VARLEN CORPORATION
6 1/2% Convertible Subordinated Debentures
due 2003
STANDBY AGREEMENT
August [ ], 1997
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated
c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇ and Madames:
Varlen Corporation, a Delaware corporation (the "COMPANY"), has outstanding
$___________ aggregate principal amount of its 6 1/2% Convertible
Subordinated Debentures due 2003 (the "DEBENTURES") issued pursuant to the
Indenture dated as of May 27, 1993 between the Company and ▇▇▇▇▇▇ Trust and
Savings Bank, as Trustee (the "INDENTURE"). The Company proposes to redeem
on September 4, 1997 (the "REDEMPTION DATE") all the outstanding Debentures
pursuant to a notice of redemption, dated August 20, 1997. The Debentures
will be redeemed at the redemption price of $1,039.00, plus accrued and
unpaid interest of $16.79 to, but not including, the Redemption Date, for an
aggregate redemption price of $1055.79 per $1,000 principal amount per
Debenture (the "REDEMPTION PRICE"). The Debentures are convertible into
shares of Common Stock, $0.10 par value per share (the "COMMON STOCK"), at a
conversion price of $22.5893 per share, into approximately 44.2688 shares of
Common Stock per $1,000 principal amount of Debentures. The right to convert
the Debentures into shares of Common Stock will terminate at the close of
business (5:00 p.m. New York City Time) on September 3, 1997 (the "CONVERSION
EXPIRATION TIME").
The Company desires to make arrangements with ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation ("DLJ"), ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. ("▇▇▇▇▇ ▇▇▇▇▇▇▇") and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated ("▇▇▇▇▇▇ ▇. ▇▇▇▇▇") (collectively, the
"PURCHASERS," and each individually, a "PURCHASER"), pursuant to which you
will severally purchase authorized but unissued shares of Common Stock which
would have been issuable upon conversion of those Debentures which are not
duly surrendered for conversion on or prior to the Conversion Expiration
Time, for a purchase price equal to $23.85 per share of Common Stock (the
"PURCHASE
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PRICE"). Each Purchased Share shall have attached thereto one stock
purchase right (collectively, the "RIGHTS") issued pursuant to a Rights
Agreement dated as of June 17, 1996 (the "RIGHTS AGREEMENT") between the
Company and ▇▇▇▇▇▇ Trust and Savings Bank, as Rights Agent.
The Company has prepared and filed with the Securities and Exchange
Commission (the "COMMISSION") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "SECURITIES ACT"), a registration
statement on Form S-3 relating to 2,421,279 shares of Common Stock (the
"COMMON SHARES") issuable by the Company upon conversion of the Debentures
and in accordance with this Agreement. The Company has also filed such
amendments thereto, if any, as may have been required to the date hereof and
will file, if required, on or prior to the effective date of the registration
statement one or more additional amendments thereto. As used in this
Agreement, the term "REGISTRATION STATEMENT" means such registration
statement in the form in which it becomes effective and includes all
financial statements, schedules, reports and documents incorporated by
reference therein and not required to be filed therewith by Form S-3 under
the Securities Act (the "INCORPORATED DOCUMENTS"), filed in accordance with
the Securities Exchange Act of 1934, as amended, and the rules, regulations
and forms of the Commission thereunder (collectively, the "EXCHANGE ACT") on
or before the date on which the Registration Statement becomes effective.
The term "PROSPECTUS" means the prospectus, including any Incorporated
Documents, on file with the Commission at the time the Registration Statement
becomes effective; PROVIDED, that (a) if the prospectus filed by the Company
pursuant to Rule 424(b) of the rules and regulations of the Commission under
the Exchange Act differs from such prospectus, the term "Prospectus" shall
refer to the Rule 424(b) Prospectus from and after the time it is mailed or
otherwise delivered to the Commission for filing, and (b) if the Company
files any documents pursuant to Section 13 or 14 of the Exchange Act after
the time the Registration Statement becomes effective and prior to the
termination of the offering of the Common Stock by the Purchasers, which
documents are deemed to be incorporated by reference into the Prospectus, the
term "Prospectus" shall refer to said Prospectus as supplemented by the
documents so filed from and after the time said documents are filed with the
Commission.
I.
The Company represents and warrants to each of the Purchasers that:
(a) The Company and the transactions contemplated by this Agreement meet
the requirements for using Form S-3 under the Securities Act. The
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Registration Statement in the form in which it becomes effective, and also in
such form as it may be when any post-effective amendment thereto shall become
effective and the Prospectus and any supplement or amendment thereto when
filed with the Commission under Rule 424(b) under the Securities Act,
complied or will comply in all material respects with the provisions of the
Securities Act and will not at any such times 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; except
that this representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing
by any of the Purchasers expressly for use therein.
(b) The Incorporated Documents heretofore filed, when they were filed
(or, if any amendment with respect to any such document was filed, when such
amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder;
any further Incorporated Documents so filed will, when they are filed,
conform in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder; no such document when it was filed
(or, if an amendment with respect to any such document was filed, when such
amendment was filed), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading; and no such further
document, when it is filed, will contain an untrue statement of a material
fact or will omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
full corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and
the Prospectus, and is duly qualified to transact business and is in good
standing in each jurisdiction or place in which the conduct of its business
or its ownership or leasing of property requires such qualification, except
to the extent that the failure so to qualify or be in good standing would not
have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company and
its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company listed on Schedule II hereto
(collectively, the "SIGNIFICANT SUBSIDIARIES") has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own,
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lease and operate its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company and
its subsidiaries, taken as a whole. Except as set forth in Schedule II
hereto, no other subsidiary of the Company constitutes a "significant
subsidiary" as defined under Rule 1-02 of Regulation S-X.
(e) All the outstanding shares of Common Stock of the Company have been
duly authorized and validly issued, are fully paid and nonassessable; the
Debentures have been duly authorized and validly issued; the Purchased Shares
(as defined in paragraph II(a)) to be issued and sold by the Company have
been duly authorized and, when issued and delivered to the Purchasers against
payment therefor in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable and free of any preemptive or similar rights
(other than under the Rights Agreement); the shares of Common Stock issuable
upon conversion of the Debentures have been duly authorized and reserved for
issuance upon such conversion and when issued and delivered upon such
conversion in accordance with the terms of the Indenture, such shares of
Common Stock will be validly issued, fully paid and nonassessable and free of
any preemptive or similar rights; and the capital stock of the Company
conforms in all material respects to the description thereof in the
Registration Statement and the Prospectus.
(f) The Rights under the Rights Agreement attached to the outstanding
shares of Common Stock have been duly authorized and validly issued; and the
Rights under the Rights Agreement to which the holders of Purchased Shares
and the holders of shares of Common Stock issuable upon conversion of the
Debentures will be entitled have been duly authorized and, upon issuance of
such Purchased Shares in accordance with this Agreement and such Common Stock
in accordance with the Indenture, will be validly issued.
(g) All of the outstanding shares of capital stock of each of the
Significant Subsidiaries have been duly authorized and are validly issued,
fully paid and non-assessable, and are owned of record and beneficially by
the Company or a subsidiary of the Company (except in the case of foreign
subsidiaries for directors' qualifying shares) free and clear of all liens,
adverse claims, security interests, pledges, charges, encumbrances,
stockholders' agreements and voting trusts, except for pledges made under
certain of the Company's and the Company's subsidiaries' credit agreements.
There is no commitment, plan or arrangement to issue, and no outstanding
option, warrant or
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other right calling for the issuance of any share of capital stock of the
Company or any of the Company's subsidiaries to any person or any security or
other instrument which by its terms is convertible into, exercisable for or
exchangeable for capital stock of the Company or any of the Company's
subsidiaries, except for the Debentures, grants made under and in accordance
with the Company's stock option plans and issuances of Common Stock pursuant
to the Company's employee stock purchase plan (collectively, the "Plans") and
pursuant to the Rights Agreement. There are no contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to include any securities of the Company in the
Registration Statement.
(h) This Agreement has been duly authorized, executed and delivered by
the Company.
(i) (A) The redemption of the Debentures and conversion thereof in
accordance with the terms of this Agreement and the execution and delivery by
the Company of, and the performance by the Company of its obligations under,
this Agreement and the consummation of the transactions contemplated hereby
will not contravene (1) the certificate of incorporation or by-laws (or other
organizational documents) of the Company or the Significant Subsidiaries or
(2) in any material respect, any agreement, contract, bond, indenture or
other instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or (3) except
for any such contraventions that, individually and in the aggregate, do not
have, and are not reasonably expected to have, a material adverse effect on
the condition (financial or other), business, properties, net worth, results
of operations of the Company and its subsidiaries taken as a whole, any
statute, law, rule or regulation or judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and (B) no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for any such
actions or for the performance by the Company of its obligations under this
Agreement and the consummation of the transactions contemplated hereby,
except the registration under the Securities Act of the Common Shares
deliverable upon conversion of the Debentures and upon purchase pursuant to
Article II hereof, and except such consents, approvals, authorizations,
orders or qualifications as may be required under the rules of the National
Association of Securities Dealers, Inc. or the securities, or Blue Sky, laws
of the various states in connection with the acquisition, sale and
distribution of the Common Shares by the Purchasers. The redemption of the
Debentures and conversion thereof in accordance with the terms of this
Agreement and the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement and the
consummation of the transactions
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contemplated hereby will not result in the imposition of any lien, charge or
encumbrance upon any of the assets of the Company or any of its subsidiaries,
pursuant to the terms of any agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party or by which any of them is
bound.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business, operations,
or prospects of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus. Since the date of the latest financial
statements incorporated by reference in the Prospectus and except as set
forth in the Prospectus, neither the Company nor any of its subsidiaries has
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions, not in the ordinary course of
business, and there has not been any material adverse change in the
condition, financial or otherwise, or in the business, prospects or results
of operations of the Company and its subsidiaries, taken as a whole or any
material change in the capital stock or increase in the long-term debt of the
Company or any of its subsidiaries except for issuances of Common Stock upon
conversion of the Debentures and pursuant to the Plans..
(k) There are no legal or governmental proceedings pending or, to the
best of the Company's knowledge, threatened against the Company or any of its
subsidiaries or to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its subsidiaries is
subject that affects the transactions contemplated by this Agreement or that
are required to be described in the Registration Statement or the Prospectus
and are not so described, or any statutes, regulations, contracts,
instruments, leases, licenses or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required.
(l) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties.
(m) Each of the Company and the Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates and
permits (collectively, "PERMITS") of and from, and has made all declarations
and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals, to own, lease, license and use its properties and assets and to
conduct its business in all material respects in the manner described in the
Prospectus, except to the extent that the failure to obtain
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or file would not have a material adverse effect on the on the condition
(financial or other), business, properties, net worth or results of
operations of the Company and its subsidiaries, taken as a whole. Neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocations or modification of any such Permits
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a material adverse effect on the condition
(financial or other), business, properties, net worth or results of
operations of the Company and its subsidiaries taken as a whole, except as
described in or contemplated by the Prospectus.
(n) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the rules and regulations of
the Commission thereunder.
(o) Neither the Company nor any of its subsidiaries is an "investment
company" or an entity "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended and in effect
from time to time, or is subject to any law, rule, regulation, order,
judgment or decree which regulates the redemption and conversion of the
Debentures as contemplated herein or the offering or sale of the Common
Shares by the Purchasers (other than the Securities Act, the Exchange Act,
the rules of the National Association of Securities Dealers, Inc. and the
Blue Sky or securities laws).
(p) Neither the Company nor any of the Significant Subsidiaries nor, to
the knowledge of the Company, any other party is now or is reasonably
expected by the Company or its subsidiaries to be in violation or breach of,
or in default in any material respect with respect to, any provision of any
material contract, agreement, instrument, lease, or license to which the
Company or any subsidiary is a party, the effect of which would materially
adversely affect the condition, financial or otherwise, earnings, business,
operations or prospects of the Company and its subsidiaries, taken as a
whole. Each such contract, agreement, instrument, lease or license (i) is in
full force, (ii) is the legal, valid, and binding obligation of the Company
or its subsidiaries and is enforceable as to the Company or its subsidiaries,
as the case may be, in accordance with its terms and (iii) to the Company's
knowledge, is the legal, valid and binding obligation of the other parties
thereto and is enforceable as to each of them in accordance with its terms,
it being understood that insofar as the Company's Mechanical Diode clutch
patent license is concerned, the foregoing representation and warranty is
subject to the information set forth in the Prospectus under the caption
"Risk Factors - Certain Litigation" relating to the two suits filed against
the Company
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and certain of its subsidiaries by Epilogics, Inc. Neither the
Company nor any of the Significant Subsidiaries is, or with giving of notice
or lapse of time or both would be, in violation of its certificate of
incorporation or by-laws (or other organizational documents).
(q) The Company and its subsidiaries have title in fee simple to all
real property and good and marketable title to all personal property owned by
them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except
such as are described in the Prospectus or such as do not materially affect
the value of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the Company and its
subsidiaries that are material to the business of the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not materially interfere with
the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries, in each case except as described in or
contemplated by the Prospectus. Each of the Company, and its subsidiaries
enjoys peaceful and undisturbed possession under all material leases and
licenses under which it is operating.
(r) The Company and its subsidiaries are (i) in compliance with any and
all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, and environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals and filed all notices required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license, notice
or approval and any remedial obligations under any Environmental Law, except
in each case where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply
with the terms and conditions of such permits, licenses, approvals or
obligations or to file such notices would not, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken as
a whole.
(s) Except as set forth in the Registration Statement and Prospectus (i)
the Company does not know of any release or potential release of any
Hazardous Material (as hereinafter defined) on or to the Company's property
the effect of which might have a materially adverse effect on the condition,
financial or otherwise, or in the earnings, business, operations or prospects
of the Company and its subsidiaries, taken as a whole; and (ii) the Company
has no present or
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contingent liability in connection with any release or potential release of
any Hazardous Material into the environment, whether on or off its property
the violation of any of which might have a materially adverse effect on the
condition, financial or otherwise, or in the earnings, business, operations
or prospects of the Company and its subsidiaries, taken as a whole. The term
"HAZARDOUS MATERIAL" means any oil (including petroleum products, crude oil
and any fraction thereof), chemical, contaminant, pollutant, solid or
hazardous waste, Hazardous Substance (as defined in Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act and
regulations thereunder), or other material that is toxic or harmful to human
health or the environment or the use, treatment, sale, discharge or disposal
of which is regulated by a local, state or federal government authority
charged with protection of health, safety or the environment.
(t) Except as disclosed in the Prospectus, no customer or supplier that
was material to the Company during the year ended January 31, 1997, or that
has been significant to the Company thereafter, has given notice to the
Company that it has terminated, materially reduced or threatened to terminate
or materially reduce its purchases from or provision of products or services
to the Company, as the case may be, and to the best of the Company's
knowledge, no such action is contemplated, except in any such case for
terminations, reductions or threatened terminations or reductions that would
not, individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), business, prospects or results of
operations of the Company and its subsidiaries, considered as a whole.
(u) The Company and each of its subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the
regulations and published interpretations thereunder; no "reportable event"
(as defined in ERISA and the regulations and published interpretations
thereunder) has occurred with respect to any "pension plan" (as defined in
ERISA and the regulations and published interpretations thereunder)
established or maintained by the Company and its subsidiaries. Neither the
Company nor any of its subsidiaries have incurred and do not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended (the "CODE"); and each "pension
plan" established or maintained by the Company or any of its subsidiaries
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and has received a favorable determination
letter as to its qualification and nothing has occurred, whether by action or
by failure to act, which would cause the loss of such qualification.
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(v) The Company and each of the Significant Subsidiaries have filed all
federal and all material state, local and foreign tax returns required to be
filed and neither the Company nor any Significant Subsidiary is in default in
the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto other than any which the Company is
contesting in good faith by appropriate proceedings and for which adequate
reserves have been made.
(w) The Company (i) makes and keeps accurate books and records and (ii)
maintains internal accounting controls which provide reasonable assurance
that (A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability for
its assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets
is compared with existing assets at reasonable intervals.
(x) The financial statements, together with related notes and supporting
schedules, included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto),
present fairly in all material respects the consolidated financial position,
results of operations shown thereby, stockholders' equity and cash flows of
the Company and its subsidiaries on the basis stated therein at the
respective dates and for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved, except as otherwise indicated therein; and
the other financial information and data included or incorporated by
reference in the Registration Statement or Prospectus (and any amendment or
supplement thereto) are accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company and its subsidiaries.
(y) ▇▇▇▇▇▇▇▇ & Touche, who have certified certain financial statements of
the Company and whose report is included in the Prospectus or is incorporated
by reference therein, are independent public accountants within the meaning
of the Securities Act and the rules and regulations thereunder.
(z) No labor problem exists or, to the knowledge of the Company, is
imminent with the employees of the Company or any of the Significant
Subsidiaries which would have a material adverse effect on the condition,
financial or otherwise, or in the earnings, business, operations or prospects
of the Company and its subsidiaries, taken as a whole.
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(aa) At the close of business on August 18, 1997, $54,695,000 aggregate
principal amount of the Debentures was outstanding, the Debentures are
convertible, until the Conversion Expiration Time, into Common Stock at a
Conversion Price of $22.5893 per Debenture (equivalent to approximately
44.2688 shares of Common Stock per $1,000 principal amount of Debentures) and
from and after the time the Registration Statement becomes effective and
until the Conversion Expiration Time the Company will take no action which
would result in any change in the Conversion Price.
(bb) The Company has instructed ▇▇▇▇▇▇ Trust and Savings Bank, the
conversion agent for the Debentures, to cooperate with you in order to
facilitate the conversion of Debentures acquired by you until the Conversion
Expiration Time.
(cc) The Company has not taken and shall not take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
would constitute, the stabilization or manipulation of the price of shares of
Common Stock to facilitate the sale of the Common Shares.
(dd) On and after the date hereof and prior to the Redemption Date, there
will be no change in the outstanding capital stock of the Company and the
Company will not issue or sell or enter into any agreement (other than this
Agreement), arrangement or understanding of any kind, or take any action, for
the issuance or sale of any capital stock of the Company or securities
convertible into capital stock of the Company or warrants or options for the
purchase of capital stock of the Company or securities convertible into
capital stock of the Company without the prior approval of the Purchasers,
except for the issuance of Common Stock pursuant to the Plans, upon
conversion of the Debentures or pursuant to and in accordance with the Rights
Agreement.
(ee) The redemption of all the outstanding Debentures on the Redemption
Date has been duly authorized by the Company; as of the date hereof, the
Debentures shall have been duly called for redemption on the Redemption Date
in accordance with the terms of the Indenture, and the right to convert the
Debentures into Common Stock shall expire at the Conversion Expiration Time.
(ff) All taxes, if any, required to be paid by the Company with respect to
the redemption of the Debentures and the issuance of shares of Common Stock
upon conversion of the Debentures or pursuant to this Agreement, have been or
will be paid by the Company.
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(gg) The Company and its subsidiaries own or possess all material
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Prospectus as being owned by them or any of them
or necessary for the conduct of their respective businesses, and the Company
is not aware of any other person to the rights of the Company and the
subsidiaries with respect to the foregoing.
II.
(a) On the basis of the representations and warranties contained in
this Agreement, and subject to its terms and conditions, the Purchasers
agree, severally and not jointly, that the Purchasers will purchase from the
Company, and the Company agrees it will sell to the Purchasers, at the
Purchase Price, in the respective percentages set forth opposite their names
on Schedule I, up to such whole number of shares of Common Stock as would
have been issuable upon conversion of any Debentures that are not duly
surrendered for conversion on or prior to the Conversion Expiration Time;
PROVIDED, HOWEVER, that the aggregate number of such shares of Common Stock
purchased pursuant to this Agreement shall not exceed 2,421,279. Shares of
Common Stock acquired by the Purchasers pursuant to this paragraph II(a) are
referred to herein as "PURCHASED SHARES." The Purchasers shall pay the
Company for the Purchased Shares, if any, purchased pursuant to this
paragraph II(a) by wire transfer payable in Federal or other immediately
available funds to the order of the Company on the Redemption Date (the
"CLOSING DATE"). Delivery to the Purchasers of any Purchased Shares
purchased pursuant to this Article II(a) shall be made at the offices of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on
the Closing Date.
(b) Until the Conversion Expiration Time, the Purchasers may (but shall
not be obligated to) purchase Debentures in the open market or otherwise in
such amounts and at such prices as the Purchasers may deem advisable. The
Purchasers agree to surrender for conversion at or before the Conversion
Expiration Time any Debentures beneficially owned by them. Shares of Common
Stock issued to the Purchasers upon conversion of the Debentures by them may
be sold by the Purchasers at any time or from time to time pursuant to an
effective registration statement under the Securities Act (including the
Registration Statement) or an applicable exemption under the Securities Act.
Shares of Common Stock acquired upon conversion of the Debentures referred to
in this Article II(b) are referred to as "ADDITIONAL SHARES." Purchased
Shares and Additional Shares are referred to in this Agreement as "ACQUIRED
SHARES."
13
(c) The Purchasers agree to inform the Company when all Acquired Shares
have been sold or if any offering of Acquired Shares is otherwise terminated
(the "REGISTRATION TERMINATION DATE").
(d) It is understood that the Purchasers intend to resell the
Acquired Shares, if any, from time to time at prices prevailing in the open
market. Each Purchaser shall remit to the Company 50% of the Excess Proceeds
(as defined below), if any, received by such Purchaser from (i) in the case
of DLJ, the first 60,532 Purchased Shares sold by it, (ii) in the case of
▇▇▇▇▇ ▇▇▇▇▇▇▇, the first 30,266 Purchased Shares sold by it and (iii) in the
case of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the first 30,266 Purchased Shares sold by it. For
purposes of the foregoing, the term "EXCESS PROCEEDS" with respect to a
Purchaser shall mean the aggregate actual sales price (net of any selling
concessions, transfer taxes and other expenses of sale) of the first 60,532
Purchased Shares sold by DLJ, the first 30,266 Purchased Shares sold by ▇▇▇▇▇
▇▇▇▇▇▇▇ and the first 30,266 Purchased Shares sold by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, less,
in each case, $23.85 per Purchased Share. Any Purchased Shares subject to
this paragraph that are not sold by or for the account of a Purchaser prior
to the close of business on the 30th day after the Redemption Date, or if
such day is not a business day, the next succeeding business day (the "LAST
PROFIT DATE"), shall be deemed to have been sold on such Last Profit Date for
an amount equal to the average of the high and low sale prices of the Common
Stock on such day as reported on the Nasdaq Stock Market. Nothing contained
herein shall limit the right of the Purchasers, in their discretion, to
determine the price or prices at which, or the time or times when, any
Acquired Shares shall be sold, whether or not prior to the Redemption Date
and whether or not for long or short account. Settlement shall occur as soon
as reasonably practicable after the final disposition (or Last Profit Date)
by a Purchaser for all Purchased Shares subject to the terms in this
paragraph.
III.
As compensation to the Purchasers for their commitment hereunder, the Company
will pay to the Purchasers: (i) on the date hereof, an aggregate standby fee
of $461,980 (the "STANDBY FEE"), by wire transfer of Federal or other
immediately available funds, which Standby Fee shall be paid to DLJ on behalf
of the Purchasers and (ii) on the Closing Date, in the event the Purchasers
acquire more than 121,064 Purchased Shares, an amount equal to $0.8348 per
Purchased Share in excess of 121,064 shares (the "TAKE-UP FEE"), by wire
transfer payable in Federal or other immediately available funds to the order
of the Purchasers, which Take-up Fee shall be paid to each Purchaser based on
the number of Purchased Shares actually purchased by such Purchaser in excess
of (a) 60,532 Purchased Shares, in the case of DLJ, (b) 30,266 Purchased
Shares, in the case of
14
▇▇▇▇▇ ▇▇▇▇▇▇▇ and (c) 30,266 Purchased Shares, in the case of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇. At the option of the Purchasers, in lieu of being paid by the Company
the amount referred to in clause (ii) above, the Purchasers may deduct such
amount from the Purchase Price payable pursuant to Article II(a). Each
Purchaser will be entitled to that portion of the Standby Fee based on the
respective percentages set forth in Schedule I, and DLJ agrees to remit such
portions of the Standby Fee to such other Purchasers as soon as practicable
after deducting their portion of the expenses relating to this engagement.
IV.
The obligations of the Company and the several obligations of the
Purchasers hereunder are subject to the condition that the Registration
Statement shall have become effective not later than 5:30 p.m., New York City
time, on the date hereof.
The several obligations of the Purchasers hereunder are subject, in
their sole discretion, to the condition that all representations and
warranties and other statements of the Company herein are, at and as of the
date hereof and the Closing Date, true and correct in all respects (except
for those representations which are made at a specified date, which shall be
true as of such date), and to the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed and to
the following further conditions:
(a) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall be
pending or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing; (ii) there shall not be in effect any
injunction, restraining order or other order of a court or any governmental
agency that prohibits or restrains the Purchasers from converting the
Debentures into Common Stock; (iii) neither the Company nor any subsidiary
shall have incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions not in the ordinary
course of business; (iv) there shall not have been any material adverse
change in the condition, financial or otherwise, or in the earnings,
business, operations, or prospects of the Company and its subsidiaries, taken
as a whole, from that set forth in the Prospectus; and (v) there shall not
have been any material change in the capital stock of the Company or increase
in long-term debt of the Company from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) except for issuances of Common Stock upon conversion of the
Debentures and pursuant to the Plans.
15
(b) At the time of the execution of this Agreement but prior to
the mailing of the Notice of Redemption, the Purchasers shall have received a
certificate, dated as of the date hereof and signed by an executive officer
of the Company satisfactory to you, to the effect that the representations
and warranties of the Company contained in this Agreement are true and
correct as of the date hereof and that the Company has complied with all of
the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the date hereof and to the
effect set forth in paragraph (a).
(c) At the time of the execution of this Agreement but prior to the
mailing of the Notice of Redemption, you shall have received an opinion of
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President and General Counsel of the Company, dated
such date, in form and substance satisfactory to you to the effect that:
(i) (A) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State of
Delaware, has the corporate power and corporate authority to own, lease
and operate its property and to conduct its business as described in the
Prospectus and (B) is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the
ownership or leasing of property requires such qualification except to the
extent that the failure so to qualify or be in good standing would not have
a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and its
subsidiaries, taken as a whole;
(ii) each Significant Subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, has the corporate power
and corporate authority to own, lease and operate its property and to
conduct its business as described in the Prospectus and is duly qualified
to transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be
so qualified or be in good standing would not have a material adverse
effect on the condition (financial or other), business, properties, net
worth or results of operations of the Company and its subsidiaries, taken
as a whole; all of the outstanding shares of capital stock of each of the
Significant Subsidiaries have been duly authorized and are validly issued,
fully paid and non-assessable, and are owned of record and beneficially by
the Company or a subsidiary of the Company (except in the case of foreign
subsidiaries for directors' qualifying shares) free and clear of all liens,
adverse claims,
16
security interests, pledges, charges, encumbrances, stockholders'
agreements and voting trusts, except for pledges made under certain of the
Company's and the Company's subsidiaries' credit agreements;
(iii) all the shares of capital stock of the Company outstanding prior
to the issuance of the Purchased Shares to be issued and sold by the
Company hereunder (including any Additional Shares and other shares of
Common Stock to be issued in connection with Debentures converted in
accordance with the Indenture prior to the Conversion Expiration Time)
have been duly authorized and are validly issued, fully paid and
non-assessable; the Rights under the Rights Agreement attached to the
shares of Common Stock outstanding prior to the issuance of the
Purchased Shares to be issued and sold by the Company hereunder
(including Rights attaching to any Additional Shares and any other shares
of Common Stock to be issued in connection with Debentures converted in
accordance with the Indenture prior to the Conversion Expiration Time)
have been duly authorized and validly issued; to the knowledge of such
counsel, there is no commitment, plan or arrangement to issue,
and no outstanding option, warrant or other right calling for the issuance
of, any share of capital stock of the Company or any of the Company's
subsidiaries to any person or any security or other instrument which by
its terms is convertible into, exercisable for or exchangeable for capital
stock of the Company or any of the Company's subsidiaries, except for the
Debentures, grants made under and in accordance with the Company's
Plans and pursuant to the Rights Agreement and there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to include any securities
of the Company in the Registration Statement;
(iv) the Purchased Shares have been duly authorized and, when issued
and delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and, to the best of such
counsel's knowledge, the issuance of such shares of Common Stock is not
subject to any preemptive or similar rights and the Rights under the Rights
Agreement to which the holders of Purchased Shares will be entitled have
been duly authorized and, upon issuance of such Purchased Shares in
accordance with this Agreement, will be validly issued;
(v) neither the Company nor any of the Significant Subsidiaries is
in violation or breach of, or in default in any material respect with
respect to any term of its articles of incorporation (or other charter
document) or by-laws;
17
(vi) This Agreement has been duly authorized, executed and delivered
by the Company;
(vii)(A) the redemption of the Debentures and conversion thereof in
accordance with the terms of this Agreement and the execution and
delivery by the Company of, and the performance by the Company of its
obligations under, this Agreement and the consummation of the transactions
contemplated hereby, will not contravene (1) the restated Certificate of
Incorporation or By-laws of the Company, or (2) the certificate of
incorporation or by-laws (or other organizational documents) of the
Significant Subsidiaries, or (3) any agreement, contract, bond,
indenture or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries, taken
as a whole or (4), except for any such contraventions that, individually
and in the aggregate, do not have, and would not reasonably be expected
to have, a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the
Company and its subsidiaries, taken as a whole, to the best of such
counsel's knowledge, any statute, law, rule or regulation or any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and (B) no consent,
approval, authorization or order of or qualification with any governmental
body or agency is required for any such actions or for the performance by
the Company of its obligations under this Agreement, except the
registration under the Securities Act of the Common Shares deliverable
upon conversion of the Debentures and upon purchase pursuant to Article II
hereof, and except such consents, approvals, authorizations, orders or
qualifications as may be required under the securities, or Blue Sky, laws
of the various states in connection with the offer and sale of the
Common Shares by the Purchasers;
(viii) the statements in the Registration Statement in Item 15, insofar
as such statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein;
(ix) the Registration Statement has become effective under the
Securities Act; to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission or the securities authority of any jurisdiction;
18
(x) neither the Company nor any of its subsidiaries is an
"investment company" or an entity "controlled" by an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended, or is subject to any law, rule, regulation, order,
judgment or decree which regulates the redemption and conversion of the
Debentures as contemplated herein, the offering or sale of the Common
Shares by the Purchasers (other than the Securities Act, the Exchange
Act, and the Blue Sky, or state securities laws);
(xi) after due inquiry, such counsel does not know of any legal or
governmental proceeding pending or threatened against the Company or any
of its subsidiaries or to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of
its subsidiaries is subject that (A) affects the transactions
contemplated by this Agreement or (B) are required to be described in
the Registration Statement or the Prospectus and are not so described or
of any statutes, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not described or
filed as required;
(xii) (A) each Incorporated Document (except for financial
statements and schedules as to which such counsel need not express any
opinion) complied when filed pursuant to the Exchange Act as to form in
all material respects with the requirements of the Exchange Act and the
applicable rules and regulations of the Commission thereunder and (B)
the Registration Statement and Prospectus and any supplements or
amendments thereto (except for financial statements and schedules
incorporated by reference therein as to which such counsel need not
express any opinion) comply as to form in all material respects with the
Securities Act and the rules and regulations of the Commission
thereunder;
(xiii) The Debentures are convertible into shares of Common Stock
as provided in the Indenture and such shares of Common Stock have been
duly authorized and reserved for issuance upon conversion of the
Debentures and, when issued and delivered upon such conversion in
accordance with the terms of the Indenture, such shares of Common Stock
will be validly issued, fully paid and nonassessable and, to the best
knowledge of such counsel, the issuance of such shares of Common Stock
is not subject to any preemptive or similar rights; and
19
(xiv) The redemption of all of the outstanding Debentures on the
Redemption Date has been duly authorized.
In addition, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President and General Counsel of the
Company, shall state that such counsel participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company and representatives of the
Purchasers at which the contents of the Registration Statement, the
Prospectus and any amendment thereof or supplement thereto, and related
matters were discussed and, although such counsel has not independently
verified and is not passing upon and does not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as otherwise indicated above),
on the basis of the foregoing, no facts have come to the attention of such
counsel which lead them to believe that either the Registration Statement or
any amendment thereto, at the time the Registration Statement or amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein not
misleading or that the Prospectus as of its date or any supplement thereto as
of its date, or the Registration Statement or the Prospectus and any
amendment or supplement thereto as of the date of such opinion 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 therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and schedules and other financial
data included or incorporated by reference in the Registration Statement or
Prospectus).
(d) At the time of the execution of this Agreement but prior
to the mailing of the Notice of Redemption, you shall have received an
opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, outside counsel to the Company, dated such date,
covering the matters referred to in the paragraph immediately following
subparagraph (xiv) of paragraph (c) above and to the effect that the
statements in the Prospectus under the captions "Certain United States
Federal Tax Considerations" and "Description of Common Stock" insofar as such
statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents or proceedings and fairly
summarize the matters referred to therein.
(e) At the time of the execution of this Agreement but prior to the
mailing of the Notice of Redemption, you shall have received an opinion of
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Purchasers, dated such date, covering
the matters referred to in subparagraphs (iv) (as to the Purchased Shares
only), (vi),
20
(ix), clause (B) of (xii) and the paragraph immediately
following subparagraph (xiv) of paragraph (c) above and to the further effect
that statements in the Prospectus under the caption "Standby and Other
Arrangements" insofar as such statements constitute summaries of the legal
matters or documents referred therein, fairly present the information called
for withe respect to such legal matters or documents and fairly summarize the
matters referred to therein. In rendering such opinion, such counsel may
state that their opinion is limited to matters governed by the federal laws
of the United States of America, the laws of the State of New York and the
corporate laws of the State of Delaware.
(f) At the time of the execution of this Agreement and prior to the
mailing of the Notice of Redemption, you shall have received a letter dated
the date hereof, in form and substance satisfactory to you, from Deloitte &
Touche, independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(g) Any certificate signed by an officer of the Company and delivered,
pursuant to this Agreement or in connection with this Agreement and the
transactions contemplated hereby, to you or your counsel shall be deemed a
representation and warranty by the Company to each of you as to the matters
covered thereby.
(h) On the Closing Date, the Purchasers shall have received, in form
and satisfactory to the Purchasers, (i) letters, dated the Closing Date, from
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ to the effect
that they reaffirm the respective opinions set forth in paragraphs (c) (other
than the opinion set forth in clause (xiii) of paragraph (c)) (d) and (e) of
this Article IV, respectively, (ii) an opinion, dated such date, from
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, outside counsel tot he Company, to the effect set forth in
clauses (i)(A), (iv), (vi), (vii) (A)(1) and (B), (viii), (ix), (x), (xi) and
(xii)(B) of paragraph (c) above, (iii) a letter from Deloitte & Touche to the
effect that it reaffirms its statements made in its letter furnished pursuant
to Article IV(g) and (iv) a bring-down certificate dated the Closing Date to
the effect that the Company reaffirms the statements made in its certificate
furnished pursuant to Article IV(b).
If any condition specified in this Article shall not have been fulfilled
when and as required by this Agreement to be fulfilled, this Agreement and
all your obligations hereunder may be canceled by you by notifying the
Company of such cancellation in writing, and any such cancellation shall be
without liability of any
21
party to any other party except as provided in
Article I, Article IV, Article V and Article VII.
V.
In further consideration of the agreements of the Purchasers herein
contained, the Company covenants as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective by 5:30 p.m. (New York City time) on the date
hereof and will advise the Purchasers promptly and, if requested by the
Purchasers, will confirm such advice in writing, when the Company receives
notice (written or oral) that the Registration Statement has become
effective. The Company also will advise the Purchasers promptly and, if
requested by the Purchasers, will confirm such advice in writing: (i) of any
request by the Commission for amendment of or a supplement to the
Registration Statement or the Prospectus or for additional information; and
(ii) upon knowledge thereof, of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Acquired Shares for offering or sale in
any jurisdiction or of the initiation of any proceeding for such purpose. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company, upon knowledge
thereof, will make every reasonable effort to obtain the withdrawal of such
order at the earliest possible time.
(b) To furnish to you, without charge, (i) as many signed and conformed
copies of the Registration Statement (including exhibits thereto and
documents incorporated by reference) as you may reasonably request and (ii)
from time to time during such period after the date hereof as in the opinion
of your counsel the Prospectus is required by law to be delivered in
connection with sales by a Purchaser or dealer, as many copies of the
Prospectus and any supplements and amendments thereto as you may reasonably
request for the purposes contemplated by the Securities Act and the rules and
regulations thereunder. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or Blue Sky laws of
the jurisdictions in which the Acquired Shares are offered by the Purchasers
and by all dealers to whom the Acquired Shares may be sold, both in
connection with the offering and sale of the Acquired Shares and for such
period of time thereafter as the Prospectus is required by the Securities Act
to be delivered in connection with sales by the Purchasers or dealers.
22
(c) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment, or
supplement and to file no such proposed amendment or supplement to which you
reasonably object, unless such amendment or supplement is, in the opinion of
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, required by law, and before or
simultaneous with filing any document which, upon filing, becomes an
Incorporated Document, to furnish to you a copy of each such proposed
Incorporated Document.
(d) If, from the date of effectiveness of the Registration Statement
until the Registration Termination Date any event shall occur or condition
exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of your counsel, it is necessary to amend
or supplement the Prospectus to comply with law, forthwith to prepare, file
with the Commission and furnish, at its own expense, to the Purchasers a
reasonable number of copies of any amendments or supplements to the
Prospectus (in form and substance satisfactory to counsel for the Purchasers)
so that the statements in the Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(e) During the period from the date of effectiveness of the
Registration Statement until the Registration Termination Date, to file in a
timely fashion all documents required to be filed with the Commission
pursuant to Section 13 or 14 of the Exchange Act subsequent to the time the
Registration Statement becomes effective.
(f) To endeavor to qualify the Acquired Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request, to comply with such laws as to permit the continuance of sales and
dealings in such jurisdictions for as long as may be necessary to complete
the distribution of the Acquired Shares; PROVIDED, HOWEVER, that the Company
shall not be required to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action which would subject it to
taxation or service of process in suits, other than those arising out of the
offering or sale of the Acquired Shares, in any jurisdiction where it is not
now so subject; and to pay all expenses (including fees and disbursements of
counsel) in connection therewith.
(g) To make generally available to the Company's security holders and
to you as soon as practicable, but not later than 90 days after the close of
the
23
period covered thereby, an earning statement covering the twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the post-effective amendment to the
Registration Statement notifying the Commission of the shares of Common Stock
which will not be sold by the Purchasers. Upon your request at termination
of the offering, the Company will file such a post-effective amendment with
the Commission that satisfies the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder.
(h) On August 20, 1997, to mail to holders of Debentures a Prospectus
and a notice of redemption complying with the requirements of the Indenture
together with notice of the other rights of the holders of Debentures.
(i) To advise the Purchasers daily, or direct the conversion agent and
redemption agent for the Debentures to advise the Purchasers daily, of the
respective number of Debentures surrendered for conversion into Common Stock
and surrendered for redemption on the preceding day.
(j) Whether or not the transactions contemplated in this Agreement are
consummated, to pay or cause to be paid all expenses incident to the
performance of its obligations under this Agreement, the redemption and
conversion of the Debentures and the authorization, issuance, sale and
delivery of the Common Stock and any expenses or taxes payable in that
connection; the fees and expenses incident to the preparation, printing and
filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto (but not the fees and expenses of counsel to
the Purchasers except as provided below); the costs of distributing the
Registration Statement as originally filed and each amendment and
post-effective amendment thereof (including exhibits), the Prospectus and any
amendment or supplement to the Prospectus or any document incorporated by
reference therein, all as provided in this Agreement, and the costs of
copying this Agreement; the expenses, including printing expenses, in
connection with mailing the Notice of Redemption and related documents and
the publication of the advertisements relating to the redemption, if any; all
costs and expenses of issuance and delivery of the shares of Common Stock
upon conversion of the Debentures, including the fees of the conversion
agent; the reasonable fees and disbursements of the Company's counsel and
accountants; the reasonable fees and expenses of preparing and printing a
Blue Sky Memorandum (including fees and expenses of counsel to the Purchasers
in connection therewith); and the fees and expenses, if any, of listing the
Common Stock on the Nasdaq Stock Market.
(k) The Company hereby agrees that, without the prior written consent
of the Purchasers, it will not, commencing from the date of this Agreement
until
24
the earlier of (a) the Registration Termination Date and (b) (x) 30
days after the Redemption Date if the Purchasers have purchased an aggregate
of 121,064 Purchased Shares or less or (y) 90 days after the Redemption Date
if the Purchasers have purchased more than 121,064 Purchased Shares: (i)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (ii) enter into any swap or
other arrangement that transfers all or a portion of the economic
consequences associated with the ownership of any Common Stock (regardless of
whether any of the transactions described in clause (i) or (ii) is to be
settled by delivery of Common Stock, or other such securities, in cash or
otherwise). The foregoing sentence shall not apply to (A) sales to the
Purchasers pursuant to this Agreement, (B) any shares of such Common Stock
issued by the Company upon the exercise of an option or warrant or the
conversion of a security (including, without limitation, the Debentures)
outstanding on the date hereof, (C) the grant of options pursuant to the
Company's stock option plans or the issuance of Common Stock pursuant to the
Company's employee stock purchase plan, and (D) from and after the
Redemption Date, Common Stock of the Company or any security convertible into
or exercisable or exchangeable for Common Stock of the Company issued in a
private placement to the seller in connection with any acquisition by the
Company or any of its subsidiaries.
(l) If the transactions contemplated in this Agreement are not
consummated, the Company will also reimburse the Purchasers for all of the
Purchasers' out-of-pocket expenses reasonably incurred in connection
herewith, including fees and expenses of counsel to the Purchasers.
VI.
The Company agrees to indemnify and hold harmless each Purchaser, the
officers and directors of each Purchaser and each person, if any, who
controls any Purchaser within the meaning of Section 15 of the Act or Section
20 of Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any reasonable
legal or other expenses incurred in connection with investigating or
defending any matter, including any action, that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the Prospectus (or any
amendment or supplement thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar
25
as such losses, claims, damages, liabilities or judgments are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Purchaser furnished in writing to the
Company by such Purchaser through you expressly for use therein.
Each Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to such Purchaser but
only with reference to information relating to such Purchaser furnished in
writing to the Company by such Purchaser through you expressly for use in the
Registrat ion Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto).
In case any action shall be commenced involving any person in respect of
which indemnity may be sought pursuant to the first or second paragraph of
this Article VI (the "INDEMNIFIED PARTY"), the indemnified party shall
promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party shall assume the
defense of such action, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of all fees and
expenses of such counsel, as incurred (except that in the case of any action
in respect of which indemnity may be sought pursuant to both the first
paragraph and the second paragraph of this Article VI, the Purchaser shall
not be required to assume the defense of such action pursuant to this
paragraph, but may employ separate counsel and participate in the defense
thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of such Purchaser). Any indemnified party shall
have the right to employ separate counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the indemnified party unless (i) the employment of such
counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the
indemnifying party, and the 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
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of the indemnified party). In any such
case, the indemnifying party shall not, in connection with any one action or
separate but substantially similar or related
26
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, in the case of parties indemnified
pursuant to the first paragraph of this Article VI, and by the Company, in
the case of parties indemnified pursuant to the second paragraph of this
Article VI. The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with its wri tten consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party
shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in
respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
on claims that are or could have been the subject matter of such action and
(ii) does not include a statement as to or an admission of fault, culpability
or a failure to act, by or on behalf of the indemnified party.
To the extent the indemnification provided for in this Article VI is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Purchasers on the other hand from the
transactions contemplated by this Agreement 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 on
the one hand and the Purchaser on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Purchasers on the other
27
hand in connection with the transactions contemplated by this Agreement
shall be deemed to be in the same respective proportions as the aggregate
Redemption Price of the Debentures outstanding on the date of this Agreement
bears to the total compensation required by the Purchasers pursuant to
Article III of this Agreement. The relative fault of the Company on the one
hand and the Purchasers on the other hand 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 or the Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this Article VI were determined by pro
rata allocation (even if the Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Article VI, no Purchaser shall be required to contribute any amount in excess
of the amount of compensation such Purchaser receives pursuant to Article III
of this Agreement. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Purchasers' obligations to contribute pursuant to this Article VI are several
in proportion to the respective percentages listed on Schedule I and not
joint.
The remedies provided for in this Article VI are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Article VI
and the representations and warranties of the Company contained in this
Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Purchaser, the officers and directors of any Purchaser or any
person controlling any Purchaser or by or on behalf of the Company, its
officers or directors or any person controlling the Company, (iii) delivery
of the Common Stock upon
28
conversion of the Debentures and (iv) purchase of
the Common Stock pursuant to Article II hereof.
VII.
Prior to the time the Company mails notice of the redemption of the
Debentures, this Agreement may be terminated by the Company by written notice
to the Purchasers, or by the Purchasers by written notice to the Company.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment,
is material and adverse and, in your judgment, makes it impracticable to
proceed with the purchases of and payment for the Debentures or the Common
Stock, the conversion of the Debentures into Common Stock or the resale of
the Common Stock by the Purchasers (ii) the suspension or material limitation
of trading in securities or other instruments on the New York Stock Exchange,
the American Stock Exchange, the Chicago Board of Options Exchange, the
Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq
National Market or limitation on prices for securities or other instruments
on any such exchange or the Nasdaq National Market, (iii) the suspension of
trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in your opinion materially
and adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking
of any action by any federal, state or local government or agency in respect
of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
VIII.
This Agreement shall become effective upon the later of (x) execution
and delivery hereof by the parties hereto and (y) release of notification of
the effectiveness of the Registration Statement by the Commission.
If, on the Closing Date, any of the Purchasers shall fail or refuse to
purchase Common Stock that it has agreed to purchase hereunder on such date,
29
and the aggregate number of shares of Common Stock which such defaulting
Purchaser(s) agreed but failed or refused to purchase is not more than one
tenth of the aggregate number of shares of Common Stock to be purchased on
such date, the non-defaulting Purchaser(s) may make arrangements satisfactory
to the Company for the purchase of such Common Stock by other persons,
including the non-defaulting Purchaser(s), but if no such arrangements are
made by the close of business on the Closing Date, the non-defaulting
Purchaser(s) shall be obligated to purchase the Common Stock that such
defaulting Purchaser(s) agreed but failed to purchase. If on the Closing
Date, any Purchaser(s) shall either fail or refuse to purchase Common Stock
and the aggregate number of shares of Common Stock with respect to which such
default occurs is more than one-tenth of the aggregate number of shares of
Common Stock to be purchased on such date, and arrangements satisfactory to
you and the Company for the purchase of such shares of Common Stock are not
made prior to the close of business on the Redemption Date, this Agreement
shall terminate without liability on the part of any non-defaulting
Purchaser(s). Any action taken under this paragraph shall not relieve any
defaulting Purchaser(s) from liability in respect of any default of such
Purchaser(s) under this Agreement.
If this Agreement shall be terminated by the Purchasers, or any of them,
because of any failure or refusal on the part of the Company to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Purchasers or such Purchasers as
have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the reasonable fees and disbursements
of their counsel) reasonably incurred by such Purchasers in connection with
this Agreement and the transactions contemplated hereunder.
Notices given pursuant to any provision of this Agreement shall be
addressed as follows: (i) if to the Company, to Varlen Corporation, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇. Box 3089, Naperville, Illinois, 60566-7089, Attention:
General Counsel and (ii) if to any Purchaser to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
Syndicate Department, or in any case to such other address as the person to
be notified may have requested in writing.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Purchasers, the
Purchasers' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company officers who sign the
Registration Statement and their respective successors and assigns, all as
and to the extent
30
provided in this Agreement, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Acquired Shares from any
of the several Purchasers merely because of such purchase.
This Agreement may be signed in two or more counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
This Agreement shall be governed by and construed in connection with the
internal laws of the State of New York.
Very truly yours,
VARLEN CORPORATION
By: _________________________
Name:
Title:
Accepted, August [ ], 1997
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & CO. INCORPORATED
By: ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
By: _____________________________
Name:
Title:
31
SCHEDULE I
PURCHASERS
Purchaser Percentage
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation . . . . . . . 50%
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. . . . . . . . . . . . . . . . . . . . . . . . 25%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated.. . . . . . . . . . . . . . . 25%
------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
======
32
SCHEDULE II
SIGNIFICANT SUBSIDIARIES
Brenco, Incorporated
Chrome Crankshaft Co.
Chrome Crankshaft Company of Illinois
Consolidated Metco, Inc.
Keystone Industries, Inc.
Means Industries Inc.
Prime Manufacturing Corporation
Unit Rail Anchor Company, Inc.
Varlen Instruments Inc.
33
