restricted
Securities specifically named in any Shelf Registration Statement, without
charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits (including those
incorporated by reference).
(d) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities specifically named in
any Shelf Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of the prospectus or
any amendment or supplement thereto by each of the selling Holders of Transfer
Restricted Securities in connection with the offering and sale of the Transfer
Restricted Securities covered by the prospectus or any amendment or supplement
thereto.
(e) The Company will furnish to each Exchanging Dealer and each Initial
Purchaser and to any other Holder who so requests, without charge, at least one
copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Exchanging Dealer, Initial Purchaser or any such Holder so requests in writing,
all exhibits (including those incorporated by reference).
(f) The Company will, during the Exchange Offer Registration Period,
promptly deliver to each Exchanging Dealer or the Initial Purchasers, as
applicable, without charge, as many copies of the prospectus included within the
coverage of Exchange Offer Registration Statement and any amendment or
supplement thereto as such Exchanging Dealer or the Initial Purchasers, as
applicable, may reasonably request for delivery by such Exchanging Dealer in
connection with a sale of Exchange Securities received by it pursuant to the
Registered Exchange Offer; and the Company consents to the use of the prospectus
or any amendment or supplement thereto by any such Exchanging Dealer as
aforesaid.
(g) To the extent required by applicable law, prior to any public
offering of Securities or Exchange Securities pursuant to any Registration
Statement, the Company will
9
use its reasonable best efforts to register or qualify or cooperate with the
Holders of Securities included therein and its counsel in connection with the
registration or qualification of such securities for offer and sale under the
state securities or blue sky laws of such United States jurisdictions as any
such Holder reasonably requests in writing and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities or Exchange Securities covered by such Registration Statement;
provided, however, that neither the Company nor any Guarantor shall be required
to qualify as a foreign corporation where it is not now so qualified or to take
any action that would subject it to service of process in suits or to taxation
in any jurisdiction where it is not now so subject.
(h) The Company will cooperate with the Holders of Securities or
Exchange Securities to facilitate the timely preparation and delivery of
certificates representing Securities or Exchange Securities to be sold pursuant
to any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request in writing
prior to sales of Securities or Exchange Securities pursuant to such
Registration Statement.
(i) If any event contemplated by paragraphs (b)(iii) through (v) above
occurs during the period in which the Company is required to maintain an
effective Registration Statement, the Company will use its reasonable best
efforts to promptly prepare a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other required
document so that, as thereafter delivered to purchasers of the Securities or
purchasers of Exchange Securities from a Holder, the prospectus will not include
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(j) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Exchange Securities
and provide the applicable trustee with certificates for the Securities or
Exchange Securities, as the case may be, in a form eligible for deposit with The
Depository Trust Company; and upon consummation of the Registered Exchange
Offer, the Company shall deliver to the Trustee, on behalf of the Holders of the
Exchange Securities, a legal opinion to the effect that the Exchange Securities,
when issued, will constitute valid and legally binding obligations of the
Company, entitled to the benefits of the Indenture, and enforceable against the
Company in accordance with their terms (subject to customary qualifications for
opinions of this type).
(k) The Company and the Guarantors will comply with all applicable
rules and regulations of the Commission and will make generally available to the
Company's security holders as soon as practicable after the effective date of
the applicable Registration Statement an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act; provided that in no event
shall such earnings statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with
10
the first month of the Company's first fiscal quarter commencing after the
effective date of the applicable Registration Statement, which statements shall
cover such 12-month period.
(l) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(m) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities as the Company may from time to time reasonably
require for inclusion in such Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any Holder
that unreasonably fails to furnish such information within a reasonable time
after receiving such request.
(n) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(iii) through (v) hereof, such
Holder will discontinue disposition of such Transfer Restricted Securities until
such Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(i) hereof, or until advised in writing (the "Advice")
by the Company that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Section 4(b)(iii) through (v) during the
period that the Company is required to maintain an effective Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of Transfer
Restricted Securities covered by such Registration Statement shall have received
(x) the copies of the supplemental or amended prospectus contemplated by Section
4(i) (if an amended or supplemental prospectus is required) or (y) the Advice
(if no amended or supplemental prospectus is required).
(o) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities and Exchange
Securities being sold or the managing underwriters (if any) shall reasonably
request in order to facilitate any disposition of Securities or Exchange
Securities pursuant to such Shelf Registration Statement; provided, however,
that the Company shall not be obligated to enter into an underwriting agreement
or to facilitate such disposition in an underwritten offering pursuant to any
Shelf Registration Statement unless Holders of a majority in aggregate principal
amount of such Transfer Restricted Securities elect to dispose of such Transfer
Restated Securities in such an underwritten offering.
(p) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as
11
defined below) acting for, Holders of a majority in aggregate principal amount
of the Securities and Exchange Securities being sold and any managing
underwriter participating in any disposition of Securities or Exchange
Securities pursuant to such Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and its subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all relevant
information reasonably requested by such representative, Special Counsel or any
such managing underwriter (an "Inspector") in connection with such Shelf
Registration Statement; provided, however, that the Company need not make
available or supply any information pursuant to this paragraph (p) to the extent
such information may not be disclosed pursuant to any confidentiality agreement
to which the Company or any of its Subsidiaries is a party or such disclosure
would jeopardize any applicable attorney-client, work product or other
privilege.
(q) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities and Exchange Securities being sold, their Special Counsel or the
managing underwriters (if any) in connection with such Shelf Registration
Statement, use its reasonable best efforts to cause (i) its counsel to deliver
an opinion relating to the Shelf Registration Statement and the Securities or
Exchange Securities, as applicable, in customary form, (ii) its officers to
execute and deliver all customary documents and certificates reasonably
requested by Holders of a majority in aggregate principal amount of the
Securities and Exchange Securities being sold, their Special Counsel or the
managing underwriters (if any) and (iii) its independent public accountants to
provide a comfort letter in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5. Registration Expenses. The Company and the Guarantors will bear all
expenses incurred in connection with the performance of their obligations under
Sections 1, 2, 3 and 4 hereof and the Company and the Guarantors will reimburse
the Initial Purchasers and the Holders for the reasonable fees and disbursements
(up to an aggregate amount of $50,000) of one firm of attorneys chosen by the
Holders of a majority in aggregate principal amount of the Securities and the
Exchange Securities to be sold pursuant to a Shelf Registration Statement (the
"Special Counsel") acting for the Initial Purchasers or Holders in connection
therewith. The Company and the Guarantors shall not have any obligation to pay
any underwriting fees, discounts or commissions attributable to the sale of any
Securities or Exchange Securities pursuant to this Agreement.
6. Indemnification. (a) Indemnification of Holders. The Company and
each Guarantor, jointly and severally, shall indemnify and hold harmless each
Holder (including, without limitation, any such Initial Purchaser or Exchanging
Dealer), their respective directors, officers, representatives and agents and
each person, if any, who controls such Holder within the meaning of Section 15
of the Securities Act (collectively referred to for the purposes of this Section
6 as a Holder) against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of Securities
or
12
Exchange Securities), to which that Holder may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any such Registration Statement or any
preliminary or final prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state in any such
Registration Statement or any preliminary or final prospectus forming part
thereof or in any amendment or supplement thereto a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each Holder for any legal or other expenses reasonably incurred
by that Holder in connection with investigating or preparing to defend or
defending against or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the foregoing indemnification agreement with respect to
any preliminary prospectus shall not inure to the benefit of any Holder from
whom the person asserting any such loss, claim, damage or liability purchased
Securities or Exchange Securities, if (i) a copy of the preliminary prospectus
(as then amended or supplemented) was delivered to such person at or prior to
the written confirmation of the sale of Securities or Exchange Securities to
such person, (ii) a copy of the final prospectus (as then amended or
supplemented) was not sent or given to such person by or on behalf of such
Holder and (iii) the final prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability; and
further provided, however, that the Company and the Guarantors shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any preliminary
prospectus or Registration Statement or any such amendment or supplement in
reliance upon and in conformity with any Holders' Information.
(b) Indemnification of Company, Guarantors, Directors and Officers.
Each Holder, severally and not jointly, agrees to indemnify and hold harmless
the Company and each Guarantor, their respective directors, officers,
representatives and agents, and each person, if any, who controls them or any of
them within the meaning of Section 15 of the Securities Act (collectively
referred to for the purposes of this Section 6 as the Company), against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which they or any of them may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in a preliminary or final prospectus or
such Registration Statement or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Holders' Information furnished to the Company by or on
behalf of that Holder specifically for use therein, and shall reimburse the
indemnified party for any legal or other expenses reasonably incurred by the
indemnified party in connection with investigating or preparing to defend or
defending against or appearing as third party witness in connection with any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that no such Holder
13
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities or Exchange
Securities pursuant to such Shelf Registration Statement.
(c) Actions; Notification. Promptly after receipt by an indemnified
party under this Section 6 of notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 6, notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
it has been materially prejudiced by such failure; and, provided, further, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 6. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof; provided, however, that any indemnified party shall
have the right to employ separate counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the employment thereof has been
specifically authorized by the indemnifying party in writing, (ii) such
indemnified party shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel or
(ii) the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which case,
if such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties, which firm shall be designated in writing
by the Holders of a majority in aggregate principal amount of the Securities or
Exchange Securities, as the case may be, if the indemnified parties under this
Section 6 consist of any Holder or any of their respective officers, employees
or controlling persons, or by the Company, if the indemnified parties under this
Section 6 consist of the Company or a Guarantor or any of their respective
directors, officers, employees or controlling persons. Each indemnified party,
as a condition of the indemnity agreements contained in Sections 6(a) and 6(b),
shall use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. Subject to the provisions of
14
Section 6(d) below, no indemnifying party shall be liable for any settlement of
any such action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested that an indemnifying party reimburse
the indemnified party for fees and expenses of counsel payable in accordance
with this Section 6, such indemnifying party agrees that it shall be liable for
any settlement of the nature contemplated by this Section 6 effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the request for reimbursement, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) Contribution. If the indemnification provided for in this Section 6
is unavailable or insufficient to hold harmless an indemnified party under
Section 6(a) or (b), then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the Guarantors on the
one hand and a Holder with respect to the sale by such Holder of Securities or
Exchange Securities on the other or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Guarantors on the one
hand and such Holder on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantors on the one hand and a Holder
on the other with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities or
Exchange Securities (before deducting expenses) received by the Company and the
Guarantors as set forth on the cover of the Offering Memorandum bear to the
total proceeds received by such Holder with respect to its sale of Securities or
Exchange Securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Guarantors on the one hand or to any
Holders' Information supplied by such Holder on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Holders agree that it would not be just and equitable if contributions pursuant
to this Section 6(e) were to be determined by pro rata allocation (even if the
Holders were treated as one entity for such purpose) or by any other method of
allocation which does not take into
15
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 6(e)
shall be deemed to include, for purposes of this Section 6(e), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(e), no Holder shall be required to contribute any
amount in excess of the amount by which the total price at which the Securities
or Exchange Securities sold by such Holder to any purchaser exceeds the amount
of any damages which such Holder has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
Any Holder's obligations to contribute as provided in this Section 6(e)
are several and not joint.
The obligations of the Company, the Guarantors and the Holders in this
Section 6 are in addition to any other liability which the Company, the
Guarantors or the Holders as the case may be, may otherwise have.
7. Rule 144A. Unless the Company is then subject to Section 13 or 15(d)
of the Exchange Act, the Company hereby agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding, to make available, upon
request, to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Company to
register any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
9. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority in aggregate principal
amount of the Securities and the Exchange Securities, taken as a single class.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of the
Holders of Securities or Exchange Securities whose Securities
16
or Exchange Securities are being sold or exchanged pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of a majority in aggregate principal amount of
the Securities or Exchange Securities being sold or exchanged by such Holders
pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder to
the Company in accordance with the provisions of this Section 9(b), which
address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture, with a copy in like
manner to Societe Generale Securities Corporation;
(2) if to you, initially at your address set forth in the Purchase
Agreement; and
(3) if to the Company or the Guarantors, initially at the address of
the Company set forth in the Purchase Agreement, or with a copy to Winston &
Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X.
Xxxxxxx.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(c) Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each of the parties; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopies) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law; Submission to Jurisdiction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17
(g) No Inconsistent Agreements. The Company has not and shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company has not previously entered into any agreement which remains in
effect granting any registration rights with respect to any of its debt
securities to any person, which agreement would allow any person other than the
Holders of Transfer Restricted Securities to require the Company to register any
such debt securities pursuant to a Registration Statement. Without limiting the
generality of the foregoing, without the written consent of the holders of a
majority in aggregate principal amount of the then outstanding Transfer
Restricted Securities, the Company shall not grant to any person the right to
request the Company to register any debt securities of the Company under the
Securities Act pursuant to a Registration Statement unless the rights so granted
are not in conflict or inconsistent with the provisions of the Agreement.
(h) No Piggyback on Registrations. Neither the Company, nor any of its
security holders (other than the holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(i) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.
(j) Remedies. In the event of a breach by the Company or any Guarantor,
or by any holder of Transfer Restricted Securities, of any of their obligations
under this Agreement, each holder of Transfer Restricted Securities or the
Company and the Guarantors, as the case may be, in addition to being entitled to
exercise all rights granted by law, including recovery of damages (other than
the recovery of damages for a breach by the Company of its obligations under
Sections 1 or 2 hereof for which Liquidated Damages have been paid pursuant to
Section 3 hereof), will be entitled to specific performance of its rights under
this Agreement. Except as provided in Section 3, the Company, the Guarantors and
each holder of Transfer Restricted Securities agree that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further agree that, in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
18
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
STELLEX INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
KII HOLDING CORP.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
KII ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
STELLEX AEROSPACE
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
XXXXX MACHINING INTERNATIONAL
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
19
PARAGON PRECISION PRODUCTS
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
SCANNING ELECTION ANALYSIS
LABORATORIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
GENERAL INSPECTION LABORATORIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
TSMD ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
STELLEX MICROWAVE SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
20
Accepted in New York, New York
SOCIETE GENERALE SECURITIES CORPORATION
By: /s/ Xxxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Managing Director
BT ALEX. XXXXX INCORPORATED
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Executive Vice President
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.1/
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer other than commissions or concessions
of any broker-dealers and will indemnify the Holders of the Securities
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
--------
1/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _______________________________________
Address: _______________________________________
_______________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Annex B
List of Subsidiaries
Name Jurisdiction of Incorporation
KII Holding Corp. Delaware
KII Acquisition Corp. Delaware
Stellex Aerospace California
Xxxxx Machining International California
Paragon Precision Products California
Scanning Electron Analysis Laboratories, Inc. California
TSMD Acquisition Corp. Delaware
Stellex Microwave Systems, Inc. California
Annex C-1
Form of legal opinion of Winston & Xxxxxx
[Winston & Xxxxxx Letterhead]
October 31, 1997
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
c/o Societe Generale Securities Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
We have acted as special counsel to Stellex Industries, Inc., a
Delaware corporation (the "Company"), TSMD Acquisition Corp, a Delaware
corporation ("TSMD Acquisition"), Stellex Microwave Systems, Inc., a California
corporation ("Stellex Microwave"), KII Holding Corp., a Delaware corporation
("KII Holding"), KII Acquisition Corp., a Delaware corporation ("KII
Acquisition"), Stellex Aerospace, a California corporation ("Stellex
Aerospace"), Xxxxx Machining International, a California corporation ("Xxxxx"),
Paragon Precision Products, a California corporation ("Paragon"), Scanning
Electron Analysis Laboratories, Inc., a California corporation ("SEAL"), and
General Inspection Laboratories, Inc., a California corporation ("GIL"), in
connection with the issuance and sale by the Company, pursuant to the Purchase
Agreement, dated October 23, 1997 (the "Purchase Agreement"), among the Company,
the Guarantors (as defined below) and Societe Generale Securities Corporation,
BT Alex. Xxxxx Incorporated and Xxxxxxxxx & Company, Inc. (collectively, the
"Initial Purchasers"), of $100 million aggregate principal amount of the
Company's 9 1/2% Senior Subordinated Notes due 2007 (the "Notes"), which will be
issued under an Indenture, dated as of October 31, 1997 (the "Indenture"), among
the Company, the Guarantors and Marine Midland Bank, as trustee. TSMD
Acquisition, Stellex Microwave, KII Holding, KII Acquisition, Stellex Aerospace,
Xxxxx, Paragon, SEAL and GIL are collectively hereinafter referred to as the
"Guarantors." TSMD Acquisition, KII Holding and KII Acquisition are sometimes
collectively hereinafter referred to as the "Delaware Guarantors." Stellex
Microwave, Stellex Aerospace, Xxxxx, Paragon, SEAL and GIL are sometimes
collectively hereinafter referred to as the "Non-Delaware Guarantors."
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 2
This opinion letter is furnished to you pursuant to Section 5(d) of the
Purchase Agreement. Except as otherwise specified, capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to such terms in the
Purchase Agreement.
In rendering the opinions set forth herein, we have examined:
(i) the Certificate of Incorporation and Bylaws of the Company, TSMD
Acquisition, KII Holding and KII Acquisition;
(ii) resolutions of the Board of Directors of the Company and each of
the Guarantors with respect to the transactions referred to
herein;
(iii) the Preliminary Offering Memorandum and Offering Memorandum;
(iv) the Indenture;
(v) the Notes;
(vi) the Purchase Agreement; and
(vii) the Registration Rights Agreement
(the documents identified in clauses (iv) through (vii) are collectively
hereinafter referred to as the "Transaction Documents") and such other
agreements, instruments and documents, and such questions of law as we have
deemed necessary or appropriate to enable us to render the opinions expressed
below. Additionally, we have examined originals or copies, certified to our
satisfaction, of such certificates of public officials and officers and
representatives of the Company and the Guarantors, and we have made such
inquiries of officers and representatives of the Company and the Guarantors, as
we have deemed relevant or necessary in connection with the opinions set forth
herein.
In rendering the opinions expressed below, we have, with your consent,
assumed that the signatures of persons signing all documents in connection with
which this opinion is rendered are genuine, all documents submitted to us as
originals or duplicate originals are authentic and all documents submitted to us
as copies, whether certified or not, conform to authentic original documents.
Additionally, we have, with your consent, assumed and relied upon the following:
(a) the accuracy and completeness of all certificates and other
statements, documents, records, financial statements and papers reviewed by us,
and the accuracy and completeness of
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 3
all representations, warranties, schedules and exhibits contained in the
Transaction Documents, with respect to the factual matters set forth therein;
(b) all parties to the documents reviewed by us (other than the Company
and the Delaware Guarantors) are duly organized, validly existing and in good
standing under the laws of all jurisdictions where they are conducting their
businesses or otherwise required to be so qualified, and have full power and
authority to execute, deliver and perform under such documents and all such
documents have been duly authorized, executed and delivered by such parties;
(c) the Notes have been delivered and paid for by the Initial
Purchasers in accordance with the terms of the Purchase Agreement, and each
Transaction Document constitutes the legal, valid and binding obligation of each
party thereto (other than the Company and the Guarantors,) enforceable against
such party in accordance with its terms; and
(d) all transactions that occur in connection with the consummation of
the Purchase Agreement, including, without limitation (i) the closing of the New
Credit Facility and (ii) the other transactions described under "Use of
Proceeds" in the Offering Memorandum, shall be deemed to have taken place
simultaneously and no delivery or payment shall be considered to have been made
until all transactions taking place on the Closing Date shall have been
completed.
Whenever our opinion with respect to the existence or absence of facts
is indicated to be based on our knowledge or awareness, we are referring to the
actual present knowledge of the particular attorneys presently members of or
employed by Winston & Xxxxxx who have given substantive attention to matters
involving the Company and the Guarantors. Except as expressly set forth herein,
we have not undertaken any independent investigation, examination or inquiry to
determine the existence or absence of any facts (and have not caused the review
of any court file or indices) and no inference as to our knowledge concerning
any facts should be drawn as a result of the limited representation undertaken
by us.
Based upon the foregoing and subject to the qualifications and
assumptions stated herein, we are of the opinion that:
1. Each of the Company and the Guarantors (A) (other than the
Non-Delaware Guarantors, as to whom we express no opinion) is duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own its
properties and conduct its business as described in the Offering Memorandum and
(B) is duly qualified to do business as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or leasing of
its properties or
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 4
the conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect.
2. Based solely on our review of the Company's and each of the
Guarantors' corporate minutes and stock transfer records, the Company has the
authorized, issued and outstanding capitalization set forth in the Offering
Memorandum; all of the issued and outstanding shares of capital stock of the
Company and the Delaware Guarantors have been duly authorized and validly issued
and are fully paid and non-assessable; to our knowledge, none of the issued and
outstanding shares of capital stock of the Company were issued in violation of
any preemptive or similar rights; and all of the outstanding shares of capital
stock of the Delaware Guarantors are owned of record by the Company or another
Guarantor, except as set forth in the Offering Memorandum.
3. The Company has all requisite corporate power and authority to
execute and deliver, and to perform its obligations under, each of the Indenture
and the Notes. Each of the Delaware Guarantors has all requisite corporate power
and authority to execute and deliver, and to perform its obligations under, each
of the Indenture and its Guarantee.
4. The Indenture conforms in all material respects to the requirements
of the Trust Indenture Act and the applicable rules and regulations promulgated
thereunder.
5. The Indenture has been duly and validly authorized, executed and
delivered by the Company and each of the Delaware Guarantors and (assuming the
due authorization, execution and delivery by the Trustee and the Non-Delaware
Guarantors) will constitute the 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.
6. The Notes are in the form contemplated by the Indenture. The Notes
have each been duly and validly authorized, executed and delivered by the
Company and, when paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement (assuming the due authorization, execution and
delivery of the Indenture by the Trustee and due authentication and delivery of
the Notes by the Trustee in accordance with the Indenture), will constitute the
valid and legally binding obligations of the Company, entitled to the benefits
of the Indenture, and enforceable against the Company in accordance with their
terms. The Guarantees have been duly authorized, executed and delivered by each
of the Delaware Guarantors and, when the Notes are executed by the Company and
authenticated by the Trustee in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement (assuming due authorization, execution and
delivery of the Indenture by the Non-Delaware Guarantors and the Trustee and due
authorization and delivery of the Notes by the Trustee in accordance with the
Indenture), will constitute the valid
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 5
and legally binding obligations of each of the Guarantors, entitled to the
benefits of the Indenture, and enforceable against each of the Guarantors in
accordance with their terms. The Exchange Securities have been duly and validly
authorized by the Company.
7. The Company and each of the Delaware Guarantors have all requisite
corporate power and authority to execute, deliver and perform their respective
obligations under the Registration Rights Agreement; the Registration Rights
Agreement has been duly and validly authorized, executed and delivered by the
Company and each of the Delaware Guarantors, and (assuming due authorization,
execution and delivery thereof by the Non-Delaware Guarantors), will constitute
the 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.
8. The Company and each of the Delaware Guarantors have all requisite
corporate power and authority to execute, deliver and perform their respective
obligations under the Purchase Agreement; the Purchase Agreement has been duly
and validly authorized, executed and delivered by the Company and each of the
Delaware Guarantors, and (assuming due authorization, execution and delivery
thereof by the Non-Delaware Guarantors), will constitute the 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.
9. The Indenture, the Notes and the Registration Rights Agreement
conform in all material respects to the descriptions thereof contained in the
Offering Memorandum.
10. To our knowledge, none of the Company or the Guarantors is (A) in
violation of its certificate of incorporation or bylaws (except we express no
opinion with respect to the Non-Delaware Guarantors) or (B) in breach or
violation of any statute, judgment, decree, order, rule or regulation of the
United States of America, the State of New York or the General Corporation Law
of the State of Delaware applicable to it or any of its properties or assets,
except for any such breaches or violations which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
11. Assuming the accuracy and fulfillment of the representations,
warranties, covenants and agreements of the Company, the Guarantors and the
Initial Purchasers in the Purchase Agreement and that the net proceeds to the
Company from the Offering are used in the manner contemplated by the Offering
Memorandum, the execution, delivery and performance of the Purchase Agreement,
the Indenture and the Registration Rights Agreement and the consummation of the
financing transactions contemplated thereby (including the issuance and sale of
the Notes to the Initial Purchasers and the making of the Guarantees by the
Guarantors) will not conflict with or constitute or result in a breach or a
default under (or an event which with
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 6
notice or passage of time or both would constitute a default under) or violation
of any of (A) the terms or provisions of any contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument binding on or
affecting the Company or any Guarantor or any of their respective properties or
assets which has been identified to us pursuant to an officers' certificate of
the Company and listed on Schedule I hereto as being material to the Company and
its subsidiaries taken as a whole (except we express no opinion as to (i)
violations under contractual obligations listed on Schedule I hereto where such
violations are immaterial, (ii) violations resulting from cross-default
provisions relating to defaults under an agreement not listed on Schedule I
hereto or (iii) violations of financial covenants), (B) the certificate of
incorporation or bylaws of the Company or any of the Delaware Guarantors, or (C)
(assuming compliance with all applicable state securities or "Blue Sky" laws and
the rules and regulations of the National Association of Securities Dealers,
Inc. (the "NASD"), as to which we render no opinion), any statute, law or rule
or regulation of the United States of America, the State of New York or the
General Corporation Law of the State of Delaware or, to our knowledge, any
judgment, decree or order of any Federal or state court located in New York or
Delaware which is applicable to the Company or any of the Guarantors or any of
their respective properties or assets.
12. Assuming the accuracy and fulfillment of the representations,
warranties, covenants and agreements of the Company, the Guarantors and the
Initial Purchasers in the Purchase Agreement, no consent, approval,
authorization or order of any governmental authority is required for (A) the
issuance and sale by the Company of the Notes to the Initial Purchasers or the
consummation by the Company of the other financing transactions contemplated in
the Purchase Agreement or (B) the issuance and sale by the Guarantors of the
Guarantees or the consummation by the Guarantors of the other financing
transactions contemplated in the Purchase Agreement, except (i) such as may be
required under state securities or "Blue Sky" laws and regulations or such as
may be required by the NASD, as to which we express no opinion, (ii) those which
have previously been obtained and (iii) in the case of the Registration Rights
Agreement and the transactions contemplated thereby, those that will be required
under the Securities Act, the Trust Indenture Act, state securities or "Blue
Sky" laws and regulations or such as may be required by the NASD; provided,
however that we express no opinion as to any consent, approval, authorization or
order of any governmental authority that may be required by virtue of the legal
or regulatory status of the Initial Purchasers.
13. Except as disclosed in the Offering Memorandum, to our knowledge,
no legal or governmental proceedings are pending or threatened to which any of
the Company or the Guarantors is a party or to which the property or assets of
the Company or any of the Guarantors is subject which would be reasonably likely
to result, individually or in the aggregate, in a Material Adverse Effect.
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 7
14. None of the Company or the Guarantors is an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended, and the
rules and regulations of the Commission promulgated thereunder.
15. No registration under the Securities Act of the Notes or the
Guarantees is required in connection with the sale of the Notes to the Initial
Purchasers as contemplated by the Purchase Agreement and the Offering Memorandum
or in connection with the initial resale of the Notes by the Initial Purchasers
in accordance with the Purchase Agreement, and prior to the commencement of the
Exchange Offer (as defined in the Registration Rights Agreement) or the
effectiveness of the Shelf Registration Statement (as defined in the
Registration Rights Agreement), and the Indenture is not required to be
qualified under the Trust Indenture Act, in each case assuming (A) that the
purchasers who buy such Notes in the initial resale thereof are qualified
institutional buyers as defined in Rule 144A promulgated under the Securities
Act ("QIBs") or accredited investors as defined in Rule 501(a) (1), (2), (3) or
(7) promulgated under the Securities Act ("Accredited Investors"), (B) the
accuracy of the Initial Purchasers' representations and those of the Company
contained in the Purchase Agreement, including, without limitation, those
regarding the absence of a general solicitation in connection with the sale of
such Notes to the Initial Purchasers and the initial resale thereof and (C) the
due performance by the Initial Purchasers of the agreements set forth in Section
2(b) of the Purchase Agreement.
16. The description in the Offering Memorandum under the caption
"Certain U.S. Federal Income Tax Considerations" constitutes a fair summary of
the legal matters referred to therein. The statements made in the Offering
Memorandum under the captions "Description of Notes" and "Exchange and
Registration Rights Agreement," insofar as they purport to constitute summaries
of certain terms of documents referred to therein, constitute accurate summaries
of the terms of such documents in all material respects.
In addition, we have participated in conferences with officers and
representatives of the Company and the Guarantors, representatives of Deloitte &
Touche LLP and Coopers & Xxxxxxx L.L.P., the independent public accountants for
the Company and the Guarantors, representatives of the Initial Purchasers and
counsel for the Initial Purchasers, at which conferences the contents of the
Offering Memorandum and related matters were discussed, and, although we have
not independently verified and are not passing upon and assume no responsibility
for the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum (except to the extent specified in paragraphs 9 and 16
hereof), no facts have come to our attention which lead us to believe that the
Offering Memorandum, on the date thereof or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 8
misleading (it being understood that we express no opinion with respect to the
financial statements and related notes thereto and the other financial,
statistical and accounting data included in the Offering Memorandum).
The opinions as expressed herein are subject to the following
qualifications and assumptions:
(a) the enforceability of the Indenture, the Notes, the Guarantees, the
Purchase Agreement, the Registration Rights Agreement and the obligations of the
Company and the Guarantors thereunder and the availability of certain rights and
remedial provisions provided for in such documents are subject to the effect of
bankruptcy, fraudulent conveyance or transfer, insolvency, reorganization,
arrangement, liquidation, conservatorship, moratorium and similar laws and are
subject to limitations imposed by other laws and judicial decisions relating to
or affecting the rights of creditors generally, and general principles of equity
(regardless of whether enforcement is considered in proceedings at law or in
equity) and upon the availability of injunctive relief or other equitable
remedies, including, without limitation, where (i) the breach of covenants or
provisions imposes restrictions or burdens upon a debtor and it cannot be
demonstrated that the enforcement of such remedies, restrictions or burdens is
reasonably necessary for the protection of a creditor; (ii) a creditor's
enforcement of remedies, covenants or provisions under the circumstances, or the
manner or procedures of such enforcement, would violate such creditor's implied
covenant of good faith and fair dealing, or would be commercially unreasonable;
or (iii) a court having jurisdiction finds that remedies, covenants or
provisions were, at the time made, or are in application, unconscionable as a
matter of law or contrary to public policy;
(b) with respect to the Indenture, the Notes, the Guarantees, the
Purchase Agreement and the Registration Rights Agreement, we express no opinion
as to the enforceability of (i) cumulative remedies to the extent such
cumulative remedies purport to or would have the effect of compensating the
party entitled to the benefits thereof in amounts in excess of the actual loss
suffered by such party, (ii) rights to indemnification or contribution, which
may be limited by applicable law or public policy considerations, or (iii) the
severability provisions contained in such documents;
(c) requirements in the Transaction Documents specifying that
provisions thereof may only be waived in writing may not be valid, binding or
enforceable to the extent that an oral agreement or an implied agreement by
trade practice or course of conduct has been created modifying any provision of
such documents; and
(d) with respect to the matters set forth in paragraph 11(C) above, we
express no opinion as to any law or regulation (i) which might be violated by
any misrepresentation or
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
Page 9
omission or a fraudulent act or (ii) to which the Company or the Guarantors may
be subject as a result of their specific business operations or regulatory
status and which are not applicable to business corporations generally (although
we are not aware of any such other law or regulation that would be violated as a
result of the execution, delivery and performance of the Purchase Agreement, the
Indenture and the Registration Rights Agreement and the consummation of the
financing transactions contemplated thereby).
The opinions expressed herein are based upon and are limited to the
laws of the State of New York, the General Corporation Law of the State of
Delaware and the laws of the United States of America to the extent specifically
referred to herein, and we express no opinion with respect to the laws of any
other state or jurisdiction.
Our opinions set forth in this letter are based upon the facts in
existence and laws in effect on the date hereof and we expressly disclaim any
obligation to update our opinions herein, regardless of whether changes in such
facts or laws come to our attention after the delivery hereof.
This opinion letter is solely for the benefit of the addressees hereof
in connection with the consummation of the financing transactions contemplated
by the Purchase Agreement. This opinion letter may not be relied upon in any
manner by any other person and may not be disclosed, quoted, filed with a
governmental agency or otherwise referred to without our express prior written
consent. Notwithstanding the foregoing, this opinion letter may be relied upon
by Marine Midland Bank, as Trustee under the Indenture.
Very truly yours,
SCHEDULE I
Schedule of Material Agreements and Instruments
1. Purchase Agreement dated as of October 23, 1997, by and among
Stellex Industries, Inc., a Delaware corporation (the
"Company"), TSMD Acquisition Corp, a Delaware corporation
("TSMD Acquisition"), Stellex Microwave Systems, Inc., a
California corporation ("Stellex Microwave"), KII Holding
Corp., a Delaware corporation ("KII Holding"), KII Acquisition
Corp., a Delaware corporation ("KII Acquisition"), Stellex
Aerospace, a California corporation ("Stellex Aerospace"),
Xxxxx Machining International, a California corporation
("Xxxxx"), Paragon Precision Products, a California
corporation ("Paragon"), Scanning Electron Analysis
Laboratories, Inc., a California corporation ("SEAL"), and
General Inspection Laboratories, Inc., a California
corporation ("GIL") (collectively, the "Guarantors"), and
Societe Generale Securities Corporation, BT Alex. Xxxxx
Incorporated and Xxxxxxxxx & Company, Inc. (collectively, the
"Initial Purchasers").
2. Indenture dated as of October 31, 1997 by and among the
Company, the Guarantors and Marine Midland Bank, as trustee.
3. Registration Rights Agreement dated as of October 31, 1997 by
and among the Company, the Guarantors and the Initial
Purchasers.
4. Credit Agreement dated as of October 31, 1997 by and among the
Company, the Guarantors and Societe Generale, as Agent.
5. Stock Purchase Agreement dated as of October 31, 1997 by and
among TSMD Acquisition and X-X TSMD Inc.
6. Stock Purchase Agreement dated as of July 1, 1997, by and
among KII Acquisition and Xxxxxxxx Industrie Holding AG.
7. Stellex Aerospace Investor Agreement dated as of July 1, 1997,
by and among KII Holding and Greystoke Capital Management
Limited LDC, and Xxxxxxx X. Call, Xxxxxx X. Xxxxx, Xxxxxxxx X.
Xxxxx, Xxxx Xxxxxxxxx, Xxxxxx X. Xxxxx, Xxxx Xxxxx and Xxxxx
X. Xxxxx.
8. Promissory Note dated as of July 1, 1997 by KII Acquisition to
Xxxxxxxx Industrie Holding AG.
9. Promissory Note dated September 6, 1991 by Paragon to Farm
Bureau Life Insurance Company.
10. Promissory Note dated July 1, 1997 by KII Holding to Trinity
Investment Corp.
11. Amended and Restated Management Advisory Services Agreement, effective
as of November 1, 1997, by and between Mentmore Holdings Corporation,
the Company and the Guarantors.
12. Tax Allocation and Indemnity Agreement dated as of October 31, 1997,
and retroactively applied to the calendar year ended December 31, 1997,
by and among the Company and the Guarantors.
13. Gallium Arsenide and Thin Film Supply and Services Agreement
dated as of October 31, 1997 between the Company and Xxxxxxx-
Xxxxxxx Company ("Xxxxxxx-Xxxxxxx").
14. Metal Injection Molding, Glass Seal and Hybrid Assembly
Facility Agreement dated as of October 31, 1997 between the
Company and Xxxxxxx-Xxxxxxx.
15. Patent Cross License Agreement dated as of October 31, 1997
between the Company and Xxxxxxx-Xxxxxxx.
Annex C-2
Form of legal opinion of O'Melveny & Xxxxx.
[Letterhead of O'Melveny & Xxxxx LLP]
October 31, 1997
Societe Generale Securities Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxxxx & Company, Inc.
c/o Societe Generale Securities Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
We have acted as special California counsel to Stellex Industries,
Inc., a Delaware corporation (the "Company"), in connection with the issuance
and sale by the Company, pursuant to the Purchase Agreement, dated as of October
23, 1997 (the "Purchase Agreement"), among the Company, TSMD Acquisition Corp.,
a Delaware corporation ("TSMD Acquisition"), KII Holding Corp., a Delaware
corporation ("KII Holding"), KII Acquisition Corp., a Delaware corporation ("KII
Acquisition"), Stellex Microwave Systems, Inc., a California corporation
("Stellex Microwave"), Stellex Aerospace, a California corporation ("Stellex
Aerospace"), Xxxxx Machining International, a California corporation ("Xxxxx"),
Paragon Precision Products, a California corporation ("Paragon"), Scanning
Electron Analysis Laboratories, Inc., a California corporation ("SEAL") and
General Inspection Laboratories, Inc., a California corporation ("GIL") and
Societe Generale Securities Corporation, BT Alex. Xxxxx Incorporated and
Xxxxxxxxx & Company, Inc. (collectively, the "Initial Purchasers"), of $100
million aggregate principal amount of the Company's 9 1/2% Senior Subordinated
Notes due 2007 (the "Notes), which will be issued under an Indenture, dated as
of October 31, 1997 (the "Indenture"), among the Company, the Guarantors (as
defined below) and Marine Midland Bank, as trustee. TSMD Acquisition, Stellex
Microwave, KII Holding, KII Acquisition, Stellex Aerospace, Xxxxx, Paragon, SEAL
and GIL are collectively hereinafter referred to as the "Guarantors." Stellex
Microwave, Stellex Aerospace, Xxxxx, Paragon, SEAL and GIL are sometimes
collectively hereinafter referred to as the "California Guarantors."
We are providing this opinion to you at the request of the Company
pursuant to Section 5(d) of the Purchase Agreement. Except as otherwise
indicated, capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Purchase Agreement.
For the purposes of this opinion we have reviewed only the following
documents and made no other investigations or inquiry:
(i) the Articles of Incorporation and Bylaws of each of the
California Guarantors;
(ii) the corporate minute books and stock transfer records of each
of the California Guarantors (other than SEAL and Xxxxx, which
do not have stock ledgers and for which we reviewed only
copies of stock certificates);
(iii) the California Guarantors' Certificates (copies of which have
been delivered to you);
(iv) A Certificate of Status-Domestic Corporation issued by the
Secretary of State of the State of California as of October
22, 1997 for each of the California Guarantors;
(v) A letter from the Franchise Tax Board of the State of
California for each of the California Guarantors stating that
each such corporation is in good standing with that agency
dated October 22, 1997 (except with respect to Stellex
Aerospace and Stellex Microwave, which letters are dated
October 23, 1997);
(vi) The opinion dated October 31, 1997 of Heller, Ehrman, White &
XxXxxxxxx as counsel to Xxxxxxx-Xxxxxxx Company, a California
corporation, and Stellex Microwave in connection with the
Stock Purchase Agreement dated as of August 29, 1997, by and
among Xxxxxxx-Xxxxxxx Company, Stellex Microwave and TSMD
Acquisition (the "Xxxxxx Opinion");
(vii) resolutions of the Board of directors of each of the
California Guarantors with respect to the transactions
referred to herein;
(viii) the Preliminary Offering Memorandum and Offering Memorandum;
(ix) the Indenture;
(x) the Purchase Agreement; and
(xi) the Registration Rights Agreement.
The Indenture, Purchase Agreement and Registration Rights Agreement are
hereinafter referred to as the "Transaction Agreements." We have assumed the
genuineness of all signatures (other than the signatures of persons signing the
Transaction Agreements on behalf of the California Guarantors), the authenticity
of all documents submitted to us as originals and the conformity with originals
of all documents submitted to us as copies. To the extent the California
Guarantors' obligations depend on the due authorization, execution and delivery
of the Transaction Agreements by the other parties to the Transaction
Agreements, we have assumed that the Transaction Agreements have been so
authorized, executed and delivered. We have further assumed that the unexecuted
copies of draft agreements we reviewed contain terms identical to the
Transaction Agreements when executed. We have also assumed the regularity and
sufficiency of corporate proceedings of each of the California Guarantors
through December 31, 1996.
On the basis of such examination, our reliance upon the assumptions in
this opinion and our consideration of those questions of law we considered
relevant, and subject to the limitations and qualifications in this opinion, we
are of the opinion that:
1. Each of the California Guarantors has been duly incorporated and is
validly existing in good standing under the laws of the State of California,
with corporate power to (i) own its properties and assets and to carry on its
business as described in the Offering Memorandum and (ii) enter into and perform
its obligations under the Transaction Agreements.
2. The outstanding shares of capital stock of each of the California
Guarantors have been duly authorized by all necessary corporate action on the
part of such corporation, and are validly issued, fully paid and non-assessable,
and all of the outstanding shares of capital stock of the California Guarantors
are owned of record by the Company or another Guarantor, all except as set forth
in the Offering Memorandum or the Certificates for Paragon.
3. The execution and delivery by, and performance of, each of the
California Guarantors of the Indenture have been duly authorized by all
necessary corporate action on the part of each of the California Guarantors, and
the Indenture has been duly executed and delivered by each of the California
Guarantors.
4. The execution and delivery by, and performance of, each of the
California Guarantors of the Registration Rights Agreement have been duly
authorized by all necessary corporate action on the part of each of the
California Guarantors, and the Registration Rights Agreement has been duly
executed and delivered by each of the California Guarantors.
5. The execution and delivery by, and performance of, each of the
California Guarantors of the Purchase Agreement have been duly authorized by all
necessary corporate action on the part of each of the California Guarantors, and
the Purchase Agreement has been duly executed and delivered by each of the
California Guarantors.
6. Assuming the accuracy and fulfillment of the representations,
warranties, covenants and agreements of the Company, the Guarantors and the
Initial Purchasers in the Transaction Agreements and that the net proceeds to
the Company from the Offering are used in the manner contemplated by the
Offering Memorandum, the execution and delivery by the California Guarantors of,
and performance of their respective obligations on or prior to the date of this
opinion under, the Transaction Agreements (A) do not violate any of the Articles
of Incorporation or Bylaws of any of the California Guarantors and (B) do not
violate any California statute, law, rule or regulation that we have, in the
exercise of customary professional diligence, recognized as applicable to the
California Guarantors or the transactions of the type contemplated by the
Transaction Agreements.
7. Stellex Microwave is not in violation of its Articles of
Incorporation or Bylaws.
For purposes of the opinions expressed in paragraph 6 above, we have
assumed that each of the California Guarantors will not in the future take any
discretionary action (including a decision not to act) permitted by any of the
Transaction Agreements that would cause the
performance of any of the Transaction Agreements to violate any California or
federal statute, rule or regulation.
In addition, our opinion in paragraph 6 above is subject to:
(i) limitations on enforceability based on by bankruptcy,
insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally
(including, without limitation, fraudulent conveyance
laws) and by general principles of equity, including,
without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the
possible unavailability of specific performance or
injunctive relief, regardless of whether considered in
a proceeding in equity or at law; and
(ii) the unenforceability under certain circumstances of
provisions imposing penalties, liquidated damages,
acceleration of future amounts due (other than
principal) without appropriate discount to present
value, late charges, prepayment charges and increased
interest rates upon default.
As to our opinion in paragraph 6, we further advise you of California
statutory provisions and case law to the effect that, in certain circumstances,
a guarantor may be exonerated if the creditor, without the consent of the
guarantor, materially alters the original obligation of the principal, elects
remedies for default that impair the subrogation or reimbursement rights of the
guarantor against the principal, or otherwise takes action that materially
prejudices the guarantor. There is also authority (including California Civil
Code Section 2856, which has not yet been the subject of judicial
interpretation) to the effect that a guarantor may effectively waive statutory
suretyship defenses if express waivers of such defenses are set forth in the
guaranty. We express no opinion as to the effectiveness, under California law,
of the waivers set forth in the Transaction Agreements. We also express no
opinion as to the effect on the California Guarantor's obligations under the
Indenture of: (i) any modification to or amendment of the Company's obligations
that materially increases those obligations, or (ii) any other action that
materially prejudices a California Guarantor, if, in any such instance, such
modification, amendment or action occurs without notice to and the consent of
the such California Guarantor.
The law covered by this opinion is limited to the present law of the
State of California. We express no opinion as to the laws of any other
jurisdiction and no opinion regarding the statutes, administrative decisions,
rules, regulations or requirements of any county, municipality, subdivision or
local authority of any jurisdiction. In addition, we express no opinion
concerning (i) antitrust, unfair competition or trade practice laws or
regulations, (ii) pension and employee benefit laws and regulations, (iii)
federal or state environmental laws and regulations, (iv) land use or
subdivision laws or regulations, (v) federal or state securities laws or (vi)
usury laws.
With respect to the opinions expressed in paragraphs 1 and 2 regarding
Stellex Microwave, we have relied on the Xxxxxx Opinion, a copy of which has
been provided to you. With respect to the opinions express in paragraph 7, we
have relied exclusively on the Xxxxxx Opinion.
This opinion is furnished by us as special counsel for the Company and
may be relied upon by you only in connection with the transaction contemplated
by the Purchase Agreement. It may not be used or relied upon by you for any
other purpose or , except as otherwise set forth in this paragraph, by any other
person, nor may copies be delivered to any other person, without in each
instance our prior written consent. This opinion may be relied upon by Winston &
Xxxxxx and Xxxxxxx Xxxxxxx & Xxxxxxxx in its entirety for the purposes of any
opinion you may request of them in connection with the transactions contemplated
by the Purchase Agreement. In addition, this opinion may be relied upon by
Marine Midland Bank, as Trustee under the Indenture.
We call attention to the fact that the opinions expressed herein may be
affected by actions taken or omitted or events occurring or failing to occur
after the date hereof. We have not undertaken to determine, or inform any
person, whether any such actions are taken, omitted, occur or fail to occur.
Respectfully submitted,
