SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 3,1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-5374
VARLEN CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
13-2651100
(I.R.S. Employer Identification No.)
55 Shuman Boulevard, P.O. Box 3089
Naperville, Illinois
(Address of principal executive offices)
60566-7089
(Zip Code)
Registrant's telephone number including area code
(630) 420-0400
Indicate by check whether the registrant (1) has filed all
reports required to be filed by Section 13 or
15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
At September 1, 1996, approximately 5,754,000 shares, par value
$.10 per share, of common stock of the Registrant were
outstanding.
PART I. FINANCIAL STATEMENTS
VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Thousands of Dollars)
August 3, January 31,
1996 1996
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and short-term investments 2,704 22,915
Accounts receivable, less allowance for doubtful 58,989 43,297
accounts of $1,733 and $1,318
Inventories:
Raw materials 21,086 18,230
Work in process 19,177 8,760
Finished goods 13,586 9,501
53,849 36,491
Deferred and refundable income taxes 5,737 4,344
Other current assets 10,058 4,467
Total current assets 131,337 111,514
Property, plant, and equipment 197,021 137,279
Less: accumulated depreciation 68,631 67,604
128,390 69,675
Goodwill and other intangible assets, net 122,534 42,837
Investments and other assets 6,437 6,848
388,698 230,874
Liabilities and Stockholders' Equity
Current maturities of long-term debt 65 87
Accounts payable 27,962 20,954
Accrued expenses 31,787 22,313
Income taxes payable 828 1,116
Total current liabilities 60,642 44,470
Long-term debt:
Convertible subordinated debentures 69,000 69,000
Other long-term debt 117,009 4,398
Total long-term debt (notes 2 and 5) 186,009 73,398
Deferred income taxes 16,293 4,539
Other liabilities 21,533 10,514
Common stock 577 541
Other stockholders' equity (notes 7 and 8) 103,644 97,412
388,698 230,874
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended
August 3, July29, August 3, July 29,
1996 1995 1996 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net sales 91,025 97,753 183,000 204,722
Cost of sales 68,546 73,675 136,724 153,286
Gross profit 22,479 24,078 46,276 51,436
Selling, general and
administrative expenses 14,093 14,129 28,347 29,418
Gain on sale of business
(note 6) 3,730 --- 3,730 ---
Interest expense, net 1,426 1,219 2,479 2,392
Earnings before income taxes 10,690 8,730 19,180 19,626
Income taxes 4,790 3,797 8,458 8,537
Net earnings 5,900 4,933 10,722 11,089
Earnings per share (note 7):
Primary 0.98 0.80 1.77 1.81
Fully diluted 0.73 0.60 1.33 1.35
Weighted average number of
shares outstanding - primary
(note 7) 6,016 6,145 6,054 6,116
Weighted average number of
shares outstanding - fully
diluted (note 7) 9,070 9,200 9,109 9,189
Dividends per common share
(note 7) 0.09 0.09 0.18 0.17
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Thousands of Dollars)
Six Months Ended
August 3, July 29,
1996 1995
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
<S> <C> <C>
Cash flows from operating activities:
Net earnings 10,722 11,089
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 6,286 5,989
Amortization 1,105 1,215
Deferred income taxes 354 261
Gain on sale of business (note 6) (3,730) ---
Change in assets and liabilities
net of effects from purchased and
sold businesses:
Accounts receivable, net 923 2,972
Inventories (3,113) 440
Refundable income taxes --- 8
Other current assets (165) 52
Accounts payable 4,306 (2,015)
Accrued expenses (2,877) (2,544)
Income taxes payable 1,793 (896)
Other noncurrent assets (159) 983
Other noncurrent liabilities 830 624
Total adjustments 5,553 7,089
Net cash provided by operating activities 16,275 18,178
Cash flows from investing activities:
Fixed asset expenditures (9,762) (14,205)
Cost of purchased business, net of
cash acquired (143,259) (1,003)
Proceeds from the sale of investments 4,294 ---
Sale of business 12,474 7,949
Disposals and other changes in
property, plant and equipment 189 315
Net cash used in investing activities (136,064) (6,944)
Cash flows from financing activities:
Proceeds from debt 105,184 86
Payments of debt (1,393) (43)
Issuance of common stock under option
plans 49 383
Cash received on stock subscriptions 78 155
Purchase of treasury stock (3,241) ---
Cash dividends paid (1,049) (1,022)
Net cash provided by/(used in)
financing activities 99,628 (441)
Effect of exchange rate changes on cash (50) 125
Net (decrease)/increase in cash and
short-term investments (20,211) 10,918
Cash and short-term investments at
beginning of year 22,915 13,096
Cash and short-term investments at
end of period 2,704 24,014
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The unaudited condensed consolidated financial statements of
Varlen Corporation (the "Company") included herein have been
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. In the opinion of the
Company, all adjustments which are considered necessary for
a fair presentation of the results for the interim periods
presented and the balance sheet at August 3, 1996 have been
made. These financial statements, which are condensed and do
not include all disclosures included in annual financial
statements, should be read in conjunction with the
consolidated financial statements and notes thereto included
in the Company's latest annual report on Form 10-K.
2. Long-term debt at period end is comprised of the following
(in thousands):
<TABLE>
<CAPTION>
August 3, January 31,
1996 1996
<S> <C> <C>
Revolving credit facility - term portion 100,000 -
Revolving credit facility - revolving
portion 5,100 -
6.5% convertible debenturesdue 2003 69,000 69,000
Industrial revenue bonds and other debt 11,974 4,485
186,074 73,485
Less current maturities (65) (87)
Long-term debt 186,009 73,398
</TABLE>
On July 19, 1996, the Company entered into a $190 million
term loan and revolving credit agreement (the "Agreement)
which replaced its $80 million revolving credit facility.
This Agreement was obtained to facilitate the Brenco,
Incorporated acquisition as well as future acquisitions.
The Agreement is in the form of two facilities. Facility
"A" is a term-loan with a total capacity of $135 million and
facility "B" is a revolving credit facility with a $55
million capacity. The term-loan comes due on July 19, 2002
and requires escalating quarterly principal payments
beginning in October 1996. The revolving credit facility
requires no prepayments and comes due on July 19, 2002 with
two optional one year extensions. The Agreement provides
for interest at one of three market interest rates selected
by the Company plus an applicable margin which is dependent
upon the market interest rate chosen and the relationship of
debt to cash flow. The highest interest rate under the
Agreement was the prime rate with maximum commitment fees of
3/8 of 1% on the unused portion of the line of credit. The
average rate on the Agreement borrowings at August 3, 1996
was 6.76%.
The Agreement contains provisions which require the Company
to maintain specified levels of net worth and comply with
various financial ratios and includes, among other
provisions, restrictions on leases, investments, dividend
payments and the incurrence of additional indebtedness.
Scheduled repayments for the term loan for fiscal 1996 and
in each of the next four fiscal years are $3,000,000,
$7,000,000, $10,000,000, $16,000,000 and $22,000,000. The
term loan repayments due in the next twelve months are
classified as long-term on the condensed consolidated
balance sheet as the Company has the ability and intent
to refinance these repayments under the facility "B" portion
of the Agreement.
3. Supplemental Cash Flow Information
(in thousands):
<TABLE>
<CAPTION>
August 3, July 29,
1996 1995
<S> <C> <C>
Cash paid during the year-
to-date period for:
Interest 2,470 2,481
Income taxes (net) 6,204 9,683
Purchase of business:
Fair value of assets acquired 201,785
Cash paid, net of cash acquired 143,259
Liabilities assumed 58,526
</TABLE>
4. Business Segment Information
(in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales:
Transportation products 79,604 78,834 157,193 163,969
Analytical instruments 11,421 18,919 25,807 40,753
91,025 97,753 183,000 204,722
Operating profits (1):
Transportation products 8,566 9,551 17,507 20,289
Analytical instruments (2) 4,811 1,706 6,845 4,549
13,377 11,257 24,352 24,838
<FN>
(1) Before interest and general corporate expenses.
(2) The 1996 amounts include a $3,730,000 gain on the sale of the
laboratory appliance division of Precision Scientific,Inc.
</TABLE>
5. Acquisition:
On June 15, 1996, the Company, a wholly-owned subsidiary of
the Company and Brenco, Incorporated ("Brenco"), a
manufacturer and reconditioner of specialized tapered roller
bearings for the railroad industry with headquarters in
Virginia, entered into an acquisition agreement for the
purchase of all of Brenco's outstanding common stock for
$16.125 per share. As a result of the tender offer which
expired on July 18, 1996, the Company owned approximately 96%
of the outstanding common stock of Brenco. On August 23,
1996, the remaining non-tendered shares were canceled and
converted into the right to receive $16.125 per share, making
Brenco a wholly-owned subsidiary of the Company. The total
purchase price for the common stock of Brenco was
approximately $165 million in cash and was financed within a
$190 million credit facility from the Company's existing bank
group plus cash on hand. Brenco had sales of approximately
$127 million in 1995 with net earnings of approximately $10.7
million. The acquisition is being accounted for under the
purchase method of accounting with the excess of the purchase
price to the net assets acquired amortized over 40 years. The
purchase price has been allocated to the net assets acquired
on a preliminary basis pending the completion of an asset
appraisal and other valuation procedures. The pro-forma
financial information giving effect to this acquisition will
be included in the Company's report on Form 8-K/A to be filed
on or about October 1, 1996.
6. Divestitures:
On July 30, 1996, the Company sold its laboratory
appliance division of its Precision Scientific, Inc.
subsidiary, a manufacturer of research laboratory appliances
for approximately $12.0 million net of selling costs. This
sale resulted in a gain of $3,730,000 ($2,100,000 after-tax)
or $.23 per fully diluted share. Net sales from this entity
for the first half of fiscal 1996 and 1995 were
approximately $8.6 million and $10.7 million, respectively,
and were $4.0 million and $5.1 million, respectively, for
the second quarter of fiscal 1996 and 1995.
On July 18, 1995, the Company sold its National Metalwares,
Inc. subsidiary, a maker of tubular steel components for
manufacturers of consumer durables, to a private investment
group for approximately $8.5 million in cash less selling
costs. Net sales from this subsidiary for 1995 through the
date of sale and for the second quarter through the date of
sale were approximately $11.0 million and $4.6 million,
respectively.
7. Stock Dividend:
On May 29, 1996, the Company's Board of Directors declared a
10% stock dividend payable on July 15, 1996 to stockholders of
record on July 1, 1996. The stock dividend increased the
Company's common shares outstanding from approximately
5,230,000 to approximately 5,753,000 at July 15, 1996. The
earnings per share, weighted average number of shares
outstanding and dividends per common share amounts for all
periods of financial information contained herein reflect this
stock dividend.
8. Stock Purchase:
On January 4, 1996, the Company's Board of Directors
authorized the purchase of up to 500,000 shares of its
Common Stock or the equivalent amount of its 6 1/2 percent
convertible subordinated debentures by the Company. As of
August 3, 1996, 181,000 shares (before restatement for the
1996 10% stock dividend) of the Company's Common Stock
have been purchased under this authorization and have been
reissued as part of the 1996 10% stock dividend.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX-MONTH PERIOD
ENDED AUGUST 3, 1996
Overview
The Company designs, manufactures, and markets a diverse
range of products in its transportation products and analytical
instruments business segments. These products are marketed to
the railroad, heavy duty truck and trailer, automotive, and
petroleum industries. The demand for the Company's products by
certain of these industries is affected by economic conditions in
the United States and abroad. The Company's manufacturing
operations have a significant fixed cost component. Accordingly,
during periods of changing product demand the profitability of
many of the Company's operations may change proportionately more
than revenues of such operations.
Results of Operations
The Company's sales in the six months ended August 3, 1996
were $183.0 million or 10.6% less than the $204.7 million
achieved in the first six months of 1995. Sales decreased in
both the transportation products segment and the analytical
instruments segment with the largest decrease being in the
analytical instruments segment. For the second quarter of 1996,
sales were $91.0 million, down $6.7 million or 6.9% from sales of
$97.8 million in the comparable 1995 period. Sales increased
slightly in the transportation segment during the quarter while
sales declined in the analytical instruments segment. On July
18, 1996, the Company acquired 96% of the stock of Brenco,
Incorporated ("Brenco"). Accordingly, the proportionate share of
revenues and earnings has been included since that date in the
transportation segment.
Net earnings for the first six months of 1996 decreased to
$10.7 million from $11.1 million in 1995's first half. Earnings
per share for the first six months in 1996 were $1.33 per share
on a fully diluted basis which compared to $1.35 per share fully
diluted in the comparable 1995 period. All per share amounts
reflect a 10% stock dividend paid on July 15, 1996 to
stockholders of record on July 1, 1996. The effects of foreign
currency translation were not material in the 1996 periods.
During the second quarter ended August 3, 1996, net earnings
increased to $5.9 million from $4.9 million in the same 1995
quarter. Earnings per share were $.73 on a fully diluted basis
for the second quarter of 1996 compared to $.60 per share on a
fully diluted basis in the equivalent 1995 period. On July 30,
1996, the Company sold the laboratory appliance division of its
Precision Scientific, Inc. subsidiary for $12.0 million net of
selling costs resulting in a pretax gain of approximately $3.7
million, or $.23 per fully diluted share during the second
quarter of 1996. The second quarter of 1995 reflected a $200,000
pretax loss, or $.01 per fully diluted share, on the sale of a
business during that quarter. Operating profit declined in the
transportation products and analytical instruments segments,
excluding the effects of disposals, in both the six-month period
and quarter ended August 3, 1996 compared to the comparable 1995
period.
On a business segment basis, revenues in the transportation
products segment for the quarter and six months ended August 3,
1996 were $79.6 million and $157.2 million, respectively, as
compared to $78.8 million and $164.0 million in the comparable
prior year periods. During the year-to-date period, sales
declined in all three transportation businesses, excluding the
effect of the acquisition of Brenco. However, during the second
quarter, sales increased at the automotive business while
declining elsewhere excluding Brenco. Operating profit in the
first six months of 1996 was $17.5 million (11.1% of segment
sales), down 13.7% from $20.3 million (12.4% of segment sales) in
the prior year first half. Similarly, operating profit in the
1996 second quarter declined 10.3% to $8.6 million (10.8% of
segment sales) compared to $9.6 million (12.1% of segment sales)
in the comparable 1995 period.
Sales to the heavy-duty truck and trailer industry were
lower in the 1996 periods than in the prior year. The Company's
decline in sales was less than the industry decline due to
stronger than industry production by the Company's largest
customer as well as shipments under a contract to produce
components for a customer's new truck model. Sales to the
automotive industry declined slightly in the first half of 1996
but increased slightly during the second quarter as industry
conditions were relatively level. Excluding sales at Brenco,
sales at the Company's railroad products business declined in
both the quarterly and year-to-date periods compared to last year
as a result of reduced industry demand which appeared to result
from a decrease in locomotive and freight car builds compared to
the same periods in 1995 and railroad mergers. Operating profits
followed the sales trends except in the automotive business where
earnings were up in both the quarterly and year-to-date 1996
periods compared to last year.
Sales in the analytical instruments segment for the quarter
and six months ended August 3, 1996, decreased to $11.4 million
and $25.8 million, respectively, compared to $18.9 million and
$40.8 million in the 1995 periods. The decrease in revenues in
this segment resulted primarily from the sale of a business in
this segment in the second quarter of 1995 and to a lesser degree
decreased sales of laboratory appliances and petroleum analyzers.
Operating profit for the analytical instruments segment for
the first six months of 1996 increased to $6.8 million (26.5% of
segment sales) compared to $4.5 million (11.2% of segment sales)
in the prior year's period. For the 1996 second quarter,
operating profit increased to $4.8 million (42.1% of segment
sales) compared to $1.7 million (9.0% of segment sales) in the
prior year's quarter. Excluding the $3.7 million pretax gain on
sale in 1996, quarterly and year-to-date earnings were down
compared to the prior year's equivalent periods. In the 1995
second quarter period, operating profit was negatively affected
by a $200,000 loss on the sale of a business. Excluding the
businesses sold in 1995 and 1996, earnings declined due to
depressed sales of petroleum analyzers.
Consolidated gross margin in the first six months increased
slightly to 25.3% in 1996 from 25.1% in 1995, and during the
second quarter consolidated gross margin also increased slightly
to 24.7% in 1996 from 24.6% in 1995. Gross margin percentages
increased during these periods at the analytical instruments
segment due to the disposition of a low gross margin business in
1995 but declined in the transportation segment as truck and rail
margin declines more than offset automotive margin increases.
Selling, general, and administrative expenses of $28.3
million or 15.5% of sales in the first six months of 1996
compared to $29.4 million or 14.4% of sales in the comparable
1995 period. During the second quarter of 1996, selling,
general, and administrative expenses were $14.1 million or 15.5%
of sales compared to $14.1 million or 14.5% of sales in the prior
year's comparable period. In both segments, selling, general, and
administrative expenses during the quarter and six-month periods
increased as a percent of sales from 1995 to 1996 while they were
similar dollar amounts in each period after considering
acquisitions and dispositions. Selling, general and
administrative expenses did not decline proportionately to sales.
Gross interest expense for the quarter and six months ended
August 3, 1996 was $1.6 million and $2.9 million, respectively,
compared to $1.4 million and $2.7 million for the prior year's
comparable periods. The increase in gross interest expense is a
result of borrowings late in the 1996 second quarter to finance
the acquisition of Brenco.
Income taxes were provided at an effective rate during the
second quarter and first six months of 1996 of 44.8% and 44.1%
compared to 43.5% in both the comparable 1995 periods. The
higher than statutory federal rate reflects non-deductible
goodwill amortization, including that associated with the Brenco
acquisition, higher taxes on foreign operations and state income
taxes.
Capital Resources and Liquidity
During the second quarter and six-month periods ended August
3, 1996, the Company generated $11.7 and $16.3 million,
respectively, of cash from operating activities. As of August 3,
1996, the Company's working capital was $70.7 million, total
assets were $388.7 million, total debt, excluding current
portion, was $186.0 million and stockholders' equity was $104.2
million. These amounts reflect a preliminary estimated purchase
cost allocation of Brenco which is subject to change based on
appraisals and other valuations.
Investing activities during the second quarter and six-month
periods ended August 3, 1996 included the acquisition of Brenco
for $143.3 million, net of cash acquired, and capital
expenditures of $4.8 million and $9.8 million, respectively.
These capital expenditures were primarily for machinery and
equipment to support new products and to improve operating
efficiency.
On July 19, 1996, the Company entered into a $190 million term l
oan and revolving credit agreement which replaced the prior $80
million revolving credit facility. This new agreement was
obtained to facilitate the Brenco acquisition as well as for
other future acquisitions. At August 3, 1996, $105.1 million was
borrowed under the facility. The Company believes that
internally generated funds will be sufficient to satisfy its
anticipated working capital needs, capital expenditures, and
scheduled debt repayments.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3(ii) - By-law Amendments Dated as of June 17, 1996.
Exhibit 4(a) - Rights Agreement Dated as of June 17, 1996.
Exhibit 4(b) - Credit Agreement by and among Varlen
Corporation, the Borrowing Subsidiaries and Lenders Party
Hereto and The First National Bank of Chicago as Agent
Dated July 19, 1996.
Exhibit 10 - Form of Indemnification Agreement Dated as of June 17, 1996.
Exhibit 11 - Computation of Per Share Earnings.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
During the second quarter of 1996, the Registrant filed a Form
8-K for the acquisition of Brenco, Incorporated dated July
18, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Varlen Corporation
(Registrant)
September 16, 1996 By: /s/ Richard A. Nunemaker
Richard A. Nunemaker
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
EXHIBIT INDEX
Exhibit No. Page No.
3 (ii) By-law Amendments Dated as of June 17, 1996. 14
4 (a) Rights Agreement Dated as of June 17, 1996. 24
4 (b) Credit Agreement By and Among Varlen Corporation, the
Borrowing Subsidiaries and Lenders party Hereto and the
First National Bank of Chicago as Agent Dated July
19,1996. 77
10 Form of Indemnification Agreement Dated as of
June 17, 1996. 183
11 Computation of Per Share Earnings 198
27 Financial Data Schedule 200
VARLEN CORPORATION AND SUBSIDIARIES
Exhibit 11
Computation of Per Share Earnings
Unaudited
(Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended
8/3/96 7/29/95 8/3/96 7/29/95
<TABLE>
<CAPTION>
Primary Earnings Per Share:
<S> <C> <C> <C> <C>
Net earnings 5,900 4,933 10,722 11,089
Computation of the Weighted Average
Number of Shares Outstanding as
Used in the Primary Earnings Per
Share Computation:
Weighted average number of shares
outstanding 5,774 5,908 5,814 5,900
Shares assumed issued under the
treasury stock method 242 237 240 216
Weighted average number of shares
outstanding, as adjusted 6,016 6,145 6,054 6,116
Primary Earnings Per Share: 0.98 0.80 1.77 1.81
Fully Diluted Earnings Per Share:
Reconciliation of net earnings per
the condensed consolidated financial
statements to the amount used for
the fully diluted computation:
Net earnings 5,900 4,933 10,722 11,089
Add interest on 6.5% convertible
subordinated debentures, net of
income tax effects 680 682 1,383 1,341
Net earnings, as adjusted 6,580 5,615 12,105 12,430
Computation of the Weighted Average
Number of Shares Outstanding as
Used in the Fully Diluted Earnings
Per Share Computation:
Weighted average number of shares
outstanding 5,774 5,908 5,814 5,900
Shares assumed issued under the
treasury stock method 241 237 240 234
Shares issuable from assumed
exercise of 6.5% convertible
subordinated debenture 3,055 3,055 3,055 3,055
Weighted average number of shares
outstanding, as adjusted 9,070 9,200 9,109 9,189
Fully Diluted Earnings Per Share: 0.73 0.60 1.33 1.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE SECOND QUARTER
1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> AUG-03-1996
<CASH> 2704
<SECURITIES> 0
<RECEIVABLES> 58989
<ALLOWANCES> 0
<INVENTORY> 53849
<CURRENT-ASSETS> 131337
<PP&E> 197021
<DEPRECIATION> 68631
<TOTAL-ASSETS> 388698
<CURRENT-LIABILITIES> 60642
<BONDS> 186009
0
0
<COMMON> 577
<OTHER-SE> 103644
<TOTAL-LIABILITY-AND-EQUITY> 388698
<SALES> 183000
<TOTAL-REVENUES> 183000
<CGS> 136724
<TOTAL-COSTS> 136724
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2919
<INCOME-PRETAX> 19180
<INCOME-TAX> 8458
<INCOME-CONTINUING> 10722
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10722
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.33
</TABLE>
RESOLVED, that Article VII, Section 4, of the by-laws
entitled "Indemnification" is hereby vacated and
repealed and Article VII, Section 4 is hereby approved
and adopted to read in its entirety as follows:
Director and Officer Indemnification
SECTION 4. Indemnification.
(A) Right to Indemnification.
The Corporation shall indemnify and hold harmless,
to the fullest extent permitted by applicable law as
it presently exists or may hereafter be amended, any
person (an "Indemnitee") who was or is made or is
threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he, or a
person for whom he is the legal representative, is
or was a director or officer of the Corporation or,
while a director or officer of the Corporation, is
or was serving at the request of the Corporation as
a director, officer, employee or agent of another
corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans,
against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by
such Indemnitee. Notwithstanding the preceding
sentence, except as otherwise provided in Section
4(C) hereof, the Corporation shall be required to
indemnify an Indemnitee in connection with a pro
ceeding (or part thereof) commenced by such
Indemnitee only if the commencement of such
proceeding (or part thereof) by the Indemnitee was
authorized by the Board of Directors of the Corpora
tion.
(B) Prepayment of Expenses.
The Corporation shall pay the expenses (including
attorneys' fees) incurred by an Indemnitee in
defending any proceeding in advance of its final
disposition, provided, final disposition of the
proceeding shall be made only upon receipt of an
undertaking by the Indemnitee to repay all amounts
advanced if it should be ultimately determined that
the Indemnitee is not entitled to be indemnified
under this Section 4 or otherwise.
(C) Claims.
If a claim for indemnification or payment of
expenses under this Section 4 is not paid in full
within sixty days after a written claim therefor by
the Indemnitee has been received by the Corporation,
the Indemnitee may file suit to recover the unpaid
amount of such claim and, if successful in whole or
in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the
Corporation shall have the burden of proving that
the Indemnitee is not entitled to the requested
indemnification or payment of expenses under
applicable law.
(D) Nonexclusivity of Rights.
The rights conferred on any Indemnitee by this
Section 4 shall not be exclusive of any other rights
which such Indemnitee may have or hereafter acquire
under any statute, provision of the Certificate of
Incorporation, these by-laws, agreement, vote of
stockholders or disinterested directors or
otherwise.
(E) Other Sources.
The Corporation's obligation, if any, to indemnify
or to advance expenses to any Indemnitee who was or
is serving at its request as a director, officer,
employee or agent of another corporation,
partnership, joint venture, trust, enterprise or
nonprofit entity shall be reduced by any amount such
Indemnitee may collect as indemnification or
advancement of expenses from such other corporation,
partnership, joint venture, trust, enterprise or
nonprofit enterprise.
(F) Amendment or Repeal.
Any repeal or modification of the foregoing
provisions of this Section 4 shall not adversely
affect any right or protection hereunder of any
Indemnitee in respect of any act or omission
occurring prior to the time of such repeal or
modification.
(G) Other Indemnification and Prepayment of
Expenses.
This Section 4 shall not limit the right of the
Corporation, to the extent and in the manner
permitted by law, to indemnify and to advance
expenses to persons other than Indemnitees when and
as authorized by appropriate corporate action.
RESOLVED, that Article I, Section 8, of the by-laws
entitled "Counting Written Consents Inspectors" is
hereby vacated and repealed and Article I, Section 8, is
hereby approved and adopted to read in its entirety as
follows:
SECTION 8. Consent of Stockholders in Lieu of
Meeting.
(A) Any action required to be taken at any annual
or special meeting of stockholders of the
Corporation, or any action which may be taken at
any annual or special meeting of the stockholders,
may be taken without a meeting, without prior
notice and without a vote, if a consent or consents
in writing, setting for the action so taken, shall
be signed by the holders of outstanding stock
having not less than the minimum number of votes
that would be necessary to authorize or take such
action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its
registered office in Delaware, its principal place
of business, or an officer or agent of the
Corporation having custody of the book in which
proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's
registered office shall be made by hand or by
certified or registered mail, return receipt
request.
(B) Every written consent shall bear the date of
signature of each stockholder who signs the consent
and no written consent shall be effective to take
the corporate action referred to therein unless,
within sixty (60) days of the date the earliest
dated consent is delivered to the Corporation, a
written consent or consents signed by a sufficient
number of holders to take action are delivered to
the Corporation in the manner prescribed in
paragraph (C) of this Section.
(C) In order that the Corporation may determine
the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of
Directors may fix a record date, which record date
shall not precede the date upon which the
resolution fixing the record date is adopted by the
Board of Directors, and which date shall not be
more than ten (10) days after the date upon which
the resolution fixing the record date is adopted by
the Board of Directors. Any stockholder of record
seeking to have the stockholders authorize or take
corporate action by written consent shall, by
written notice to the Secretary, request the Board
of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within
ten (10) days after the date on which such a
request is received, adopt a resolution fixing the
record date. If no record date has been fixed by
the Board of Directors within ten (10) days of the
date on which such a request is received, the
record date for determining stockholders entitled
to consent to corporate action in writing without a
meeting, when no prior action by the Board of
Directors is required by applicable law, shall be
the first date on which a signed written consent
setting forth the action taken or proposed to be
taken is delivered to the Corporation in accordance
with paragraphs (A) and (B) of this Section. If no
record date has been fixed by the Board of
Directors and prior action by the Board of
Directors is required by applicable law, the record
date for determining stockholders entitled to
consent to corporate action in writing without a
meeting shall be at the close of business on the
date on which the Board of Directors adopts the
resolution taking such prior action.
(D) Within five (5) business days after receipt of
the earliest dated consent delivered to the
Corporation in the manner provided in this Section,
the Corporation, shall retain nationally recognized
independent inspectors of elections for the
purposes of performing a ministerial review of the
validity of consents and any revocations thereof.
The cost of retaining inspectors of election shall
be borne by the Corporation.
(E) At any time that stockholders soliciting
consents in writing to corporate action have a good
faith belief that the requisite number of valid and
unrevoked consents to authorize or take the action
specified has been received by them, the consents
shall be delivered by the soliciting stockholders
of the Corporation's registered office in the State
of Delaware or principal place of business or to
the Secretary of the Corporation, together with a
certificate stating their belief that the requisite
number of valid and unrevoked consents has been re
ceived as of a specific date, which date shall be
identified in the certificate. In the event that
delivery shall be made to the Corporation's
registered office in Delaware, such delivery shall
be made by hand or by certified or registered mail,
return receipt requested. Upon receipt of such
consents, the Corporation shall cause the consents
to be delivered promptly to the inspectors of elec
tion. The Corporation also shall deliver promptly
to the inspectors of election any revocations of
consents in its possession, custody or control as
of the time of receipt of the consents.
(F) As promptly as practicable after the consents
and revocations are received by them, the
inspectors of election shall issue a preliminary
report to the Corporation stating: (i) the number
of shares represented by valid and unrevoked
consents; (ii) the number of shares represented by
invalid consents; (iii) the number of shares
represented by invalid revocations; and (iv) the
number of shares entitled to submit consents as of
the record date. Unless the Corporation and the
soliciting stockholders agree to a shorter or
longer period, the Corporation and the soliciting
stockholders shall have five (5) days to review the
consents and revocations and to advise the
inspectors and the opposing party in writing as to
whether they intend to challenge the preliminary
report. If no timely written notice of an
intention to challenge the preliminary report is
received, the inspectors shall certify the
preliminary report (as corrected or modified by
virtue or the detection by the inspectors of
clerical errors) as their final report and deliver
it to the Corporation. If the Corporation or the
soliciting stockholders give timely written notice
of an intention to challenge the preliminary
report, a challenge session shall be scheduled by
the inspectors as promptly as practicable. A
transcript of the challenge session shall be
recorded by a certified court reporter. Following
completion of the challenge session, the inspectors
shall issue as promptly as practicable their final
report and deliver it to the Corporation. A copy
of the final report shall be included in the book
in which the proceedings of meetings of stock
holders are required.
(G) The Corporation shall give prompt notice to
the stockholders of the results of any consent
solicitation or the taking of corporate action
without a meeting by less than unanimous written
consent.
(H) This Section shall in no way impair or
diminish the right of any stockholder or director,
or any officer whose title to office is contested,
to contest the validity of any
consent or revocation thereof, or to take any other
action with respect thereto.
RESOLVED, that Article I, Section 9, of the by-laws
entitled "Notice of and Record Date for Stockholder
Consents; Solicitation Period" is hereby vacated and
repealed and Article I, Section 9 is hereby approved and
adopted to read in its entirety as follows:
SECTION 9. Notice of Stockholder Business and
Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the
Board of Directors of the Corporation and the
proposal of business to be considered by the
stockholders may be made at an annual meeting of
stockholders (a) pursuant to the Corporation's
notice of meeting delivered pursuant to Article I,
Section 3 of these by-laws, (b) by or at the
direction of the Chairman of the Board of Directors
or (c) by any stockholder of the Corporation who is
entitled to vote at the meeting, who complied with
the notice procedures set forth in clauses (2) and
(3) of this paragraph (A) of this by-law and who
was a stockholder of record at the time such notice
is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be
properly brought before an annual meeting by a
stockholder pursuant to clause (c) of paragraph
(A)(1) of this by-law, the stockholder must have
given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the
Corporation not less than seventy days nor more
than ninety days prior to the first anniversary of
the preceding year's annual meeting; provided,
however, that in the event that the date of the
annual meeting is advanced by more than twenty
days, or delayed by more than seventy days, from
such anniversary date, notice by the stockholder to
be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not
later than the close of business on the later of
the seventieth day prior to such annual meeting or
the tenth day following the day on which public
announcement of the date of such meetings if first
made. Such stockholder's notice shall set forth
(a) as to each person whom the stockholder proposes
to nominate for election or re-election as a
director all information relating to such person
that is required to be disclosed in solicitations
of proxies for election of directors, or is
otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including
such person's written consent to being named in the
proxy statement as a nominee and to serving as a
director if elected; (b) as to any other business
desired to be brought before the meeting, the
reasons for conducting such business at the meeting
and any material interest in such business of such
stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner
and (ii) the class and number of shares of the
Corporation which are owned beneficially and or
record by such stockholder and such beneficial
owner.
(3) Notwithstanding anything in the second
sentence of paragraph (A)(2) of this by-law to the
contrary, in the event that the number of directors
to be elected to the Board of Directors of the
Corporation is increased and there is no public
announcement naming all of the nominees for
director or specifying the size of the increased
Board of Directors made by the Corporation at least
eighty days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's
notice required by this by-law shall also be
considered timely, but only with respect to
nominees for any new positions created by such
increase, if it shall be delivered to the Secretary
at the principal executive offices of the
Corporation not later than the close of business on
the tenth day following the day on which such
public announcement is first made by the
Corporation.
(B) Special Meetings of Stockholders.
Only such business shall be conducted at a special
meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's
notice of meeting pursuant to Article I, Section 3
of these by-laws. Nominations of persons for
election to the Board of Directors may be made at a
special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's
notice of meeting (a) by or at the direction of the
Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting,
who complies with the notice procedures set forth
in this by-law and who is a stockholder of record
at the time such notice is delivered to the
Secretary of the Corporation. Nominations by
stockholders of persons for election to the Board
of Directors may be made at such a special meeting
of stockholders if the stockholder's notice as
required by paragraph (A)(2) of this by-law shall
be delivered to the Secretary at the principal
executive offices of the Corporation not earlier
than the ninetieth day prior to such special
meeting and not later than the close of business on
the later of the seventieth day prior to such
special meeting or the tenth day following the day
on which public announcement is first made of the
date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at
such meeting. In no event shall the public
announcement of an adjournment of a special meeting
commence a new time period for the giving of a
stockholder's notice as described above.
(C) General.
(1) Only persons who are nominated in accordance
with the procedures set forth in this by-law shall
be eligible to service as director and only such
business shall be conducted at a meeting of
stockholders as shall have been brought before the
meeting in accordance with the procedures set forth
in this by-law. Except as otherwise provided by
law, the Certificate of Incorporation or these by-
laws, the chairman of the meeting shall have the
power and duty to determine whether a nomination or
any business proposed to be brought before the
meeting was made in accordance with the procedures
set forth in this by-law and, if any proposed
nomination or business is not compliance with this
by-law, to declare that such defective proposal or
nomination shall disregarded.
(2) For purposes of this by-law, "public
announcement" shall mean disclosure in a press
release reported by the Dow Jones News Service,
Associated Press or comparable national news
service or in a document publicly filed by the
Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act.
(3) Notwithstanding the foregoing provisions of
this by-law, a stockholder shall also comply with
all applicable requirements of the Exchange Act and
the rules and regulations thereunder with respect
to the matters set forth in this by-law. Nothing
in this by-law shall be deemed to affect any rights
of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
RESOLVED, that Article I, Section 10 entitled
"Nominations for Directors" and Section 11 entitled
"Business at Stockholder Meetings", of the by-laws is
hereby vacated and repealed;
RESOLVED, that Article II, Section 11, of the by-laws
entitled "Vacancies" is hereby vacated and repealed and
Article II, Section 11, is hereby approved and adopted
to read in its entirety as follows:
SECTION 11. Vacancies. Subject to the rights of
the holders of any series of Preferred Stock, or
any other series or class of stock as set forth in
the Certificate of Incorporation, to elect
additional directors under specified circumstances,
and unless the Board of Directors otherwise
determines, vacancies resulting from death,
resignation, retirement, disqualification, removal
from office or other cause, and newly created
directorships resulting from any increase in the
authorized number of directors, may be filled only
by the affirmative vote of a majority of the
remaining directors, though less than a quorum of
the Board of Directors, and directors so chosen
shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office
of the class to which they have been elected
expires and until such director's successor shall
have been duly elected and qualified.
VARLEN CORPORATION
and
HARRIS TRUST AND SAVINGS BANK, as Rights Agent
RIGHTS AGREEMENT
Dated as of June 17, 1996
TABLE OF CONTENTS
Page
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 5
Section 3. Issue of Right Certificates 5
Section 4. Form of Right Certificates 7
Section 5. Countersignature and Registration 7
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates 8
Section 7. Exercise of Rights, Purchase Price;
Expiration Date of Rights 8
Section 8. Cancellation and Destruction of Right
Certificates 10
Section 9. Availability of Shares of Preferred Stock 10
Section 10. Preferred Stock Record Date 11
Section 11.Adjustment of Purchase Price, Number
of Shares and Number of Rights 11
Section 12.Certificate of Adjusted Purchase Price
or Number of Shares 19
Section 13.Consolidation, Merger or Sale or Transfer
of Assets or Earning Power 19
Section 14. Fractional Rights and Fractional Shares 22
Section 15. Rights of Action 23
Section 16. Agreement of Right Holders 24
Section 17.Right Certificate Holder Not Deemed a
Stockholder 24
Section 18.Concerning the Rights Agent 24
Section 19.Merger or Consolidation or Change
of Name of Rights Agent 25
Section 20. Duties of Rights Agent 25
Section 21. Change of Rights Agent 27
Section 22.Issuance of New Right Certificates 28
Section 23.Redemption 28
Section 24.Exchange 29
Section 25.Notice of Certain Events 30
Section 26. Notices 31
Section 27. Supplements and Amendments 31
Section 28. Successors 32
Section 29. Benefits of this Agreement 32
Section 30.Determinations and Actions by the
Board of Directors 32
Section 31. Severability 32
Section 32. Governing Law 32
Section 33. Counterparts 33
Section 34. Descriptive Headings 33
RIGHTS AGREEMENT
Rights Agreement, dated as of June 17, 1996
("Agreement"), between Varlen Corporation, a Delaware corporation
(the "Company"), and Harris Trust and Savings Bank, as Rights
Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a
"Right") for each share of Common Stock (as hereinafter defined)
of the Company outstanding as of the Close of Business (as
defined below) on July 1, 1996 (the "Record Date"), each Right
representing the right to purchase one one-thousandth (subject to
adjustment) of a share of Preferred Stock (as hereinafter
defined), upon the terms and subject to the conditions herein set
forth, and has further authorized and directed the issuance of
one Right (subject to adjustment as provided herein) with respect
to each share of Common Stock that shall become outstanding
between the Record Date and the earlier of the Distribution Date
and the Expiration Date (as such terms are hereinafter defined);
provided, however, that Rights may be issued with respect to
shares of Common Stock that shall become outstanding after the
Distribution Date and prior to the Expiration Date in accordance
with Section 22.
Accordingly, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the
shares of Common Stock then outstanding, but shall not include an
Exempt Person (as such term is hereinafter defined); provided,
however, that (i) if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an
"Acquiring Person" became such inadvertently (including, without
limitation, because (A) such Person was unaware that it
beneficially owned a percentage of Common Stock that would
otherwise cause such Person to be an "Acquiring Person" or (B)
such Person was aware of the extent of its Beneficial Ownership
of Common Stock but had no actual knowledge of the consequences
of such Beneficial Ownership under this Agreement) and without
any intention of changing or influencing control of the Company,
and if such Person as promptly as practicable divested or divests
itself of Beneficial Ownership of a sufficient number of shares
of Common Stock so that such Person would no longer be an
"Acquiring Person," then such Person shall not be deemed to be or
to have become an "Acquiring Person" for any purposes of this
Agreement; (ii) if, as of the date hereof, any Person is the
Beneficial Owner of 15% or more of the shares of Common Stock
outstanding, such Person shall not be or become an "Acquiring
Person" unless and until such time as such Person shall become
the Beneficial Owner of additional shares of Common Stock (other
than pursuant to a dividend or distribution paid or made by the
Company on the outstanding Common Stock in shares of Common Stock
or pursuant to a split or subdivision of the outstanding Common
Stock), unless, upon becoming the Beneficial Owner of such
additional shares of Common Stock, such Person is not then the
Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding; and (iii) no Person shall become an "Acquiring
Person" as the result of an acquisition of shares of Common Stock
by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares of
Common Stock beneficially owned by such Person to 15% or more of
the shares of Common Stock then outstanding, provided, however,
that if a Person shall become the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding by reason of such
share acquisitions by the Company and shall thereafter become the
Beneficial Owner of any additional shares of Common Stock (other
than pursuant to a dividend or distribution paid or made by the
Company on the outstanding Common Stock in shares of Common Stock
or pursuant to a split or subdivision of the outstanding Common
Stock), then such Person shall be deemed to be an "Acquiring
Person" unless upon becoming the Beneficial Owner of such
additional shares of Common Stock such Person does not
beneficially own 15% or more of the shares of Common Stock then
outstanding. For all purposes of this Agreement, any calculation
of the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the
particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as in effect on the
date hereof.
(b) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in
effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of,
shall be deemed to have "Beneficial Ownership" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates is deemed to beneficially own, directly
or indirectly, within the meaning of Rule l3d-3 of the General
Rules and Regulations under the Exchange Act as in effect on the
date hereof;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding
(other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, (x) securities
tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase, (y) securities which such Person has a right to acquire
upon the exercise of Rights at any time prior to the time that
any Person becomes an Acquiring Person or (z) securities issuable
upon the exercise of Rights from and after the time that any
Person becomes an Acquiring Person if such Rights were acquired
by such Person or any of such Person's Affiliates or Associates
prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof ("Original Rights") or pursuant to Section
11(i) or Section 11(n) with respect to an adjustment to Original
Rights; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially
own, any security by reason of such agreement, arrangement or
understanding if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations promulgated under the
Exchange Act and (2) is not also then reportable on Schedule 13D
under the Exchange Act (or any comparable or successor report);
or
(iii) which are beneficially owned, directly or
indirectly, by any other Person and with respect to which such
Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group
members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except
to the extent contemplated by the proviso to Section 1(c)(ii)(B))
or disposing of such securities of the Company;
provided, however, that no Person who is an officer, director or
employee of an Exempt Person shall be deemed, solely by reason of
such Person's status or authority as such, to be the "Beneficial
Owner" of, to have "Beneficial Ownership" of or to "beneficially
own" any securities that are "beneficially owned" (as defined in
this Section l(c)), including, without limitation, in a fiduciary
capacity, by an Exempt Person or by any other such officer,
director or employee of an Exempt Person.
(d) "Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the
State of Illinois or the city in which the principal office of
the Rights Agent is located are authorized or obligated by law or
executive order to close.
(e) "Close of Business" on any given date shall mean
5:00 P.M., Chicago, Illinois time, on such date; provided,
however, that if such date is not a Business Day it shall mean
5:00 P.M., Chicago, Illinois time, on the next succeeding
Business Day.
(f) "Common Stock" when used with reference to the
Company shall mean the Common Stock, presently par value $.10 per
share, of the Company. "Common Stock" when used with reference
to any Person other than the Company shall mean the common stock
(or, in the case of an unincorporated entity, the equivalent
equity interest) with the greatest voting power of such other
Person or, if such other Person is a subsidiary of another
Person, the Person or Persons which ultimately control such first-
mentioned Person.
(g) "Common Stock Equivalents" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(h) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(i) "Distribution Date" shall have the meaning set forth
in Section 3 hereof.
(j) "Equivalent Preferred Shares" shall have the meaning
set forth in Section 11(b) hereof.
(k) "Exempt Person" shall mean the Company or any
Subsidiary (as such term is hereinafter defined) of the Company,
in each case including, without limitation, in its fiduciary
capacity, or any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity or trustee holding
Common Stock for or pursuant to the terms of any such plan or for
the purpose of funding any such plan or funding other employee
benefits for employees of the Company or of any Subsidiary of the
Company.
(l) "Exchange Ratio" shall have the meaning set forth in
Section 24 hereof.
(m) "Expiration Date" shall have the meaning set forth
in Section 7 hereof.
(n) "Flip-In Event" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(o) "Final Expiration Date" shall have the meaning set
forth in Section 7 hereof.
(p) "NASDAQ" shall mean The NASDAQ Stock Market.
(q) "New York Stock Exchange" shall mean the New York
Stock Exchange, Inc.
(r) "Person" shall mean any individual, firm,
corporation, partnership, limited liability company, trust or
other entity, and shall include any successor (by merger or
otherwise) to such entity.
(s) "Preferred Stock" shall mean the Series A Junior
Participating Preferred Stock, par value $1.00 per share, of the
Company having the rights and preferences set forth in the Form
of Certificate of Designation attached to this Agreement as
Exhibit A.
(t) "Principal Party" shall have the meaning set forth
in Section 13(b) hereof.
(u) "Redemption Date" shall have the meaning set forth
in Section 7 hereof.
(v) "Redemption Price" shall have the meaning set forth
in Section 23 hereof.
(w) "Right Certificate" shall have the meaning set forth
in Section 3 hereof.
(x) "Securities Act" shall mean the Securities Act of
1933, as amended.
(y) "Section 11(a)(ii) Trigger Date" shall have the
meaning set forth in Section 11(a)(iii) hereof.
(z) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(aa) "Stock Acquisition Date" shall mean the first date
of public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) by the Company or an Acquiring
Person that an Acquiring Person has become such, or such earlier
date as a majority of the Board of Directors shall become aware
of the existence of an Acquiring Person.
(bb) "Subsidiary" of any Person shall mean any
corporation or other entity of which securities or other
ownership interests having ordinary voting power sufficient to
elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or
indirectly, by such Person, and any corporation or other entity
that is otherwise controlled by such Person.
(cc) "Substitution Period" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(dd) "Summary of Rights" shall have the meaning set forth
in Section 3 hereof.
(ee) "Trading Day" shall have the meaning set forth in
Section 11(d)(i) hereof.
Section 2. Appointment of Rights Agent. The Company
hereby appoints the Rights Agent to act as agent for the Company
and the holders of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date be the holders of
Common Stock) in accordance with the terms and conditions hereof,
and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it
may deem necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the Close of Business on the earlier of (i)
the tenth day after the Stock Acquisition Date or (ii) the tenth
Business Day (or such later date as may be determined by action
of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement
by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of such Person (other than
an Exempt Person) to commence, a tender or exchange offer the
consummation of which would result in any Person (other than an
Exempt Person) becoming the Beneficial Owner of shares of Common
Stock aggregating 15% or more of the Common Stock then
outstanding (the earlier of such dates being herein referred to
as the "Distribution Date", provided, however, that if either of
such dates occurs after the date of this Agreement and on or
prior to the Record Date, then the Distribution Date shall be the
Record Date), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common
Stock registered in the names of the holders thereof and not by
separate Right Certificates, and (y) the Rights will be
transferable only in connection with the transfer of Common
Stock. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will
countersign and the Company will send or cause to be sent (and
the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common
Stock as of the close of business on the Distribution Date (other
than any Acquiring Person or any Associate or Affiliate of an
Acquiring Person), at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a "Right Certificate"), evidencing one
Right (subject to adjustment as provided herein) for each share
of Common Stock so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights
to Purchase Shares of Preferred Stock, in substantially the form
of Exhibit C hereto (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Stock as of
the Close of Business on the Record Date (other than any
Acquiring Person or any Associate or Affiliate of any Acquiring
Person), at the address of such holder shown on the records of
the Company. With respect to certificates for Common Stock
outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in
the names of the holders thereof together with the Summary of
Rights. Until the Distribution Date (or, if earlier, the
Expiration Date), the surrender for transfer of any certificate
for Common Stock outstanding on the Record Date, with or without
a copy of the Summary of Rights, shall also constitute the
transfer of the Rights associated with the Common Stock
represented thereby.
(c) Certificates issued for Common Stock (including,
without limitation, upon transfer of outstanding Common Stock,
disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares)
after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date shall have impressed
on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement
between Varlen Corporation (the "Company") and Harris Trust and
Savings Bank, as Rights Agent, dated as of June 17, 1996 as the
same may be amended from time to time (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive offices
of the Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
The Company will mail to the holder of this certificate a copy of
the Rights Agreement without charge after receipt of a written
request therefor. Under certain circumstances, as set forth in
the Rights Agreement, Rights owned by or transferred to any
Person who is or becomes an Acquiring Person (as defined in the
Rights Agreement) and certain transferees thereof will become
null and void and will no longer be transferable.
With respect to such certificates containing the foregoing
legend, until the Distribution Date the Rights associated with
the Common Stock represented by such certificates shall be
evidenced by such certificates alone, and the surrender for
transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby. In the
event that the Company purchases or otherwise acquires any Common
Stock after the Record Date but prior to the Distribution Date,
any Rights associated with such Common Stock shall be deemed
canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Stock which are no
longer outstanding.
Notwithstanding this paragraph (c), the omission of a
legend shall not affect the enforceability of any part of this
Agreement or the rights of any holder of the Rights.
Section 4. Form of Right Certificates. The Right
Certificates (and the forms of election to purchase shares and of
assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company
may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock
exchange or interdealer quotation system on which the Rights may
from time to time be listed or quoted, or to conform to usage.
Subject to the provisions of Sections 11, 13 and 22 hereof, the
Right Certificates shall entitle the holders thereof to purchase
such number of one one-thousandths of a share of Preferred Stock
as shall be set forth therein at the price per one one-thousandth
of a share of Preferred Stock set forth therein (the "Purchase
Price"), but the number of such one one-thousandths of a share of
Preferred Stock and the Purchase Price shall be subject to
adjustment as provided herein.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf
of the Company by the President of the Company, either manually
or by facsimile signature, shall have affixed thereto the
Company's seal or a facsimile thereof and shall be attested by
the Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company
who shall have signed any of the Right Certificates shall cease
to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force
and effect as though the Person who signed such Right
Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such
Right Certificate, shall be a proper officer of the Company to
sign such Right Certificate, although at the date of the
execution of this Agreement any such Person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at an office or agency designated
for such purpose, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each
of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates.
(a) Subject to the provisions of Sections 7(e),
11(a)(ii), 13 and 14 hereof, at any time after the Distribution
Date and prior to the Expiration Date, any Right Certificate or
Right Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock as the Right
Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged
at the office or agency of the Rights Agent designated for such
purpose. Thereupon the Rights Agent shall countersign and
deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right
Certificates.
(b) Subject to the provisions of Section 11(a)(ii)
hereof, at any time after the Distribution Date and prior to the
Expiration Date, upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price;
Expiration Date of Rights.
(a) Except as otherwise provided herein, the Rights
shall become exercisable on the Distribution Date, and thereafter
the registered holder of any Right Certificate may, subject to
Section 11(a)(ii) hereof and except as otherwise provided herein,
exercise the Rights evidenced thereby in whole or in part upon
surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights
Agent at the office or agency of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase
Price with respect to the total number of one one-thousandths of
a share of Preferred Stock (or other securities, cash or other
assets, as the case may be) as to which the Rights are exercised,
at any time which is both after the Distribution Date and prior
to the time (the "Expiration Date") that is the earliest of (i)
the Close of Business on June 16, 2006 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date") or (iii)
the time at which such Rights are exchanged as provided in
Section 24 hereof.
(b) The Purchase Price shall be initially $75 for each
one one-thousandth of a share of Preferred Stock purchasable upon
the exercise of a Right. The Purchase Price and the number of
one one-thousandths of a share of Preferred Stock or other
securities or property to be acquired upon exercise of a Right
shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) of
this Section 7.
(c) Except as otherwise provided herein, upon receipt of
a Right Certificate representing exercisable Rights, with the
form of election to purchase duly executed, accompanied by
payment of the aggregate Purchase Price for the shares of
Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such
Right Certificate in accordance with Section 9 hereof, in cash or
by certified check, cashier's check or money order payable to the
order of the Company, the Rights Agent shall thereupon promptly
(i) (A) requisition from any transfer agent of the Preferred
Stock certificates for the number of shares of Preferred Stock to
be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B)
requisition from the depositary agent depositary receipts
representing interests in such number of one one-thousandths of a
share of Preferred Stock as are to be purchased (in which case
certificates for the Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to
comply with such request, (ii) when appropriate, requisition from
the Company the amount of cash to be paid in lieu of issuance of
fractional shares in accordance with Section 14 hereof, (iii)
promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of
the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and (iv)
when appropriate, after receipt, promptly deliver such cash to or
upon the order of the registered holder of such Right
Certificate.
(d) Except as otherwise provided herein, in case the
registered holder of any Right Certificate shall exercise less
than all of the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the exercisable Rights remaining
unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered
holder of Rights upon the occurrence of any purported transfer or
exercise of Rights pursuant to Section 6 hereof or this Section 7
unless such registered holder shall have (i) completed and signed
the certificate contained in the form of assignment or form of
election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such transfer or exercise and (ii)
provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) thereof as the
Company shall reasonably request.
Section 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered for the purpose
of exercise, transfer, split up, combination or exchange shall,
if surrendered to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled
by it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel
and retire, any other Right Certificate purchased or acquired by
the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Right Certificates to the
Company, or shall, at the written request of the Company, destroy
such canceled Right Certificates, and in such case shall deliver
a certificate of destruction thereof to the Company.
Section 9. Availability of Shares of Preferred Stock.
(a) The Company covenants and agrees that it will cause
to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock or any shares of Preferred
Stock held in its treasury, the number of shares of Preferred
Stock that will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock issuable
upon the exercise of Rights may be listed or admitted to trading
on any national securities exchange, or quoted on NASDAQ, the
Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for
such issuance to be listed or admitted to trading on such
exchange, or quoted on NASDAQ, upon official notice of issuance
upon such exercise.
(c) From and after such time as the Rights become
exercisable, the Company shall use its best efforts, if then
necessary to permit the issuance of shares of Preferred Stock
upon the exercise of Rights, to register and qualify such shares
of Preferred Stock under the Securities Act and any applicable
state securities or "Blue Sky" laws (to the extent exemptions
therefrom are not available), cause such registration statement
and qualifications to become effective as soon as possible after
such filing and keep such registration and qualifications
effective until the earlier of the date as of which the Rights
are no longer exercisable for such securities and the Expiration
Date. The Company may temporarily suspend, for a period of time
not to exceed 90 days, the exercisability of the Rights in order
to prepare and file a registration statement under the Securities
Act and permit it to become effective. Upon any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is
no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in
any jurisdiction unless the requisite qualification in such
jurisdiction shall have been obtained and until a registration
statement under the Securities Act (if required) shall have been
declared effective.
(d) The Company covenants and agrees that it will take
all such action as may be necessary to ensure that all shares of
Preferred Stock delivered upon exercise of Rights shall, at the
time of delivery of the certificates therefor (subject to payment
of the Purchase Price), be duly and validly authorized and issued
and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it
will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the
issuance or delivery of the Right Certificates or of any shares
of Preferred Stock upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which may
be payable in respect of any transfer or delivery of Right
Certificates to a Person other than, or the issuance or delivery
of certificates or depositary receipts for the Preferred Stock in
a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to
issue or deliver any certificates or depositary receipts for
Preferred Stock upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by that
holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in
whose name any certificate for Preferred Stock is issued upon the
exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Preferred Stock
represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if
the date of such surrender and payment is a date upon which the
Preferred Stock transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Stock transfer
books of the Company are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall
not be entitled to any rights of a holder of Preferred Stock for
which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other
distributions, and shall not be entitled to receive any notice of
any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares and Number of Rights. The Purchase Price, the
number of shares of Preferred Stock or other securities or
property purchasable upon exercise of each Right and the number
of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a)(i) In the event the Company shall at any time after
the date of this Agreement (A) declare and pay a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B)
subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares of
Preferred Stock or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Stock
transfer books of the Company were open, the holder would have
owned upon such exercise and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate
par value of the shares of capital stock of the Company issuable
upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the
event any Person becomes an Acquiring Person (the first
occurrence of such event being referred to hereinafter as the
"Flip-In Event"), then (A) the Purchase Price shall be adjusted
to be the Purchase Price in effect immediately prior to the Flip-
In Event multiplied by the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable
immediately prior to such Flip-In Event, whether or not such
Right was then exercisable, and (B) each holder of a Right,
except as otherwise provided in this Section 11(a)(ii) and
Section 11(a)(iii) hereof, shall thereafter have the right to
receive, upon exercise thereof at a price equal to the Purchase
Price (as so adjusted), in accordance with the terms of this
Agreement and in lieu of shares of Preferred Stock, such number
of shares of Common Stock as shall equal the result obtained by
dividing the Purchase Price (as so adjusted) by 50% of the
current per share market price of the Common Stock (determined
pursuant to Section 11(d) hereof) on the date of such Flip-In
Event; provided, however, that the Purchase Price (as so
adjusted) and the number of shares of Common Stock so receivable
upon exercise of a Right shall, following the Flip-In Event, be
subject to further adjustment as appropriate in accordance with
Section 11(f) hereof. Notwithstanding anything in this Agreement
to the contrary, however, from and after the Flip-In Event, any
Rights that are beneficially owned by (x) any Acquiring Person
(or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or
Associate) who becomes a transferee after the Flip-In Event or
(z) a transferee of any Acquiring Person (or any such Affiliate
or Associate) who became a transferee prior to or concurrently
with the Flip-In Event pursuant to either (I) a transfer from the
Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (II) a transfer
which the Board of Directors has determined is part of a plan,
arrangement or understanding which has the purpose or effect of
avoiding the provisions of this paragraph, and subsequent
transferees of such Persons, shall be void without any further
action and any holder of such Rights shall thereafter have no
rights whatsoever with respect to such Rights under any provision
of this Agreement. The Company shall use all reasonable efforts
to ensure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of Right
Certificates or other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder. From and after
the Flip-In Event, no Right Certificate shall be issued pursuant
to Section 3 or Section 6 hereof that represents Rights that are
or have become void pursuant to the provisions of this paragraph,
and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be canceled. From and after
the occurrence of an event specified in Section 13(a) hereof, any
Rights that theretofore have not been exercised pursuant to this
Section 11(a)(ii) shall thereafter be exercisable only in
accordance with Section 13 and not pursuant to this Section
11(a)(ii).
(iii) The Company may at its option substitute for a
share of Common Stock issuable upon the exercise of Rights in
accordance with the foregoing subparagraph (ii) a number of
shares of Preferred Stock or fraction thereof such that the
current per share market price of one share of Preferred Stock
multiplied by such number or fraction is equal to the current per
share market price of one share of Common Stock. In the event
that there shall not be sufficient shares of Common Stock issued
but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Board of Directors shall, to the extent
permitted by applicable law and any material agreements then in
effect to which the Company is a party (A) determine the excess
(such excess, the "Spread") of (1) the value of the shares of
Common Stock issuable upon the exercise of a Right in accordance
with the foregoing subparagraph (ii) (the "Current Value") over
(2) the Purchase Price (as adjusted in accordance with the
foregoing subparagraph (ii)), and (B) with respect to each Right
(other than Rights which have become void pursuant to the
foregoing subparagraph (ii)), make adequate provision to
substitute for the shares of Common Stock issuable in accordance
with the foregoing subparagraph (ii) upon exercise of the Right
and payment of the Purchase Price (as adjusted in accordance
therewith), (1) cash, (2) a reduction in such Purchase Price, (3)
shares of Preferred Stock or other equity securities of the
Company (including, without limitation, shares or fractions of
shares of preferred stock which, by virtue of having dividend,
voting and liquidation rights substantially comparable to those
of the shares of Common Stock, are deemed in good faith by the
Board of Directors to have substantially the same value as the
shares of Common Stock (such shares of Preferred Stock and shares
or fractions of shares of preferred stock are hereinafter
referred to as "Common Stock Equivalents")), (4) debt securities
of the Company, (5) other assets, or (6) any combination of the
foregoing, having a value which, when added to the value of the
shares of Common Stock issued upon exercise of such Right, shall
have an aggregate value equal to the Current Value (less the
amount of any reduction in such Purchase Price), where such
aggregate value has been determined by the Board of Directors
upon the advice of a nationally recognized investment banking
firm selected in good faith by the Board of Directors; provided,
however, that if the Company shall not make adequate provision to
deliver value pursuant to clause (B) above within thirty (30)
days following the Flip-In Event (the "Section 11(a) (ii) Trigger
Date"), then the Company shall be obligated to deliver, to the
extent permitted by applicable law and any material agreements
then in effect to which the Company is a party, upon the
surrender for exercise of a Right and without requiring payment
of such Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of
shares of Preferred Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If, upon the occurrence of the Flip-In
Event, the Board of Directors shall determine in good faith that
it is likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of the
Rights, then, if the Board of Directors so elects, the thirty
(30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section
11(a) (ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, is
herein called the "Substitution Period"). To the extent that the
Company determines that some action need be taken pursuant to the
second and/or third sentence of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 11(a)(ii) hereof
and the last sentence of this Section 11(a)(iii) hereof, that
such action shall apply uniformly to all outstanding Rights and
(y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such
second sentence and to determine the value thereof. In the event
of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of the shares of Common
Stock shall be the current per share market price (as determined
pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger
Date and the per share or fractional value of any "Common Stock
Equivalent" shall be deemed to equal the current per share market
price of the Common Stock. The Board of Directors of the Company
may, but shall not be required to, establish procedures to
allocate the right to receive shares of Common Stock upon the
exercise of the Rights among holders of Rights pursuant to this
Section 11(a)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of
Preferred Stock entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or
purchase Preferred Stock (or shares having the same rights,
privileges and preferences as the Preferred Stock ("equivalent
preferred shares")) or securities convertible into Preferred
Stock or equivalent preferred shares at a price per share of
Preferred Stock or equivalent preferred shares (or having a
conversion price per share, if a security convertible into shares
of Preferred Stock or equivalent preferred shares) less than the
then current per share market price of the Preferred Stock
(determined pursuant to Section 11(d) hereof) on such record
date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred
Stock and equivalent preferred shares outstanding on such record
date plus the number of shares of Preferred Stock and equivalent
preferred shares which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent preferred
shares so to be offered (and/or the aggregate initial conversion
price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of
which shall be the number of shares of Preferred Stock and
equivalent preferred shares outstanding on such record date plus
the number of additional shares of Preferred Stock and/or
equivalent preferred shares to be offered for subscription or
purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no
event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right.
In case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent.
Shares of Preferred Stock and equivalent preferred shares owned
by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date
is fixed; and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of the Preferred Stock
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness or assets
(other than a regular quarterly cash dividend or a dividend
payable in Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market
price of the Preferred Stock (determined pursuant to Section
11(d) hereof) on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company
whose determination shall be described in a statement filed with
the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights
or warrants applicable to one share of Preferred Stock, and the
denominator of which shall be such current per share market price
(determined pursuant to Section 11(d) hereof) of the Preferred
Stock; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of
the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the
Purchase Price which would then be in effect if such record date
had not been fixed.
(d)(i) Except as otherwise provided herein, for the
purpose of any computation hereunder, the "current per share
market price " of any security (a "Security " for the purpose of
this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security
for the 30 consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that
in the event that the current per share market price of the
Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution
on such Security payable in shares of such Security or securities
convertible into such shares, or (B) any subdivision, combination
or reclassification of such Security, and prior to the expiration
of 30 Trading Days after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular
way, in either case as reported by the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the
Security is not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security
is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use,
or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
Security selected by the Board of Directors of the Company. The
term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Security is listed or
admitted to trading is open for the transaction of business or,
if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the
Preferred Stock is publicly traded, the "current per share market
price" of the Preferred Stock shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred
Stock is not publicly traded but the Common Stock is publicly
traded, the "current per share market price" of the Preferred
Stock shall be conclusively deemed to be the current per share
market price of the Common Stock as determined pursuant to
Section 11(d)(i) multiplied by the then applicable Adjustment
Number (as defined in and determined in accordance with the
Certificate of Designation for the Preferred Stock). If neither
the Common Stock nor the Preferred Stock is publicly traded,
"current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a
statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are
not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
nearest one millionth of a share of Preferred Stock or one
thousandth of a share of Common Stock or other share or security
as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall
be made no later than the earlier of (i) three years from the
date of the transaction which requires such adjustment or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital
stock of the Company other than the Preferred Stock, thereafter
the Purchase Price and the number of such other shares so
receivable upon exercise of a Right shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Preferred Stock contained in Sections 11(a), 11(b), 11(c), 11(e),
11(h), 11(i) and 11(m) hereof, as applicable, and the provisions
of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase
Price, the number of one one-thousandths of a share of Preferred
Stock purchasable from time to time hereunder upon exercise of
the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the
Purchase Price as a result of the calculations made in Sections
11(b) and 11(c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-
thousandth of a share of Preferred Stock (calculated to the
nearest one hundred-thousandth of a share of Preferred Stock)
obtained by (i) multiplying (x) the number of one one-thousandths
of a share purchasable upon the exercise of a Right immediately
prior to such adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price pursuant to Sections 11(b) or
11(c) hereof to adjust the number of Rights, in substitution for
any adjustment in the number of one one-thousandths of a share of
Preferred Stock purchasable upon the exercise of a Right. Each
of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest one-thousandth)
obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price
in effect immediately after adjustment of the Purchase Price.
The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the
adjustment to be made. Such record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the
Right Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this Section 11(i), the Company may, as
promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the
holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a share of
Preferred Stock issuable upon the exercise of a Right, the Right
Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of one one-thousandths
of a share of Preferred Stock which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value,
if any, of the fraction of Preferred Stock or other shares of
capital stock issuable upon exercise of a Right, the Company
shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Preferred
Stock or other such shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of
a record date for a specified event, the Company may elect to
defer until the occurrence of such event issuing to the holder of
any Right exercised after such record date the Preferred Stock
and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Stock
and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the
Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive
such additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
adjustments in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the
extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the
Preferred Stock, issuance wholly for cash of any shares of
Preferred Stock at less than the current market price, issuance
wholly for cash of Preferred Stock or securities which by their
terms are convertible into or exchangeable for Preferred Stock,
dividends on Preferred Stock payable in shares of Preferred Stock
or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) Anything in this Agreement to the contrary
notwithstanding, in the event that at any time after the date of
this Agreement and prior to the Distribution Date, the Company
shall (i) declare and pay any dividend on the Common Stock
payable in Common Stock (other than the 10% stock dividend
declared May 29, 1996, payable on July 15, 1996 to stockholders
of record on July 15, 1996) or (ii) effect a subdivision,
combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of a dividend
payable in Common Stock) into a greater or lesser number of
shares of Common Stock, then, in each such case, the number of
Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter, shall be
proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number
of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall be
the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the occurrence of
such event.
(o) The Company agrees that, after the earlier of the
Distribution Date or the Stock Acquisition Date, it will not,
except as permitted by Sections 23, 24 or 27 hereof, take (or
permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action
will diminish substantially or eliminate the benefits intended to
be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in
Section 11 or 13 hereof, the Company shall promptly (a) prepare a
certificate setting forth such adjustment, and a brief statement
of the facts accounting for such adjustment, (b) file with the
Rights Agent and with each transfer agent for the Common Stock
and the Preferred Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in
accordance with Section 25 hereof (if so required under Section
25 hereof). The Rights Agent shall be fully protected in relying
on any such certificate and on any adjustment therein contained
and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event, directly or indirectly, at any time
after the Flip-In Event (i) the Company shall consolidate with or
shall merge into any other Person, (ii) any Person shall merge
with and into the Company and the Company shall be the continuing
or surviving corporation of such merger and, in connection with
such merger, all or part of the Common Stock shall be changed
into or exchanged for stock or other securities of any other
Person (or of the Company) or cash or any other property, or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in
one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person (other than
the Company or one or more wholly-owned Subsidiaries of the
Company), then upon the first occurrence of such event, proper
provision shall be made so that: (A) each holder of a Right
(other than Rights which have become void pursuant to Section
11(a)(ii) hereof) shall thereafter have the right to receive,
upon the exercise thereof at the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof), in
accordance with the terms of this Agreement and in lieu of shares
of Preferred Stock or Common Stock of the Company, such number of
validly authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as
shall equal the result obtained by dividing the Purchase Price
(as theretofore adjusted in accordance with Section 11(a)(ii)
hereof) by 50% of the current per share market price of the
Common Stock of such Principal Party (determined pursuant to
Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; provided, however, that
the Purchase Price (as theretofore adjusted in accordance with
Section 11(a)(ii) hereof) and the number of shares of Common
Stock of such Principal Party so receivable upon exercise of a
Right shall be subject to further adjustment as appropriate in
accordance with Section 11(f) hereof to reflect any events
occurring in respect of the Common Stock of such Principal Party
after the occurrence of such consolidation, merger, sale or
transfer; (B) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger,
sale or transfer, all the obligations and duties of the Company
pursuant to this Rights Agreement; (C) the term "Company" shall
thereafter be deemed to refer to such Principal Party; and (D)
such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its shares
of Common Stock in accordance with Section 9 hereof) in
connection with such consummation of any such transaction as may
be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in
relation to the shares of its Common Stock thereafter deliverable
upon the exercise of the Rights; provided that, upon the
subsequent occurrence of any consolidation, merger, sale or
transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon
be entitled to receive, upon exercise of a Right and payment of
the Purchase Price as provided in this Section 13(a), such cash,
shares, rights, warrants and other property which such holder
would have been entitled to receive had such holder, at the time
of such transaction, owned the Common Stock of the Principal
Party receivable upon the exercise of a Right pursuant to this
Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock)
as may be necessary to permit the subsequent exercise of the
Rights in accordance with the terms hereof for such cash, shares,
rights, warrants and other property.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (i)
or (ii) of the first sentence of Section 13(a) hereof: (A) the
Person that is the issuer of the securities into which the shares
of Common Stock are converted in such merger or consolidation,
or, if there is more than one such issuer, the issuer the shares
of Common Stock of which have the greatest aggregate market value
of shares outstanding, or (B) if no securities are so issued, (x)
the Person that is the other party to the merger, if such Person
survives said merger, or, if there is more than one such Person,
the Person the shares of Common Stock of which have the greatest
aggregate market value of shares outstanding or (y) if the Person
that is the other party to the merger does not survive the
merger, the Person that does survive the merger (including the
Company if it survives) or (z) the Person resulting from the
consolidation; and
(ii) in the case of any transaction described in
(iii) of the first sentence in Section 13(a) hereof, the Person
that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person receiving
the greatest portion of the assets or earning power cannot be
determined, whichever of such Persons is the issuer of Common
Stock having the greatest aggregate market value of shares
outstanding;
provided, however, that in any such case described in the
foregoing clause (b)(i) or (b)(ii), if the Common Stock of such
Person is not at such time or has not been continuously over the
preceding 12-month period registered under Section 12 of the
Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has
been so registered, the term "Principal Party" shall refer to
such other Person, or (2) if such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Stock
of all of which is and has been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the
issuer of Common Stock having the greatest aggregate market value
of shares outstanding, or (3) if such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person,
the rules set forth in clauses (1) and (2) above shall apply to
each of the owners having an interest in the venture as if the
Person owned by the joint venture was a Subsidiary of both or all
of such joint venturers, and the Principal Party in each such
case shall bear the obligations set forth in this Section 13 in
the same ratio as its interest in such Person bears to the total
of such interests.
(c) The Company shall not consummate any consolidation,
merger, sale or transfer referred to in Section 13(a) hereof
unless prior thereto the Company and the Principal Party involved
therein shall have executed and delivered to the Rights Agent an
agreement confirming that the requirements of Sections 13(a) and
(b) hereof shall promptly be performed in accordance with their
terms and that such consolidation, merger, sale or transfer of
assets shall not result in a default by the Principal Party under
this Agreement as the same shall have been assumed by the
Principal Party pursuant to Sections 13(a) and (b) hereof and
providing that, as soon as practicable after executing such
agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under
the Securities Act, if necessary, with respect to the Rights and
the securities purchasable upon exercise of the Rights on an
appropriate form, use its best efforts to cause such registration
statement to become effective as soon as practicable after such
filing and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the
Expiration Date and similarly comply with applicable state
securities laws;
(ii) use its best efforts, if the Common Stock of
the Principal Party shall be listed or admitted to trading on the
New York Stock Exchange or on another national securities
exchange, to list or admit to trading (or continue the listing
of) the Rights and the securities purchasable upon exercise of
the Rights on the New York Stock Exchange or such securities
exchange, or, if the Common Stock of the Principal Party shall
not be listed or admitted to trading on the New York Stock
Exchange or a national securities exchange, to cause the Rights
and the securities receivable upon exercise of the Rights to be
authorized for quotation on NASDAQ or on such other system then
in use;
(iii) deliver to holders of the Rights
historical financial statements for the Principal Party which
comply in all respects with the requirements for registration on
Form 10 (or any successor form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal
or preemptive rights in respect of the Common Stock of the
Principal Party subject to purchase upon exercise of outstanding
Rights.
(d) In case the Principal Party has provision in any of
its authorized securities or in its certificate of incorporation
or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights
pursuant to this Section 13), in connection with, or as a
consequence of, the consummation of a transaction referred to in
this Section 13, shares of Common Stock or Common Stock
Equivalents of such Principal Party at less than the then current
market price per share thereof (determined pursuant to Section
11(d) hereof) or securities exercisable for, or convertible into,
Common Stock or Common Stock Equivalents of such Principal Party
at less than such then current market price, or (ii) providing
for any special payment, tax or similar provision in connection
with the issuance of the Common Stock of such Principal Party
pursuant to the provisions of Section 13, then, in such event,
the Company hereby agrees with each holder of Rights that it
shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall have
been canceled, waived or amended, or that the authorized
securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of,
the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not,
at any time after the Flip-In Event, enter into any transaction
of the type described in clauses (i) through (iii) of Section
13(a) hereof if (i) at the time of or immediately after such
consolidation, merger, sale, transfer or other transaction there
are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (ii) prior to, simultaneously with or
immediately after such consolidation, merger, sale, transfer or
other transaction, the stockholders of the Person who
constitutes, or would constitute, the Principal Party for
purposes of Section 13(b) hereof shall have received a
distribution of Rights previously owned by such Person or any of
its Affiliates or Associates or (iii) the form or nature of
organization of the Principal Party would preclude or limit the
exercisability of the Rights.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions
of Rights or to distribute Right Certificates which evidence
fractional Rights (except prior to the Distribution Date in
accordance with Section 11(n) hereof). In lieu of such
fractional Rights, there shall be paid to the registered holders
of the Right Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right.
For the purposes of this Section 14(a), the current market value
of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The
closing price for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted
to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected
by the Board of Directors of the Company. If on any such date no
such market maker is making a market in the Rights, the fair
value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions
of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock) or
to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock)
upon the exercise or exchange of Rights. Interests in fractions
of Preferred Stock in integral multiples of one one-thousandth of
a share of Preferred Stock may, at the election of the Company,
be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges
and preferences to which they are entitled as beneficial owners
of the Preferred Stock represented by such depositary receipts.
In lieu of fractional shares of Preferred Stock that are not
integral multiples of one one-thousandth of a share of Preferred
Stock, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised or exchanged
as herein provided an amount in cash equal to the same fraction
of the current market value of a whole share of Preferred Stock
(as determined in accordance with Section 14(a) hereof) for the
Trading Day immediately prior to the date of such exercise or
exchange.
(c) The Company shall not be required to issue fractions
of shares of Common Stock or to distribute certificates which
evidence fractional shares of Common Stock upon the exercise or
exchange of Rights. In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional shares of
Common Stock would otherwise be issuable an amount in cash equal
to the same fraction of the current market value of a whole share
of Common Stock (as determined in accordance with Section 14(a)
hereof) for the Trading Day immediately prior to the date of such
exercise or exchange.
(d) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or
any fractional shares upon exercise or exchange of a Right
(except as provided above).
Section 15. Rights of Action. All rights of action in
respect of this Agreement, excepting the rights of action given
to the Rights Agent under Section 18 hereof, are vested in the
respective registered holders of the Right Certificates (and,
prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any
other Right Certificate (or, prior to the Distribution Date, of
the Common Stock), on his own behalf and for his own benefit, may
enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such
Right Certificate (or, prior to the Distribution Date, such
Common Stock) in the manner provided therein and in this
Agreement. Without limiting the foregoing or any remedies
available to the holders of Rights, it is specifically acknowl
edged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be
entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the
obligations of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of
a Right, by accepting the same, consents and agrees with the
Company and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common
Stock;
(b) after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent
if surrendered at the office or agency of the Rights Agent
designated for such purpose, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat
the Person in whose name the Right Certificate (or, prior to the
Distribution Date, the Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the
Right Certificates or the Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right Certificate shall
be entitled to vote, receive dividends or be deemed for any
purpose the holder of the Preferred Stock or any other securities
of the Company which may at any time be issuable on the exercise
or exchange of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in
this Agreement), or to receive dividends or subscription rights,
or otherwise, until the Rights evidenced by such Right
Certificate shall have been exercised or exchanged in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense,
incurred without negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration
of this Agreement, including the costs and expenses of defending
against any claim of liability arising therefrom, directly or
indirectly.
(b) The Rights Agent shall be protected and shall incur
no liability for, or in respect of any action taken, suffered or
omitted by it in connection with, its administration of this
Agreement in reliance upon any Right Certificate or certificate
for the Preferred Stock or Common Stock or for other securities
of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document
believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person
or Persons, or otherwise upon the advice of counsel as set forth
in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties
hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any
of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates
either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Right Certificates
shall have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, the
Rights Agent may countersign such Right Certificates either in
its prior name or in its changed name and in all such cases such
Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable
that any fact or matter be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved
and established by a certificate signed by the President and the
Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent
for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence, bad
faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in
this Agreement or in the Right Certificates (except its
countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement
or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights
becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the Rights provided for in Sections 3,
11, 13, 23 and 24, or the ascertaining of the existence of facts
that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Right Certificates
after receipt of a certificate furnished pursuant to Section 12,
describing such change or adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any shares of Preferred Stock
or other securities to be issued pursuant to this Agreement or
any Right Certificate or as to whether any shares of Preferred
Stock or other securities will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its
duties hereunder from any person reasonably believed by the
Rights Agent to be one of the President or the Secretary of the
Company, and to apply to such officers for advice or instructions
in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while
waiting for those instructions. Any application by the Rights
Agent for written instructions from the Company may, at the
option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this
Agreement and the date on and/or after which such action shall be
taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application
(which date shall not be less than five Business Days after the
date any officer of the Company actually receives such
application unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in
any of the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the
certificate contained in the form of assignment or the form of
election to purchase set forth on the reverse thereof, as the
case may be, has not been completed to certify the holder is not
an Acquiring Person (or an Affiliate or Associate thereof), the
Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with
the Company.
Section 21. Change of Rights Agent. The Rights Agent or
any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon 30 days' notice in writing
mailed to the Company and to each transfer agent of the Common
Stock or Preferred Stock by registered or certified mail, and,
following the Distribution Date, to the holders of the Right
Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon 30 days' notice
in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common
Stock or Preferred Stock by registered or certified mail, and,
following the Distribution Date, to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within
a period of 30 days after giving notice of such removal or after
it has been notified in writing of such resignation or incapacity
by the resigning or incapacitated Rights Agent or by the holder
of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court
of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and
doing business under the laws of the United States or the laws of
any state of the United States or the District of Columbia, in
good standing, having an office in the State of Illinois, which
is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million. After appointment, the
successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall
file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock or Preferred Stock,
and, following the Distribution Date, mail a notice thereof in
writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new
Right Certificates evidencing Rights in such forms as may be
approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the
Right Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale
of Common Stock following the Distribution Date and prior to the
Expiration Date, the Company may with respect to shares of Common
Stock so issued or sold pursuant to (i) the exercise of stock
options, (ii) under any employee plan or arrangement, (iii) upon
the exercise, conversion or exchange of securities, notes or
debentures issued by the Company or (iv) a contractual obligation
of the Company, in each case existing prior to the Distribution
Date, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at any
time prior to the Flip-In Event, redeem all but not less than all
the then outstanding Rights at a redemption price of $.01 per
Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof
(the redemption price being hereinafter referred to as the
"Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish. The
Redemption Price shall be payable, at the option of the Company,
in cash, shares of Common Stock, or such other form of
consideration as the Board of Directors shall determine.
(b) Immediately upon the action of the Board of
Directors ordering the redemption of the Rights pursuant to
paragraph (a) of this Section 23 (or at such later time as the
Board of Directors may establish for the effectiveness of such
redemption), and without any further action and without any
notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly give
public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after
such action of the Board of Directors ordering the redemption of
the Rights (or such later time as the Board of Directors may
establish for the effectiveness of such redemption), the Company
shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon
the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent
for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state
the method by which the payment of the Redemption Price will be
made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its
option, at any time after the Flip-In Event, exchange all or part
of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions
of Section 11(a)(ii) hereof) for Common Stock at an exchange
ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such amount per
Right being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not
be empowered to effect such exchange at any time after an
Acquiring Person shall have become the Beneficial Owner of shares
of Common Stock aggregating 50% or more of the shares of Common
Stock then outstanding. From and after the occurrence of an
event specified in Section 13(a) hereof, any Rights that
theretofore have not been exchanged pursuant to this Section
24(a) shall thereafter be exercisable only in accordance with
Section 13 and may not be exchanged pursuant to this Section
24(a). The exchange of the Rights by the Board of Directors may
be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon the effectiveness of the action of
the Board of Directors of the Company ordering the exchange of
any Rights pursuant to paragraph (a) of this Section 24 and
without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that
number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The
Company shall promptly mail a notice of any such exchange to all
of the holders of the Rights so exchanged at their last addresses
as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the
exchange of the shares of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of
Section 11(a)(ii) hereof) held by each holder of Rights.
(c) The Company may at its option substitute, and, in
the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to
permit an exchange of Rights for Common Stock as contemplated in
accordance with this Section 24, the Company shall substitute to
the extent of such insufficiency, for each share of Common Stock
that would otherwise be issuable upon exchange of a Right, a
number of shares of Preferred Stock or fraction thereof (or
equivalent preferred shares, as such term is defined in Section
11(b)) such that the current per share market price (determined
pursuant to Section 11(d) hereof) of one share of Preferred Stock
(or equivalent preferred share) multiplied by such number or
fraction is equal to the current per share market price of one
share of Common Stock (determined pursuant to Section 11(d)
hereof) as of the date of such exchange.
Section 25. Notice of Certain Events.
(a) In case the Company shall at any time after the
earlier of the Distribution Date or the Stock Acquisition Date
propose (i) to pay any dividend payable in stock of any class to
the holders of its Preferred Stock or to make any other
distribution to the holders of its Preferred Stock (other than a
regular quarterly cash dividend), (ii) to offer to the holders of
its Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of
stock of any class or any other securities, rights or options,
(iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision or
combination of outstanding Preferred Stock), (iv) to effect the
liquidation, dissolution or winding up of the Company, or (v) to
pay any dividend on the Common Stock payable in Common Stock or
to effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or otherwise than by payment of
dividends in Common Stock), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance
with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on
which such liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of the
Common Stock and/or Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior
to the record date for determining holders of the Preferred Stock
for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the
holders of the Common Stock and/or Preferred Stock, whichever
shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or
Section 13 shall occur then the Company shall as soon as
practicable thereafter give to each holder of a Right Certificate
(or if occurring prior to the Distribution Date, the holders of
the Common Stock) in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe such
event and the consequences of such event to holders of Rights
under Section 11(a)(ii) and Section 13 hereof.
Section 26. Notices. Notices or demands authorized by
this Agreement to be given or made by the Rights Agent or by the
holder of any Right Certificate to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Varlen Corporation
55 Shuman Boulevard
P.O. Box 3089
Naperville, Illinois 60566-7089
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Attention: Stock Transfer Department
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any
Right Certificate shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the
Company.
Section 27. Supplements and Amendments. Except as
provided in the penultimate sentence of this Section 27, for so
long as the Rights are then redeemable, the Company may in its
sole and absolute discretion, and the Rights Agent shall if the
Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of
the Rights. At any time when the Rights are no longer
redeemable, except as provided in the penultimate sentence of
this Section 27, the Company may, and the Rights Agent shall, if
the Company so directs, supplement or amend this Agreement
without the approval of any holders of Rights in order to (i)
cure any ambiguity, (ii) correct or supplement any provision
contained herein which may be defective or inconsistent with any
other provision herein, (iii) shorten or lengthen any time period
hereunder, or (iv) change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable;
provided that no such supplement or amendment shall adversely
affect the interests of the holders of Rights as such (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring
Person), and no such amendment may cause the Rights again to
become redeemable or cause the Agreement again to become
amendable other than in accordance with this sentence.
Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment shall be made which changes
the Redemption Price. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or
amendment.
Section 28. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the Company
or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the
Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common
Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock).
Section 30. Determinations and Actions by the Board of
Directors. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to
exercise the rights and powers specifically granted to the Board
of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i)
interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation,
a determination to redeem or not redeem the Rights or to amend
this Agreement). All such actions, calculations, interpretations
and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or
made by the Board of Directors of the Company in good faith,
shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights, as such, and all other
parties, and (y) not subject the Board of Directors to any
liability to the holders of the Rights.
Section 31. Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each
Right Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with
the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. Counterparts. This Agreement may be
executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings
of the several Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first
above written.
VARLEN CORPORATION
By:
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
By:
Name:
Title:
Exhibit A
FORM OF CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
VARLEN CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Varlen Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority vested in the Board of
Directors in accordance with the provisions of the Certificate of
Incorporation of the said Corporation, the said Board of
Directors on June 17, 1996 adopted the following resolution
creating a series of 50,000 shares of Preferred Stock designated
as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in
the Board of Directors of this Corporation in accordance with the
provisions of the Certificate of Incorporation, a series of
Preferred Stock, par value $1.00 per share, of the Corporation be
and hereby is created, and that the designation and number of
shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares
of such series and the qualifications, limitations and
restrictions thereof are as follows:
Series A Junior Participating Preferred Stock
1. Designation and Amount. There shall be a series of
Preferred Stock that shall be designated as "Series A Junior
Participating Preferred Stock," and the number of shares
constituting such series shall be 50,000. Such number of shares
may be increased or decreased by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the
number of shares of Series A Junior Participating Preferred
Stock to less than the number of shares then issued and
outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the
holders of any shares of any class or series of stock of the
Corporation ranking prior and superior to the shares of Series A
Junior Participating Preferred Stock with respect to dividends,
the holders of shares of Series A Junior Participating Preferred
Stock, in preference to the holders of shares of any class or
series of stock of the Corporation ranking junior to the Series A
Junior Participating Preferred Stock in respect thereof, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the last business day of
March, June, September and December, in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A
Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $100 or
(b) the Adjustment Number (as defined below) times the aggregate
per share amount of all cash dividends, and the Adjustment Number
times the aggregate per share amount (payable in kind) of all non-
cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $.10 per
share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. The "Adjustment Number"
shall initially be 1000. In the event the Corporation shall at
any time after July 1, 1996 (the "Rights Declaration Date") (i)
declare and pay any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or
(iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying
such Adjustment Number by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Junior Participating Preferred Stock
as provided in paragraph (A) above immediately after it declares
a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Junior Participating
Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series
A Junior Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock
entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following
voting rights:
(A) Each share of Series A Junior Participating
Preferred Stock shall entitle the holder thereof to a number of
votes equal to the Adjustment Number on all matters submitted to
a vote of the stockholders of the Corporation.
(B) Except as required by law and by Section 10
hereof, holders of Series A Junior Participating Preferred Stock
shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any
corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends
or distributions payable on the Series A Junior Participating
Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise
acquire for consideration any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any
other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, except
dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity with
the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of Series A Junior Participating Preferred Stock, or to
such holders and holders of any such shares ranking on a parity
therewith, upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary
of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired
promptly after the acquisition thereof. All such shares shall
upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to any conditions and restrictions on
issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation, dissolution or winding up of the Corporation,
voluntary or otherwise, no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A
Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Series A Junior Participating Preferred
Stock shall have received an amount per share (the "Series A
Liquidation Preference") equal to the greater of (i) $100 plus an
amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, or
(ii) the Adjustment Number times the per share amount of all cash
and other property to be distributed in respect of the Common
Stock upon such liquidation, dissolution or winding up of the
Corporation.
(B) In the event, however, that there are not
sufficient assets available to permit payment in full of the
Series A Liquidation Preference and the liquidation preferences
of all other classes and series of stock of the Corporation, if
any, that rank on a parity with the Series A Junior Participating
Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of
the Series A Junior Participating Preferred Stock and the holders
of such parity shares in proportion to their respective
liquidation preferences.
(C) Neither the merger or consolidation of the
Corporation into or with another corporation nor the merger or
consolidation of any other corporation into or with the
Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section
6.
7. Consolidation, Merger, Etc. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the outstanding shares of Common Stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share
equal to the Adjustment Number times the aggregate amount of
stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior
Participating Preferred Stock shall not be subject to redemption
by the Company.
9. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the
Preferred Stock as to the payment of dividends and as to the
distribution of assets upon liquidation, dissolution or winding
up, unless the terms of any such series shall provide otherwise,
and shall rank senior to the Common Stock as to such matters.
10. Amendment. At any time that any shares of Series A
Junior Participating Preferred Stock are outstanding, the
Restated Certificate of Incorporation of the Corporation shall
not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A
Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-
thirds of the outstanding shares of Series A Junior Participating
Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share that shall
entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, participate
in distributions and to have the benefit of all other rights of
holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this __ day of June, 1996.
VARLEN CORPORATION
By:
Name:
Title:
Exhibit B
Form of Right Certificate
Certificate No. R-______
NOT EXERCISABLE AFTER JUNE 16, 2006 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED
TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED
IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL
BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
RIGHT CERTIFICATE
VARLEN CORPORATION
This certifies that ____________________________ or
registered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights
Agreement, dated as of June 17, 1996, as the same may be amended
from time to time (the "Rights Agreement"), between Varlen
Corporation, a Delaware corporation (the "Company"), and Harris
Trust and Savings Bank, as Rights Agent (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to
5:00 P.M., Chicago, Illinois time, on June 16, 2006, at the
office or agency of the Rights Agent designated for such purpose,
or of its successor as Rights Agent, one one-thousandth of a
fully paid non-assessable share of Series A Junior Participating
Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), of the Company at a purchase price of $75 per one one-
thousandth of a share of Preferred Stock (the "Purchase Price"),
upon presentation and surrender of this Right Certificate with
the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Rights Certificate (and the number of
one one-thousandths of a share of Preferred Stock which may be
purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of
July 1, 1996, based on the Preferred Stock as constituted at such
date. As provided in the Rights Agreement, the Purchase Price,
the number of one one-thousandths of a share of Preferred Stock
(or other securities or property) which may be purchased upon the
exercise of the Rights and the number of Rights evidenced by this
Right Certificate are subject to modification and adjustment upon
the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file
at the principal executive offices of the Company and the above-
mentioned office or agency of the Rights Agent. The Company will
mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request
therefor.
This Right Certificate, with or without other Right
Certificates, upon surrender at the office or agency of the
Rights Agent designated for such purpose, may be exchanged for
another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights
evidenced by the Right Certificate or Right Certificates
surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate (i) may be redeemed by the
Company at a redemption price of $.01 per Right or (ii) may be
exchanged in whole or in part for shares of the Company's Common
Stock, par value $.10 per share, or shares of Preferred Stock.
No fractional shares of Preferred Stock or Common Stock
will be issued upon the exercise or exchange of any Right or
Rights evidenced hereby (other than fractions of Preferred Stock
which are integral multiples of one one-thousandth of a share of
Preferred Stock, which may, at the election of the Company, be
evidenced by depository receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any
purpose the holder of the Preferred Stock or of any other
securities of the Company which may at any time be issuable on
the exercise or exchange hereof, nor shall anything contained in
the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement) or to
receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by this Right Certificate shall have
been exercised or exchanged as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory
for any purpose until it shall have been countersigned by the
Rights Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal. Dated as of _________ __,
199_.
VARLEN CORPORATION
By:__________________________________
[Title]
ATTEST:
____________________________________
[Title]
Countersigned:
HARRIS TRUST AND SAVINGS BANK., as Rights Agent
By__________________________________
[Title]
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED __________________________ hereby
sells, assigns and transfers unto
_______________________________________________________________
(Please print name and address of transferee)
________________________________________________________________
Rights represented by this Right Certificate, together with all
right, title and interest therein, and does hereby irrevocably
constitute and appoint _________________
Attorney, to transfer said Rights on the books of the within-
named Company, with full power of substitution.
Dated: ____________________________
____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company,
broker, dealer or other eligible institution participating in a
recognized signature guarantee medallion program.
.................................................................
.............................................
(To be completed)
The undersigned hereby certifies that the Rights
evidenced by this Right Certificate are not beneficially owned
by, were not acquired by the undersigned from, and are not being
assigned to an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).
____________________________________
Signature
Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To VARLEN CORPORATION:
The undersigned hereby irrevocably elects to exercise
________ Rights represented by this Right Certificate to purchase
the shares of Preferred Stock (or other securities or property)
issuable upon the exercise of such Rights and requests that
certificates for such shares of Preferred Stock (or such other
securities) be issued in the name of:
___________________________________________________________________
(Please print name and address)
____________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by
this Right Certificate, a new Right Certificate for the balance
remaining of such Rights shall be registered in the name of and
delivered to:
Please insert social security
or other identifying number
___________________________________________________________________
(Please print name and address)
____________________________________________________________________
Dated:________________________
____________________________________
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by a bank, trust company,
broker, dealer or other eligible institution participating in a
recognized signature guarantee medallion program.
Form of Reverse Side of Right Certificate - continued
______________________________________________________________________
(To be completed)
The undersigned certifies that the Rights evidenced by
this Right Certificate are not beneficially owned by, and were
not acquired by the undersigned from, an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights
Agreement).
____________________________________
Signature
_____________________________________________________________________
NOTICE
The signature in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to the
name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the
Form of Assignment or the Form of Election to Purchase, as the
case may be, is not completed, such Assignment or Election to
Purchase will not be honored.
Exhibit C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR
BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT)
AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND
WILL NO LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF PREFERRED STOCK OF
VARLEN CORPORATION
On June 17, 1996, the Board of Directors of Varlen
Corporation (the "Company") declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of
common stock, par value $.10 per share, of the Company (the
"Common Stock"). The dividend is payable at the close of
business on July 15, 1996 (the "Record Date") to the stockholders
of record on July 1, 1996. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share
of Series A Junior Participating Preferred Stock, par value $1.00
per share, of the Company (the "Preferred Stock") at a price of
$75 per one one-thousandth of a share of Preferred Stock (the
"Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement dated as
of June 17, 1996, as the same may be amended from time to time
(the "Rights Agreement"), between the Company and Harris Trust
and Savings Bank, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a
public announcement that a person or group of affiliated or
associated persons (with certain exceptions, an "Acquiring
Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock or (ii) 10 business days (or
such later date as may be determined by action of the Board of
Directors prior to such time as any person or group of affiliated
persons becomes an Acquiring Person) following the commencement
of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the
outstanding shares of Common Stock (the earlier of such dates
being called the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Stock certificates
outstanding as of the Record Date, by such Common Stock
certificate together with a copy of this Summary of Rights.
The Rights Agreement provides that, until the
Distribution Date (or earlier expiration of the Rights), the
Rights will be transferred with and only with the Common Stock.
Until the Distribution Date (or earlier expiration of the
Rights), new Common Stock certificates issued after the Record
Date upon transfer or new issuances of Common Stock will contain
a notation incorporating the Rights Agreement by reference.
Until the Distribution Date (or earlier expiration of the
Rights), the surrender for transfer of any certificates for
shares of Common Stock outstanding as of the Record Date, even
without such notation or a copy of this Summary of Rights, will
also constitute the transfer of the Rights associated with the
shares of Common Stock represented by such certificate. As soon
as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Stock as of the close
of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution
Date. The Rights will expire on June 16, 2006 (the "Final
Expiration Date"), unless the Final Expiration Date is advanced
or extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of
Preferred Stock or other securities or property issuable, upon
exercise of the Rights is subject to adjustment from time to time
to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred
Stock at a price, or securities convertible into Preferred Stock
with a conversion price, less than the then-current market price
of the Preferred Stock or (iii) upon the distribution to holders
of the Preferred Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends or dividends payable
in Preferred Stock) or of subscription rights or warrants (other
than those referred to above).
The number of outstanding Rights is subject to adjustment
in the event of a stock dividend on the Common Stock payable in
shares of Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of
the Rights will not be redeemable. Each share of Preferred Stock
will be entitled, when, as and if declared, to a minimum
preferential quarterly dividend payment of $100 per share but
will be entitled to an aggregate dividend of 1000 times the
dividend declared per share of Common Stock. In the event of
liquidation, dissolution or winding up of the Company, the
holders of the Preferred Stock will be entitled to a minimum
preferential payment of $100 per share (plus any accrued but
unpaid dividends) but will be entitled to an aggregate payment of
1000 times the payment made per share of Common Stock. Each
share of Preferred Stock will have 1000 votes, voting together
with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which outstanding shares of
Common Stock are converted or exchanged, each share of Preferred
Stock will be entitled to receive 1000 times the amount received
per share of Common Stock. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the value of the one one-
thousandth interest in a share of Preferred Stock purchasable
upon exercise of each Right should approximate the value of one
share of Common Stock.
In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, each holder of a
Right, other than Rights beneficially owned by the Acquiring
Person (which will thereupon become void), will thereafter have
the right to receive upon exercise of a Right that number of
shares of Common Stock having a market value of two times the
exercise price of the Right.
In the event that, after a person or group has become an
Acquiring Person, the Company is acquired in a merger or other
business combination transaction or 50% or more of its
consolidated assets or earning power are sold, proper provisions
will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become
void) will thereafter have the right to receive upon the exercise
of a Right that number of shares of common stock of the person
with whom the Company has engaged in the foregoing transaction
(or its parent) that at the time of such transaction have a
market value of two times the exercise price of the Right.
At any time after any person or group becomes an
Acquiring Person and prior to the earlier of one of the events
described in the previous paragraph or the acquisition by such
Acquiring Person of 50% or more of the outstanding shares of
Common Stock, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such Acquiring Person
which will have become void), in whole or in part, for shares of
Common Stock or Preferred Stock (or a series of the Company's
preferred stock having equivalent rights, preferences and
privileges), at an exchange ratio of one share of Common Stock,
or a fractional share of Preferred Stock (or other preferred
stock) equivalent in value thereto, per Right.
With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments require an
adjustment of at least 1% in such Purchase Price. No fractional
shares of Preferred Stock or Common Stock will be issued (other
than fractions of Preferred Stock which are integral multiples of
one one-thousandth of a share of Preferred Stock, which may, at
the election of the Company, be evidenced by depositary
receipts), and in lieu thereof an adjustment in cash will be made
based on the current market price of the Preferred Stock or the
Common Stock.
At any time prior to the time an Acquiring Person becomes
such, the Board of Directors of the Company may redeem the Rights
in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
For so long as the Rights are then redeemable, the
Company may, except with respect to the redemption price, amend
the Rights Agreement in any manner. After the Rights are no
longer redeemable, the Company may, except with respect to the
redemption price, amend the Rights Agreement in any manner that
does not adversely affect the interests of holders of the Rights.
Until a Right is exercised or exchanged, the holder
thereof, as such, will have no rights as a stockholder of the
Company, including, without limitation, the right to vote or to
receive dividends.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A dated July __, 1996. A copy
of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to
the Rights Agreement, as the same may be amended from time to
time, which is hereby incorporated herein by reference.
Execution Copy of 7/19/96
Varlen Corporation Credit Agreement
CONFORMED EXECUTION COPY
CREDIT AGREEMENT
by and among
VARLEN CORPORATION,
THE BORROWING SUBSIDIARIES
AND LENDERS PARTY HERETO
and
THE FIRST NATIONAL BANK OF CHICAGO,
As Agent
dated as of July 19, 1996
TABLE OF CONTENTS
ARTICLE I DEFINITIONS Page 1
ARTICLE II THE CREDITS Page 24
2.1. Commitment Page 24
2.1.1. Facility A Loans. Page 24
2.1.2. Facility B Loans Page 27
2.2. Ratable Loans; Types of Advances Page 27
2.3. Minimum Amount of Each Advance Page 28
2.4. Fees Page 28
2.4.1. Commitment Fee Page 28
2.4.2. Upfront Fee Page 28
2.4.3. Agent Fees Page 28
2.5. Applicable Margin Page 28
2.6. Reductions in Aggregate Facility B
Commitment Page 30
2.7. Principal Payments Page 30
2.7.1. Optional Payments Page 30
2.7.2. Currency Fluctuations; Permitted
Excess over Aggregate Commitment Page 31
2.7.3. Termination Page 31
2.7.4. Mandatory Prepayments Page 31
2.8. Method of Selecting Types and
Interest Periods for New Advances Page 33
2.9. Conversion and Continuation of
Outstanding Advances Page 34
2.9.1. Dollar Advances Page 34
2.9.2. Foreign Currency Advances Page 34
2.9.3. General Provisions Page 34
2.10. Changes in Interest Rate, etc. Page 35
2.11. Rates Applicable After Default Page 35
2.12. Method of Payment Page 36
2.12.1. General Page 36
2.12.2. Currency of Payment Page 36
2.13. Notes; Telephonic Notices Page 37
2.14. Interest Payment Dates; Interest
and Fee Basis Page 37
2.15. Notification by Agent Page 37
2.16. Lending Installations Page 37
2.17. Non-Receipt of Funds by the Agent Page 38
2.18. Withholding Tax Exemption Page 38
2.19. Extension of Facility B
Termination Date Page 39
2.20. Change in Circumstances Page 39
2.20.1. Taxes Page 39
2.20.2. Yield Protection Page 41
2.20.3. Changes in Capital Adequacy
Regulations Page 42
2.20.4. Availability of Types of
Advances Page 43
2.20.5. Funding Indemnification Page 43
2.20.6. Lender Statements; Survival
of Indemnity Page 43
ARTICLE III THE LETTER OF CREDIT SUBFACILITY Page 44
3.1. Obligation to Issue Page 44
3.2. Types and Amounts Page 44
3.3. Conditions Page 45
3.4. Procedure for Issuance of Facility B
Letters of Credit Page 45
3.5. Reimbursement Obligations; Automatic
Alternate Base Rate Advance;
Duties of Issuing Banks Page 47
3.6. Participation Page 48
3.7. Payment of Reimbursement Obligations Page 49
3.8. Compensation for Facility B Letters of
Credit Page 50
3.9. Letter of Credit Collateral Account Page 52
ARTICLE IV CONDITIONS PRECEDENT Page 52
4.1. Initial Advance and Facility B Letter
of Credit Page 52
4.2. Each Advance and Facility B Letter of
Credit Page 53
4.3. First Advance or Facility B Letter of
Credit to New Borrowing Subsidiaries Page 54
4.4. Facility A Advance in connection with
Offer to Purchase Page 55
4.5. Facility A Advance in connection with
Merger Page 56
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
BORROWER Page 58
5.1. Corporate Existence and Standing Page 58
5.2. Authorization and Validity Page 58
5.3. No Conflict; Government Consent Page 58
5.4. Financial Statements Page 59
5.5. Material Adverse Change Page 59
5.6. Taxes Page 59
5.7. Litigation and Contingent
Obligations Page 59
5.8. Subsidiaries Page 60
5.9. ERISA Page 60
5.10. Accuracy of Information Page 60
5.11. Regulations G, T, U, and X Page 60
5.12. Material Agreements Page 60
5.13. Compliance With Laws Page 61
5.14. Ownership of Properties Page 61
5.15. Investment Company Act Page 61
5.16. Public Utility Holding Company Act Page 61
5.17. Subordinated Indebtedness Page 61
5.18. Insurance Page 61
5.19. Solvency Page 61
5.20. Benefits Page 62
ARTICLE V-ARE PRESENTATIONS AND WARRANTIES OF BORROWING
SUBSIDIARIES Page 62
5A.1. Corporate Existence and Standing Page 63
5A.2. Authorization and Validity Page 63
5A.3. No Conflict; Government Consent Page 63
5A.4. Filing Page 63
5A.5. No Immunity Page 64
5A.6. Investment Company Act Page 64
5A.7. Public Utility Holding Company Act Page 64
5A.8. Regulation U Page 64
ARTICLE VI COVENANTS Page 65
6.1. Financial Reporting Page 65
6.2. Use of Proceeds Page 66
6.3. Notice of Default Page 67
6.4. Conduct of Business Page 67
6.5. Taxes Page 67
6.6. Insurance Page 67
6.7. Compliance with Laws Page 67
6.8. Maintenance of Properties Page 68
6.9. Inspection Page 68
6.10. Dividends Page 68
6.11. Indebtedness Page 68
6.12. Merger Page 69
6.13. Sale of Assets Page 69
6.14. Sale of Accounts Page 70
6.15. Sale and Leaseback Page 70
6.16. Investments and Acquisitions Page 70
6.17. Liens Page 73
6.18. Fixed Asset Expenditures Page 74
6.19. Rentals Page 74
6.20. Affiliates Page 75
6.21. Subordinated Indebtedness Page 75
6.22. Financial Covenants Page 75
6.22.1. Interest Coverage Ratio Page 75
6.22.2. Leverage Ratio Page 75
6.22.3. Operating Cash Flow to Senior
Debt Page 76
6.22.4. Net Worth Page 76
6.22.5 Fixed Charge Coverage Ratio Page 76
6.23. Foreign Assets Page 77
6.24. Rate Hedging Obligations Page 77
6.25. Interest Rate Agreements Page 77
6.26. Consummation of Merger Page 77
ARTICLE VII DEFAULTS Page 78
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS
AND REMEDIES Page 80
8.1. Acceleration Page 80
8.2. Amendments Page 81
8.3. Preservation of Rights Page 81
ARTICLE IX GENERAL PROVISIONS Page 82
9.1. Survival of Representations Page 82
9.2. Governmental Regulation Page 82
9.3. Taxes Page 82
9.4. Headings Page 82
9.5. Entire Agreement Page 82
9.6. Several Obligations; Benefits of
this Agreement Page 82
9.7. Expenses; Indemnification Page 83
9.8. Numbers of Documents Page 83
9.9. Accounting Page 83
9.10. Severability of Provisions Page 83
9.11. Nonliability of Lenders Page 84
9.12. Language Page 84
9.13. CHOICE OF LAW Page 84
9.14. CONSENT TO JURISDICTION Page 84
9.15. SERVICE OF PROCESS Page 84
9.16. WAIVER OF JURY TRIAL Page 85
9.17. ERISA Representation Page 85
9.18. Confidentiality Page 85
9.19. Joint and Several Liability Page 86
ARTICLE X THE AGENT Page 86
10.1. Appointment Page 86
10.2. Powers Page 86
10.3. General Immunity Page 86
10.4. No Responsibility for Loans,
Recitals, etc. Page 87
10.5. Action on Instructions of Lenders Page 87
10.6. Employment of Agents and Counsel Page 87
10.7. Reliance on Documents; Counsel Page 87
10.8. Agent's Reimbursement and
Indemnification Page 87
10.9. Rights as a Lender Page 88
10.10. Lender Credit Decision Page 88
10.11. Successor Agent Page 88
ARTICLE XI SETOFF; RATABLE PAYMENTS Page 89
11.1. Setoff Page 89
11.2. Ratable Payments Page 89
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS;
PARTICIPATIONS Page 90
12.1. Successors and Assigns Page 90
12.2. Participations Page 90
12.2.1 Permitted Participants; Effect Page 90
12.2.2. Benefit of Setoff Page 91
12.3. Assignments Page 91
12.3.1. Permitted Assignments Page 91
12.3.2. Effect; Effective Date Page 91
12.4. Dissemination of Information Page 92
12.5. Tax Treatment Page 92
ARTICLE XIII NOTICES Page 92
13.1. Giving Notice Page 92
13.2. Change of Address Page 93
ARTICLE XIV BORROWER RESPONSIBILITY FOR
BORROWING SUBSIDIARY OBLIGATIONS Page 93
14.1 Direct Obligations Page 93
14.2 Obligations Unconditional Page 93
14.3. Discharge Only Upon Payment
in Full; Reinstatement in Certain
Circumstances Page 94
14.4. Waiver Page 94
14.5. Stay of Acceleration Page 95
14.6. Payments Page 95
14.7 Subrogation Page 95
ARTICLE XV COUNTERPARTS Page 95
EXHIBITS
EXHIBIT A-1A BORROWER FACILITY A NOTE
EXHIBIT A-1B BORROWER FACILITY B NOTE
EXHIBIT A-2 BORROWING SUBSIDIARY NOTE
EXHIBIT B ELECTION TO PARTICIPATE
EXHIBIT C FORM OF APPLICATION FOR
STANDBY FACILITY LETTER OF CREDIT
EXHIBIT D-1 FORM OF OPINION OF COUNSEL TO BORROWER
EXHIBIT D-2 FORM OF OPINION OF COUNSEL TO
BORROWING SUBSIDIARY
EXHIBIT E LOAN/CREDIT RELATED MONEY
TRANSFER INSTRUCTION
EXHIBIT F COMPLIANCE CERTIFICATE
EXHIBIT G FORM OF GUARANTY
EXHIBIT H ASSIGNMENT AGREEMENT
EXHIBIT I LIST OF CLOSING DOCUMENTS
SCHEDULES
SCHEDULE 1 PERCENTAGES
SCHEDULE 2 LENDING INSTALLATIONS
SCHEDULE 3 LITIGATION
SCHEDULE 4 SUBSIDIARIES AND OTHER INVESTMENTS
SCHEDULE 5 INDEBTEDNESS AND LIENS
SCHEDULE 5.3 CONFLICTS; CONSENTS
SCHEDULE 6 EXISTING LETTERS OF CREDIT
CREDIT AGREEMENT
This Agreement, dated as of July 19, 1996, is among Varlen
Corporation, a Delaware corporation, the Borrowing Subsidiaries
who may from time to time become party hereto, the Lenders and
The First National Bank of Chicago, as Agent. The parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of
related transactions, consummated on or after the date of this
Agreement, by which the Borrower or any of its Subsidiaries (i)
acquires (A) all or a substantial part of the assets (other than
through a purchase of inventory in the ordinary course of
business), (B) one or more manufacturing lines or (C) a going
business or division, of any Person whether through purchase of
assets, merger or otherwise or (ii) directly or indirectly
acquires (in one transaction or as the most recent transaction in
a series of transactions) control of at least 10% (in number of
votes) of the securities of a corporation which have ordinary
voting power for the election of directors (other than securities
having such power only by reason of the happening of a
contingency) or a 10% (by percentage or voting power) ownership
interest in any partnership, joint venture or limited liability
company (other than corporate partnerships or joint ventures
covered by the preceding clause).
"Acquisition Agreement" is defined in Section 4.5.
"Acquisition Subsidiary" means, prior to the Merger, BAS,
Inc., a Virginia corporation, and from and after the Merger,
Brenco, and their respective permitted successors and assigns.
"Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Loans made by the Lenders to the
Borrower or any other Borrowing Entity of the same Type and, in
the case of Eurocurrency Advances, denominated in the same
Eurocurrency and, in the case of Fixed Rate Advances, for the
same Interest Period.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control
with such Person. A Person shall be deemed to control another
Person if the controlling Person owns 20% or more of any class of
equity securities (or other ownership interests) of the
controlled Person having the right to elect directors (or similar
Persons) without the happening of a contingency or possesses,
directly or indirectly, the power to direct or cause the
direction of the management or policies of the controlled Person,
whether through ownership of stock, membership interests, by
contract or otherwise.
"Agent" means The First National Bank of Chicago in its
capacity as contractual representative for the Lenders pursuant
to Article X, and not in its individual capacity as a Lender, and
any successor Agent appointed pursuant to Article X.
"Aggregate Available Commitment" means at any time the
Aggregate Commitment minus the Facility B Letter of Credit
Obligations.
"Aggregate Commitment" means the sum of the Aggregate
Facility A Commitment and the Aggregate Facility B Commitment.
"Aggregate Facility A Commitment" means $135,000,000, as
such amount may be reduced from time to time pursuant to the
terms hereof.
"Aggregate Facility B Commitment" means $55,000,000, as such
amount may be reduced from time to time pursuant to the terms
hereof.
"Agreement" means this credit agreement, as it may be
amended, modified, supplemented and/or restated, and as in effect
from time to time.
"Agreement Accounting Principles" means generally accepted
accounting principles as in effect as of the date of this
Agreement, applied in a manner consistent with that used in
preparing the financial statements referred to in Section 5.4.
"Alternate Base Rate" means, for any day, a rate of interest
per annum equal to the sum of (i) the percentage indicated as the
Applicable Margin for such day for the Alternate Base Rate and
(ii) the higher of (a) the Corporate Base Rate for such day and
(b) the sum of Federal Funds Effective Rate for such day plus
1/2% per annum.
"Alternate Base Rate Advance" means an Advance which bears
interest at the Alternate Base Rate.
"Alternate Base Rate Loan" means a Loan which bears interest
at the Alternate Base Rate.
"Applicable Margin" means, at any date of determination
thereof with respect to any Advance, the commitment fees payable
pursuant to Section 2.4.1 and Facility B Letter of Credit Fees,
the respective rates per annum for such Advance, commitment fees
and Facility B Letter of Credit Fees calculated in accordance
with the terms of Section 2.5.
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Assessment Rate" means, for any CD Interest Period, the
assessment rate per annum (rounded upwards to the next higher
multiple of 1/100 of 1% if the rate is not such a multiple)
payable to the Federal Deposit Insurance Corporation (or any
successor) for the insurance of domestic time deposits of First
Chicago, as determined by First Chicago on the first day of such
CD Interest Period.
"Asset Sale" means with respect to any Person, (i) the
sale, lease, conveyance, disposition (including any "disposition"
as such term is defined in Section 6.13) or other transfer by
such Person of any of its assets (including by way of a sale-
leaseback transaction and including the sale or other transfer of
any of the capital stock of any Subsidiary of such Person) or
(ii) the issuance, sale, conveyance, disposition or other
transfer by such Person (other than the Borrower) of any capital
stock of such Person; provided, however, that notwithstanding the
foregoing, the term "Asset Sale" shall not include the sale,
conveyance, disposition or other transfer of (i) inventory in the
ordinary course of business, (ii) equipment in the ordinary
course of business in connection with the replacement of such
equipment and (iii) receivables in connection with a sale
permitted under Section 6.14.
"Authorized Officer" (i) of the Borrower means the
President, the Vice President, Finance and Chief Financial
Officer, the Executive Vice President or any Group Vice President
thereof, and (ii) of any other Borrowing Entity means the
President, any Managing Director or any Controller/Treasurer
thereof or any attorney-in-fact thereof who is also an Authorized
Officer of the Borrower, each such enumerated Person acting
singly.
"Borrower" means Varlen Corporation, a Delaware corporation,
and its permitted successors and assigns.
"Borrower Note" means (i) in connection with the Facility A
Loans, a promissory note in substantially the form of Exhibit A-
1A hereto, duly executed by the Borrower and payable to the order
of a Lender in a principal amount less than or equal to its
Facility A Commitment, including any amendment, modification,
renewal or replacement of such promissory note and (ii) in
connection with the Facility B Loans, a promissory note, in
substantially the form of Exhibit A-1B hereto, duly executed by
the Borrower and payable to the order of a Lender in a principal
amount up to and including its Facility B Commitment, including
any amendment, modification, renewal or replacement of such
promissory note.
"Borrowing Date" means a date on which an Advance is or is
to be made hereunder or a Facility B Letter of Credit is or is to
be issued hereunder.
"Borrowing Entities" means (i) with respect to a Facility A
Loan, the Borrower and (ii) with respect to a Facility B Loan,
the Borrower and any Borrowing Subsidiaries.
"Borrowing Notice" is defined in Section 2.8.
"Borrowing Subsidiary" means any Wholly-Owned Subsidiary,
including without limitation the Acquisition Subsidiary, which
has satisfied the provisions of Section 4.3 hereof, and its
permitted successors and assigns.
"Borrowing Subsidiary Note" means a promissory note, in
substantially the form of Exhibit A-2 hereto, duly executed by a
Borrowing Subsidiary and payable to the order of a Lender in a
principal amount up to and including its Facility B Commitment,
including any amendment, modification, renewal or replacement of
such promissory note.
"Borrowing Subsidiary Obligations" means, with respect to
each Borrowing Subsidiary, any and all amounts or obligations
payable or performable by such Borrowing Subsidiary under or in
respect of this Agreement or its Borrowing Subsidiary Note,
including without limitation all principal and interest payable
hereunder or under such Borrowing Subsidiary Note in respect of
Loans made to such Borrowing Subsidiary and all obligations
arising under or resulting from any Facility B Letter of Credit
issued for the benefit and upon the application of such Borrowing
Subsidiary.
"Brenco" means Brenco, Incorporated, a Virginia corporation.
"Brenco Acquisition" means the acquisition of Brenco by the
Acquisition Subsidiary and the Borrower pursuant to the
Acquisition Agreement. The Brenco Acquisition shall be
consummated in two stages: (i) the purchase of shares of common
stock of Brenco by the Acquisition Subsidiary pursuant to the
Offer to Purchase and (ii) the Merger.
"Business Day" means (i) with respect to any borrowing,
payment or rate selection of Eurocurrency Advances, a day (other
than a Saturday or Sunday) on which banks generally are open in
Chicago, New York, London and, for currencies other than Dollar-
denominated Eurocurrencies, the principal financial center of the
country in whose currency the Advance is to be funded, for the
conduct of commercial lending activities and on which dealings in
the relevant Eurocurrency are carried on in the London interbank
market and (ii) for all other purposes, a day (other than a
Saturday or Sunday) on which banks generally are open in Chicago
for the conduct of commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property
by such Person as lessee which would be capitalized on a balance
sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount
of the obligations of such Person under Capitalized Leases which
would be shown as a liability on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Cash Flow Incurrence Test" means, with respect to any
Acquisition, a pro-forma incurrence test, calculated as of the
most recent fiscal quarter of the Borrower for which the Borrower
was obligated (pursuant to Section 6.1) to deliver financial
statements on or prior to such date of calculation (the "End
Quarter"), the satisfaction of which requires the ratio of:
(i) the sum of (a) Operating Cash Flow for such
End Quarter and the three immediately preceding fiscal
quarters plus (b) either (1) EBITDA of the Target of
the Acquisition for such End Quarter and the three
immediately preceding fiscal quarters (provided that if
the fiscal quarters of such Target are not coterminous
with those of the Borrower, then for the most recently
ended fiscal quarter of such Target for which financial
statements are available and which ended within 75 days
of the last day of the End Quarter and the three
immediately preceding fiscal quarters of such Target)
or (2) if the Borrower is acquiring 50% or less of the
Target of such Acquisition (and the Acquisition is of
voting stock or other ownership interests in a Person)
and the acquisition agreement (or other relevant
document) (x) requires the payment of any Mandatory
Cash Payments to the Borrower or any Subsidiary, the
amount of such Mandatory Cash Payments that (on a pro
forma basis) would have been so required to be paid for
such four fiscal quarters, adjusted for withholding
taxes (if any), plus the amount calculated under clause
(y), if any, (y) requires the payment of any Contingent
Cash Payments to the Borrower or any Subsidiary, the
amount of such Contingent Cash Payments accepted by the
Agent (as described in the definition of Contingent
Cash Payments) that (on a pro forma basis) would have
been paid for such four fiscal quarters, adjusted for
withholding taxes (if any), plus the amount calculated
under clause (x), if any, (z) does not require the
payment of any Mandatory Cash Payments or any
Contingent Cash Payments, zero to
(ii) the sum of (x) Senior Debt plus (y) debt to
be assumed by the Borrower or any of its Subsidiaries
pursuant to the Acquisition, minus (z) the cash and
Marketable Securities acquired by the Borrower or any
of its Subsidiaries in such Acquisition
to be greater than or equal to .20 to 1.0.
"CD Interest Period" means, with respect to a Fixed CD Rate
Advance, a period of 30, 60, 90 or 180 days commencing on a
Business Day selected by a Borrowing Entity pursuant to this
Agreement. If such CD Interest Period would end on a day which
is not a Business Day, such CD Interest Period shall end on the
next succeeding Business Day.
"Change in Control" means any of the following events that
occur after the date of this Agreement: (i) all or substantially
all of the Borrower's assets are sold as an entirety to any
Person or related group of Persons; (ii) there shall be
consummated any consolidation or merger of the Borrower (A) in
which the Borrower is not the continuing or surviving corporation
(other than a consolidation or merger with a Wholly-Owned
Subsidiary of the Borrower in which all shares of Common Stock of
the Borrower outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock of the Borrower is
converted into cash, securities or other property, in each case
other than a consolidation or merger of the Borrower in which the
holders of the Common Stock of the Borrower immediately prior to
the consolidation or merger have, directly or indirectly, at
least a majority of the Common Stock of the continuing or
surviving corporation immediately after such consolidation or
merger; (iii) any Person, or any Persons acting together which
would constitute a "group" for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Borrower, any Subsidiary, any employee stock
purchase or program, retirement plan or automatic dividend
reinvestment plan or any substantially similar plan of the
Borrower or any Subsidiary or any Person holding securities of
the Borrower for or pursuant to the terms of any such employee
benefit plan), together with any Affiliates and Subsidiaries
thereof, shall beneficially own (as defined in Rule 13 d-3 of the
Exchange Act) at least 35% of the total voting power of all
classes of capital stock of the Borrower entitled to vote
generally in the election of directors of the Borrower; or (iv)
there shall be consummated any transaction the result of which
shall be that the Borrower or the Acquisition Subsidiary shall,
prior to the consummation of the Merger, fail to beneficially own
at least 66-2/3% of the outstanding shares of Brenco; provided
that the failure of any event to constitute a "Change in Control"
for the purposes of Section 7.12 shall not be deemed to waive or
otherwise affect the application of any other provision of this
Agreement to such event.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Commercial Letter of Credit" means a commercial or trade
Letter of Credit issued by an Issuing Bank pursuant to Section
3.1.
"Commitment" means, for each Lender, the obligation of such
Lender to make Loans and participate in Facility B Letters of
Credit not exceeding in the aggregate the sum of such Lender's
Facility A Commitment and Facility B Commitment.
"Contingent Cash Payments" means those cash payments
required (upon the occurrence of a contingency) to be paid to the
Borrower or any Subsidiary pursuant to the terms of an
acquisition agreement (or other relevant document) described in
the definition of "Cash Flow Incurrence Test" and which are
accepted by the Agent as likely to be paid (because of the likely
occurrence of the applicable contingency), such payments to
include, without limitation, those required on account of royalty
payments, license and technical transfer fees, administrative
reimbursements, dividends, interest, principal and other return
of capital payments which (in each case) are contingent.
"Contingent Obligation" of a Person means (without
duplication) any agreement, undertaking or arrangement by which
such Person assumes, guarantees, endorses, contingently agrees to
purchase or provide funds for the payment of, or otherwise
becomes or is contingently liable upon, the obligation or
liability of any other Person (including but not limited to
Financial Guaranties), or agrees to maintain the net worth or
working capital or other financial condition of any other Person,
or otherwise assures any creditor of such other Person against
loss, including, without limitation, any comfort letter,
operating agreement, take-or-pay contract or Letter of Credit
reimbursement obligation. The amount of any Contingent
Obligation that is not a Financial Guaranty of a Person or a
standby Letter of Credit reimbursement obligation shall, at any
date, be the amount of such obligation which is reasonably
susceptible to quantification as a matured obligation (taking
into account the likelihood that such Contingent Obligation will
mature into an actual obligation). The amount of any Contingent
Obligation that is a standby Letter of Credit reimbursement
obligation shall be the LC Contingent Reimbursement Value. The
amount of any Financial Guaranty of a Person at any date shall be
the maximum amount that may become payable (conditionally or
unconditionally) by such Person as of such date thereunder.
"Controlled Group" means all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrower or any of its Subsidiaries, are treated as a single
employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section
2.9.3.
"Corporate Base Rate" means a rate per annum equal to the
corporate base rate of interest announced by First Chicago from
time to time, changing when and as said corporate base rate
changes.
"Default" means an event described in Article VII.
"Designated Prepayment" is defined in Section 2.7.4(iv).
"Dollar" or "$" means United States Dollars.
"Dollar Equivalent" of (i) any Advance (other than a Foreign
Currency Advance) as of any date, means the Dollar amount of such
Advance outstanding (or to be made) on such date, (ii) any
Foreign Currency Advance as of any date, means the amount of
Dollars into which the amount of such Foreign Currency Advance
outstanding (or to be made) on such date may be converted at the
spot rate at which Dollars are offered to the Agent in London for
the Foreign Currency in which such Foreign Currency Advance is
(or is to be) denominated in an amount comparable to the amount
of such Advance at approximately 11:00 a.m. (London time) on the
second Business Day prior to the date such Foreign Currency
Advance was initially (or is to be) made, (iii) any Facility B
Letter of Credit as of any date, means the Dollar stated amount
of such Facility B Letter of Credit undrawn on such date, (iv)
any Reimbursement Obligation as of any date, means the Dollar
amount of the then unreimbursed payments or disbursements made by
Lenders, the Issuing Banks and/or the Agent (without duplication)
in respect of draws under any Facility B Letter of Credit and (v)
any other amount required to be determined under the terms of
this Agreement (a) if denominated in Dollars, such Dollar amount
and (b) if denominated in a currency other than Dollars, the
amount of Dollars required to purchase such amount of other
currency at the spot rate at which Dollars are offered by
recognized dealers to the Agent in London for such other currency
on the date of the calculation of such amount.
"Domestic Borrowing Subsidiary" means any Domestic
Subsidiary that is also a Borrowing Subsidiary.
"Domestic Subsidiary" means any Subsidiary which is
incorporated or organized under the laws of the United States of
America, any state thereof or the District of Columbia.
"Earnings" means, (i) when used with respect to the
Borrower, income from operations on a consolidated basis for the
Borrower and its Subsidiaries excluding equity earnings in non-
consolidated Subsidiaries and Affiliates plus cash dividends from
non-consolidated Subsidiaries and Affiliates, and (ii) when used
with respect to any other Person, income from operations on a
consolidated basis for such Person and its Subsidiaries excluding
equity earnings in non-consolidated Subsidiaries and Affiliates
plus cash dividends from non-consolidated Subsidiaries and
Affiliates.
"EBITDA" means, (i) when used in connection with the
Borrower and its Subsidiaries for any period, the sum of Earnings
before Net Interest, income taxes, depreciation expense and
amortization expense for such period plus any non-cash charges
and expenses incurred during such period related to the
disposition of businesses or entire facilities or to the
revaluation of intangibles minus any cash payments made during
such period with respect to any non-cash charges and expenses
related to the disposition of businesses or entire facilities
previously taken into account, all determined in accordance with
Agreement Accounting Principles on a consolidated basis for the
Borrower and its Subsidiaries and (ii) when used in connection
with any Acquisition Target for any period, (y) where the
Acquisition is of voting securities or other ownership interests
in a corporation, partnership interest or joint venture, Earnings
before Net Interest, income taxes, depreciation expense and
amortization expense for such period, all determined in
accordance with Agreement Accounting Principles on a consolidated
basis for the Target and its Subsidiaries included in such
Acquisition, and (z) where the Target consists of assets of a
Person (including, without limitation, a going business or
division or one or more manufacturing lines) other than voting
securities or other ownership interests in another Person, the
income from operations before Net Interest, income taxes,
depreciation expense and amortization expense generated by the
assets comprising the Target during such period; provided there
shall be excluded from the calculation of EBITDA the effect of
EITF 85-45 (promulgated by the Financial Accounting Standards
Board) as a result of the Brenco Acquisition.
"Effective Date" is defined in Section 4.1.
"Election to Participate" means a letter agreement, in the
form of Exhibit B attached hereto, pursuant to which a Subsidiary
agrees to become a Borrowing Subsidiary hereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation
issued thereunder.
"Eurocurrency" means Dollars and, to the extent such
currencies are freely transferable and convertible into Dollars
and are available in the London interbank market, the lawful
currencies of France, Germany, Italy, Japan, Switzerland, Canada,
the United Kingdom and any other country agreed to by the
Required Banks.
"Eurocurrency Advance" means an Advance denominated in a
Eurocurrency which bears interest at the Eurocurrency Rate,
including, but not limited to, Eurodollar Advances.
"Eurocurrency Base Rate" means either (i) with respect to
any Eurocurrency Advance for any specified Eurocurrency Interest
Period, the rate of interest per annum equal to the rate for (in
the case of Eurodollar Advances) Dollar deposits (and in the case
of Advances in any other Eurocurrency, deposits in such
Eurocurrency) in the approximate amount of such Eurocurrency
Advance with maturities equal to such Eurocurrency Interest
Period which appears on Telerate Page 3750 (or, in the case of
Advances in any other Eurocurrency, on the appropriate Telerate
Page for such Eurocurrency) or, if there is more than one such
rate for the applicable Eurocurrency, the average of such rates
rounded to the nearest 1/100 of 1%, as of 11 a.m. (London time)
two Business Days prior to the first day of such Eurocurrency
Interest Period or (ii) if no such rate of interest appears on
Telerate Page 3750 (or, in the case of Advances in any other
Eurocurrency, on the appropriate Telerate Page for such
Eurocurrency), for any specified Eurocurrency Interest Period,
the rate of interest per annum determined by the Agent to be the
rate at which deposits in the applicable Eurocurrency are offered
by First Chicago to first-class banks in the London interbank
market at approximately 11 a.m. (London time) two Business Days
prior to the first day of such Eurocurrency Interest Period for
delivery on such day, in the approximate amount of First
Chicago's pro rata share of such Eurocurrency Advance and having
a maturity equal to such Eurocurrency Interest Period. The term
"Telerate Page 3750" means the display designated as "Page 3750"
on the Associated Press-Dow Jones Telerate Service (or such other
page as may replace Page 3750 on the Associated Press-Dow Jones
Telerate Service or such other service as may be nominated by the
British Bankers' Association as the information vendor for the
purpose of displaying British Bankers' Association interest rate
settlement rates for Dollar deposits). Any Eurocurrency Rate
determined on the basis of the rate displayed on Telerate Page
3750 in accordance with the foregoing provisions of this
subparagraph shall be subject to corrections, if any, made in
such rate and displayed by the Associated Press-Dow Jones
Telerate Service within one hour of the time when such rate is
first displayed by such service.
"Eurocurrency Interest Period" means, with respect to a
Eurocurrency Advance, a period of one, two, three or six months
commencing on a Business Day selected by the Borrowing Entity
pursuant to this Agreement. Such Eurocurrency Interest Period
shall end on (but exclude) the day which corresponds numerically
to such date one, two, three or six months thereafter; provided,
however, that if there is no such numerically corresponding day
in such next, second, third or sixth succeeding month, such
Eurocurrency Interest Period shall end on the last Business Day
of such next, second, third or sixth succeeding month; and
provided further, however, that if a Eurocurrency Interest Period
would otherwise end on a day which is not a Business Day, such
Eurocurrency Interest Period shall end on the next succeeding
Business Day; provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Eurocurrency
Interest Period shall end on the immediately preceding Business
Day.
"Eurocurrency Loan" means a Loan denominated in a
Eurocurrency which bears interest at the Eurocurrency Rate,
including, but not limited to, Eurodollar Loans.
"Eurocurrency Rate" means, with respect to any Eurocurrency
Advance for any specified Eurocurrency Interest Period, a rate
per annum equal to the sum of (i) the percentage indicated as the
Applicable Margin for the Eurocurrency Rate plus (ii) the
quotient of (a) the Eurocurrency Base Rate applicable to such
Eurocurrency Advance and Eurocurrency Interest Period, divided by
(b) either (1) for any Eurodollar Advance, a number equal to one
minus the Reserve Requirement (expressed as a decimal) applicable
to such Eurocurrency Advance and Eurocurrency Interest Period or
(2) for any other Eurocurrency Advance, the number one The
Eurocurrency Rate shall be rounded to the next higher multiple of
1/16 of 1% if the rate is not such a multiple.
"Eurodollar Advance" means an Advance denominated in Dollars
which bears interest at the Eurocurrency Rate.
"Eurodollar Loan" means a Loan denominated in Dollars which
bears interest at the Eurocurrency Rate.
"Exchange Act" is defined in the definition of "Change of
Control" in this Article I.
"Excluded Asset Sales" are any of the Asset Sales permitted
under Section 6.13(a)(x) or Section 6.13(a)(y).
"Excluded Tax" is defined in Section 2.20.1(a).
"Existing Letters of Credit" means the outstanding Letters
of Credit listed on Schedule 6.
"Extension Date" means (i) initially, July 19, 2000 and (ii)
thereafter, July 19, 2001.
"Extension Request" is defined in Section 2.19.
"Facility A Advance" means an advance consisting of Facility
A Loans.
"Facility A Borrowing Date" means (i) when used with respect
to Loans made to fund the Offer to Purchase, the date(s) of the
purchase(s) of shares pursuant to the Offer to Purchase and (ii)
when used with respect to Loans made to fund the Merger, the date
of the consummation of the Merger.
"Facility A Commitment" means, for each Lender, the
obligation of such Lender to make Facility A Loans not exceeding
an amount equal to the product of (i) the then existing Aggregate
Facility A Commitment and (ii) the Percentage applicable to such
Lender.
"Facility A Loan" is defined in Section 2.1.1.
"Facility A Termination Date" means July 19, 2002 or such
earlier date as the Aggregate Facility A Commitment may be
terminated in accordance with this Agreement.
"Facility B Advance" means an advance consisting of Facility
B Loans.
"Facility B Commitment" means, for each Lender, the
obligation of such Lender to make Facility B Loans and to
participate in Facility B Letters of Credit not exceeding an
amount equal to the product of (i) the then existing Aggregate
Facility B Commitment and (ii) the Percentage applicable to such
Lender.
"Facility B Letter of Credit" means (a) the Existing Letters
of Credit (including, without limitation the Specified Letter of
Credit) and (b) a Commercial Letter of Credit or Standby Letter
of Credit issued hereunder.
"Facility B Letter of Credit Fee" is defined in Section 3.8.
"Facility B Letter of Credit Obligations" means, as at the
time of determination thereof, the sum of (a) the Reimbursement
Obligations then outstanding and (b) the aggregate then undrawn
face amount of the then outstanding Facility B Letters of Credit
(including, without limitation, the Existing Letters of Credit).
"Facility B Loan" is defined in Section 2.1.2.
"Facility B Termination Date" means July 19, 2002 or such
(x) later date as to which the Facility B Termination Date may be
extended in accordance with Section 2.19 or (y) earlier date as
the Aggregate Facility B Commitment may be terminated in
accordance with this Agreement.
"Facility Termination Date" means the later to occur of the
Facility A Termination Date and the Facility B Termination Date.
"Federal Funds Effective Rate" means, for any day, an
interest rate per annum equal to the weighted average of the
rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such
day, as published for such day (or, if such day is not a Business
Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the
quotations at approximately 10 a.m. (Chicago time) on such day
for such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent.
"Financial Guaranties" of a Person means (without
duplication) any agreement, undertaking or arrangement by which
such Person assumes, guarantees, endorses or contingently agrees
to provide funds for the repayment of money borrowed by or
advanced to or for the account of another Person. The amount of
any Financial Guaranty of a Person at any date shall be the
maximum amount that may become payable (conditionally or
unconditionally) by such Person as of such date thereunder.
"Financial Letter of Credit" means any Standby Letter of
Credit which represents an irrevocable obligation to the
beneficiary on the part of the Issuing Bank (i) to repay money
borrowed by or advanced to or for the account of the account
party or (ii) to make any payment on account of any indebtedness
undertaken by the account party, in the event the account party
fails to fulfill its obligation to the beneficiary.
"First Chicago" means The First National Bank of Chicago in
its individual capacity, and its successors.
"Fixed Asset Expenditures" is defined in Section 6.18.
"Fixed CD Base Rate" means, with respect to any Fixed CD
Rate Advance for any specified CD Interest Period, the per annum
rate determined by the Agent to be the arithmetic average of the
prevailing bid rates quoted to the Agent at or before 10 a.m.
(Chicago time) on the first day of such CD Interest Period by
three New York or Chicago certificate of deposit dealers of
recognized standing selected by the Agent in its sole discretion
for the purchase on such day at face value of certificates of
deposit of First Chicago in the approximate amount of First
Chicago's relevant Fixed CD Rate Loan and having a maturity equal
to such CD Interest Period.
"Fixed CD Rate" means, with respect to any Fixed CD Rate
Advance for any specified CD Interest Period, a rate per annum
equal to the sum of (i) the quotient of (a) the Fixed CD Base
Rate applicable to such Fixed CD Rate Advance and CD Interest
Period, divided by (b) one minus the Reserve Requirement
(expressed as a decimal) applicable to such Fixed CD Rate Advance
and CD Interest Period plus (ii) the Assessment Rate applicable
to such CD Interest Period, plus (iii) the percentage indicated
as the Applicable Margin for the Fixed CD Rate. The Fixed CD
Rate shall be rounded to the next higher multiple of 1/100 of 1%
if the rate is not such a multiple.
"Fixed CD Rate Advance" means an Advance which bears
interest at a Fixed CD Rate.
"Fixed CD Rate Loan" means a Loan which bears interest at a
Fixed CD Rate.
"Fixed Charge Coverage Ratio" is defined in Section 6.22.5
hereof.
"Fixed Rate" means the Fixed CD Rate or the Eurocurrency
Rate.
"Fixed Rate Advance" means an Advance which bears interest
at a Fixed Rate.
"Fixed Rate Loan" means a Loan which bears interest at a
Fixed Rate.
"Foreign Borrowing Subsidiary" means any Foreign Subsidiary
that is also a Borrowing Subsidiary.
"Foreign Currency" means any currency other than Dollars.
"Foreign Currency Advance" means any Eurocurrency Advance in
a Foreign Currency.
"Foreign Currency Loan" means any Eurocurrency Loan in a
Foreign Currency.
"Foreign Subsidiary" means any Subsidiary that is not a
Domestic Subsidiary.
"Governmental Agency" means any government (foreign or
domestic) or any state or other political subdivision thereof, or
governmental body, agency, authority, department or commission
(including without limitation any taxing authority or political
subdivision) or instrumentality (including without limitation any
court or tribunal) exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government and any corporation, partnership or other entity,
directly or indirectly majority-owned by or subject to the
control of any of the foregoing.
"Gross Negligence" means recklessness, the absence of the
slightest care or the complete disregard of consequences. Gross
Negligence does not mean the absence of ordinary care or
diligence, or an inadvertent act or inadvertent failure to act.
If the term "gross negligence" is used with respect to the Agent
or any Lender or any indemnitee in any of the other Loan
Documents, it shall have the meaning set forth herein.
"Guarantors" means all of the Borrower's Subsidiaries as of
the Effective Date (other than Foreign Subsidiaries) and any
other New Subsidiaries (other than Foreign Subsidiaries) which
have satisfied the provisions of Section 6.16(b)(ii) hereof, and
their respective successors and assigns.
"Guaranty" means that certain Subsidiary Guaranty dated as
of July 19, 1996 executed by the Guarantors in favor of the
Agent, for the ratable benefit of the Lenders, as it may be
amended, modified, supplemented and/or restated (including to add
new Guarantors), and as in effect from time to time.
"Indebtedness" of a Person means (without duplication) such
Person's (i) obligations for borrowed money, (ii) obligations
representing the deferred purchase price of Property or services
(other than accounts payable arising in the ordinary course of
such Person's business payable on terms customary in the trade),
provided that such deferral was initially for a period of one
year or longer, (iii) obligations, whether or not assumed,
secured by Liens on property now or hereafter owned or acquired
by such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capitalized Lease
Obligations and (vi) Contingent Obligations.
"Initial Syndication Period" is defined in Section 2.2.
"Intangible Assets" means, as of any specified date, the
amount shown as "Goodwill and other intangible assets, less
accumulated amortization" (or any successor line item) for the
most recently ended fiscal quarter of the Borrower for which
financial statements were delivered under Section 6.1.
"Interest Coverage Ratio" means, as of any fiscal quarter
end, a ratio of (i) EBITDA for such fiscal quarter and the three
immediately preceding fiscal quarters to (ii) Net Interest for
such fiscal quarter and the three immediately preceding fiscal
quarters, all determined in accordance with Agreement Accounting
Principles on a consolidated basis for the Borrower and its
Subsidiaries.
"Interest Period" means a CD Interest Period or a
Eurocurrency Interest Period.
"Investment" of a Person means any loan, advance (other than
commissions, travel and other advances to officers, directors and
employees made in the ordinary course of business or in
connection with compensatory plan arrangements), extension of
credit (other than accounts receivable arising in the ordinary
course of business), deposit account or contribution of capital
by such Person to any other Person or any investment in, or
purchase or other acquisition of, the stock, partnership
interests, notes, debentures or other securities of any other
Person made by such Person.
"Issuance Date" is defined in Section 3.4(a).
"Issuance Notice" is defined in Section 3.4(c).
"Issuing Bank" is defined in Section 3.1.
"Judgment Currency" is defined in Section 2.12.2.
"LC Contingent Reimbursement Value" means, when used in the
definition of "Contingent Obligation" herein, (i) for standby
Letters of Credit with respect to which the Borrower has shown or
will show, on its consolidated financial statements, a charge
against Net Income and has accrued or will accrue a corresponding
liability relating to the partial or total occurrence of the
contingency against which the Letter of Credit is issued, zero,
(ii) for standby Letters of Credit issued in support of
Indebtedness reflected on the consolidated financial statements
of the Borrower, zero and (iii) for standby Letters of Credit
issued in support of Indebtedness not reflected on the
consolidated financial statements of the Borrower, the face
amount of such Letter of Credit.
"Lenders" means the lending institutions listed on the
signature pages of this Agreement and their respective successors
and assigns.
"Lending Installation" means, with respect to a Lender or
the Agent, any office, branch, subsidiary or affiliate of such
Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or
similar instrument which is issued upon the application of such
Person or upon which such Person is an account party or a co-
obligor.
"Letter of Credit Collateral Account" is defined in Section
3.9.
"Letter of Credit Request" is defined in Section 3.4(a).
"Level I Status" is defined in Section 2.5.
"Level II Status" is defined in Section 2.5.
"Level III Status" is defined in Section 2.5.
"Level IV Status" is defined in Section 2.5.
"Level V Status" is defined in Section 2.5.
"Level VI Status" is defined in Section 2.5.
"Leverage Ratio," for any day, means a ratio of (i) (a)
Indebtedness of the Borrower and its Subsidiaries on such day
minus (b) cash and Marketable Securities of the Borrower and its
Subsidiaries on such day in excess of $1,500,000 to (ii) EBITDA
of the Borrower and its Subsidiaries for the fiscal quarter ended
on such day (or most recently ended, if such day is not a fiscal
quarter end date) and the immediately preceding three fiscal
quarters.
"Lien" means any lien (statutory or other), mortgage,
pledge, hypothecation, assignment as security, deposit
arrangement for security, encumbrance or similar preference,
priority or other security agreement or arrangement of any kind
or nature whatsoever (including, without limitation, the interest
of a vendor or lessor under any conditional sale, Capitalized
Lease or other title retention agreement).
"Loan" means, (i) with respect to a Lender, such Lender's
portion of any Advance made pursuant to Section 2.1 and (ii)
collectively, with respect to all Lenders, all Facility A Loans
and Facility B Loans.
"Loan Documents" means this Agreement, the Notes, the
Guaranty and, if any pledge agreement is ever delivered hereunder
pursuant to Section 6.16(a)(iii) hereof, such pledge agreement.
"Mandatory Cash Payments" means those cash payments required
(without the occurrence of any contingency) to be paid to the
Borrower or any Subsidiary pursuant to the terms of an
acquisition agreement (or other relevant document) described in
the definition of "Cash Flow Incurrence Test", such payments to
include, without limitation, those required on account of royalty
payments, license and technical transfer fees, administrative
reimbursements, dividends, interest, principal and other return
of capital payments which (in each case) are mandatory.
"Marketable Securities" means any of the following: (i)
obligations of, or fully guaranteed by, the United States of
America or any agency or instrumentality thereof maturing not
more than 12 months after the date of acquisition; (ii)
Commercial paper rated A-l or better by S&P or P-l or better by
Moody's; (iii) Demand deposit accounts maintained in the ordinary
course of business; (iv) Certificates of deposit and bankers'
acceptances issued by and time deposits with commercial banks
(whether domestic or foreign) having capital and surplus in
excess of $100,000,000 or with any Lender; and (v) obligations of
any United States state or any political subdivision of such a
state, or any agency or instrumentality of such a state or
political subdivision, maturing not more than 12 months after
acquisition that are rated A or better by S&P or A or better by
Moody's.
"Material Adverse Effect" means a material adverse effect on
(i) the business, Property, condition (financial or otherwise),
results of operations, or prospects of the Borrower and its
Subsidiaries taken as a whole, (ii) the ability of the Borrower
to perform its obligations under the Loan Documents, or (iii) the
validity or enforceability of any of the Loan Documents or the
rights or remedies of the Agent or the Lenders thereunder.
"Merger" means the merger of the Acquisition Subsidiary with
and into Brenco pursuant to Article II of the Acquisition
Agreement.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which
the Borrower or any member of the Controlled Group is a party to
which more than one employer is obligated to make contributions.
"Net Assets" means total assets minus current liabilities,
all determined on a consolidated basis for the Borrower and its
Subsidiaries.
"Net Cash Proceeds" means, with respect to any Asset Sale by
any Person (calculated in each instance in Dollar Equivalents):
(a) cash and Marketable Securities (freely convertible
into Dollars) received by such Person or any Subsidiary of
such Person from such Asset Sale (including cash and
Marketable Securities received (x) as consideration for the
assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale or (y)
conversion or other liquidation of any Property received as
consideration in such Asset Sale), after (i) provision for
all income or other taxes measured by or resulting from such
Asset Sale, (ii) payment of all brokerage commissions and
other fees and expenses related to such Asset Sale, (iii)
all amounts (in Dollar Equivalents) used to repay
Indebtedness secured by a Lien on any asset disposed of in
such Asset Sale or which is or may be required (by the
express terms of the instrument governing such Indebtedness)
to be repaid in connection with such Asset Sale (including
payments made to obtain or avoid the need for the consent of
any holder of such Indebtedness), and (iv) deduction of
appropriate amounts (in Dollar Equivalents) to be provided
by such Person or a Subsidiary of such Person as a reserve,
the existence and amount of which shall be only to the
extent required to be established as a reserve on the
applicable Person's balance sheet in accordance with
Agreement Accounting Principles, against any liabilities
associated with the assets sold or disposed of in such Asset
Sale and retained by such Person or a Subsidiary of such
Person after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold
or disposed of in such Asset Sale; and
(b) cash payments in respect of any Indebtedness,
capital stock or other consideration received by such Person
or any Subsidiary of such Person from such Asset Sale upon
receipt of such cash payments by such Person or such
Subsidiary after netting amounts for the items described in
clauses (i) through (iv) of the foregoing clause (a) (to the
extent such amounts were not previously netted from amounts
paid under the foregoing clause (a)).
"Net Income" means, for any period, the net income (or loss)
of the Borrower and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in
conformity with Agreement Accounting Principles (plus any
non-cash charges and expenses incurred during such period related
to the disposition of businesses or entire facilities or to the
revaluation of intangibles and minus any cash payments made
during such period with respect to any non-cash charges and
expenses related to the disposition of businesses or entire
facilities previously taken into account); provided, however,
that to the extent reported as a separate item on the Borrower's
financial statements delivered pursuant to Section 6.1, there
shall be excluded (i) the income (or loss) of any non-Subsidiary
Affiliate of the Borrower or other Person (other than a
Subsidiary of the Borrower) in which any Person (other than the
Borrower or any of its Subsidiaries) has a joint interest, except
to the extent of the amount of dividends, distributions or other
cash amounts actually paid to the Borrower, or any of its
Subsidiaries by such Affiliate or other Person during such period
and (ii) the income (or loss) of any Person accrued prior to the
date that such Person becomes a Subsidiary of the Borrower or is
merged into or consolidated with the Borrower or any of its
Subsidiaries or that Person's assets are acquired by the Borrower
or any of its Subsidiaries; provided there shall be excluded from
the calculation of Net Income the effect of EITF 85-45
(promulgated by the Financial Accounting Standards Board) as a
result of the Brenco Acquisition.
"Net Interest" means, for any period, total interest expense
minus total interest income.
"Net Worth" means the aggregate amount of common
shareholders' equity as determined from a consolidated balance
sheet of the Borrower and its Subsidiaries, prepared in
accordance with Agreement Accounting Principles; provided there
shall be excluded from the calculation of Net Worth the effect of
EITF 85-45 (promulgated by the Financial Accounting Standards
Board) as a result of the Brenco Acquisition.
"New Subsidiary" is defined in Section 6.16(b).
"Notes" means, collectively, the Borrower Notes and the
Borrowing Subsidiary Notes.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Notes, the Facility B Letter of Credit
Obligations and all other liabilities (if any), whether actual or
contingent, of the Borrowing Entities with respect to Facility B
Letters of Credit, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the
Borrowing Entities to the Lenders or to any Lender, the Agent or
any indemnified party hereunder arising under the Loan Documents,
including the Borrowing Subsidiary Obligations.
"Offer to Purchase" shall mean the Acquisition Subsidiary's
Offer to Purchase for cash any and all outstanding shares of
common stock of Brenco, dated June 20, 1996.
"Operating Cash Flow" for any period means, for the Borrower
and its Subsidiaries on a consolidated basis, without
duplication, the sum of (i) Net Income for such period, (ii)
depreciation expense for such period, (iii) amortization expense
for such period and (iv) any non-cash losses (minus any non-cash
gains) arising outside of the ordinary course of business which
have been included in the determination of Net Income for such
period (to the extent reported as a separate item on the
Borrower's financial statements), all calculated in accordance
with Agreement Accounting Principles.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each January, April,
July and October.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Percentage" means, for each Lender the percentage set forth
opposite its name on Schedule 1 attached hereto, as such
percentage (and such schedule) may be modified from time to time
pursuant to the terms hereof, including but not limited to the
provisions of Section 12.3.2.
"Performance Letter of Credit" means any Standby Letter of
Credit which represents an irrevocable obligation to the
beneficiary on the part of the Issuing Bank to make payment on
account of any default by the account party in the performance of
a nonfinancial or commercial obligation.
"Permitted Acquisition" means an Acquisition (excluding the
Brenco Acquisition, which shall be permitted notwithstanding the
following provisions, but subject to the other applicable terms
and conditions set forth in this Agreement): (i) made at a time
when no Default or Unmatured Default exists or would exist after
giving effect to such Acquisition, (ii) for which the board of
directors or other governing body of such Person being acquired
has approved the terms of such Acquisition (if such Acquisition
is a tender offer for the securities of a Person that is required
to file periodic reports under the Exchange Act, or if by the
terms of such Acquisition such board or other governing body
approval is required) or for which (in any other case) the board
of directors or other governing body of the Person owning the
stock or assets being acquired (as the case may be) has approved
the terms of such Acquisition, (iii) for which the Borrower has
demonstrated to the Lenders that, after giving effect to such
Acquisition, the Borrower can satisfy the Cash Flow Incurrence
Test (provided that this test need only be satisfied if the
purchase price of the subject Acquisition, excluding assumed
liabilities, either (a) equals or exceeds $10,000,000 or (b) when
added to the purchase price of each other Acquisition, the
purchase price of which (excluding any liabilities assumed) was
less than $10,000,000, made during the same fiscal year, equals
or exceeds $10,000,000) and (iv) for which the Borrower has first
provided the Lenders with (a) financial information with respect
to the Target of such Acquisition (including historical financial
statements, to the extent available) and (b) a description of the
Target of such Acquisition.
"Permitted Indebtedness" means Indebtedness permitted under
any of clauses (i) through (viii) of Section 6.11.
"Person" means any natural person, corporation, firm, joint
venture, partnership, association, enterprise, trust or other
entity or organization, or any Governmental Agency.
"Plan" means an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code as to which the Borrower
or any member of the Controlled Group may have any liability.
"Property" of a Person means any and all property and
assets, whether real, personal, tangible, intangible, or mixed,
of such Person.
"Purchasers" is defined in Section 12.3.1.
"Regulation D" means Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor thereto or other regulation or official
interpretation of said Board of Governors relating to reserve
requirements applicable to member banks of the Federal Reserve
System.
"Regulation G" means Regulation G of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by
nonbank, nonbroker lenders for the purpose of purchasing or
carrying margin stock (as defined therein).
"Regulation T" means Regulation T of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by
and to brokers and dealers of securities for the purpose of
purchasing or carrying margin stock (as defined therein).
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by
banks for the purpose of purchasing or carrying margin stock
applicable to member banks of the Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor or other regulation or official interpretation of
said Board of Governors relating to the obtaining of credit for
the purpose of purchasing or carrying margin stock from (among
others) member banks of the Federal Reserve System.
"Reimbursement Obligations" means, at any time, the
aggregate (without duplication) of the Obligations of the
Borrowing Entities to the Lenders, the Issuing Banks and/or the
Agent in respect of all unreimbursed payments or disbursements
made by the Lenders, the Issuing Banks and/or the Agent under or
in respect of draws made under the Facility B Letters of Credit.
"Rentals" of a Person means the aggregate fixed amounts
payable by such Person under any lease of Property having an
original term (including any required renewals or any renewals at
the option of the lessor or lessee) of one year or more, but does
not include any amounts payable under Capitalized Leases of such
Person.
"Reportable Event" means a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such
section, with respect to a Plan, excluding, however, such events
as to which the PBGC by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure
to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event
regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at
least 66 % of the Aggregate Commitment or, if the Aggregate
Commitment has been terminated, Lenders in the aggregate holding
at least 66 % of the sum of (i) the Dollar Equivalent of the
aggregate unpaid principal amount of the outstanding Advances
plus (ii) the Facility B Letter of Credit Obligations.
"Reserve Requirement" means, with respect to any Fixed Rate
Advance for any Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and
other reserves) which is imposed under Regulation D on new
non-personal time deposits of $100,000 or more with a maturity
equal to that of such Fixed CD Rate Advance for such CD Interest
Period (in the case of Fixed CD Rate Advances) or on
"Eurocurrency liabilities" with a maturity equal to that of such
Eurodollar Advance for such Eurocurrency Interest Period (in the
case of Eurodollar Advances).
"S&P" means Standard and Poor's Corporation.
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Senior Debt" means total Indebtedness, other than
Subordinated Indebtedness, minus cash and Marketable Securities
of the Borrower in excess of $1,000,000, all determined for the
Borrower and its Subsidiaries on a consolidated basis (without
duplication).
"Single Employer Plan" means a Plan maintained by the
Borrower or any member of the Controlled Group for employees of
the Borrower or any member of the Controlled Group.
"Specified Currency" is defined in Section 2.12.2.
"Specified Letter of Credit" means that certain Irrevocable
Standby Letter of Credit Number SPL33958 issued by Harris Trust
and Savings Bank on April 20, 1994 in the face amount of
$4,940,727.00 for the benefit of Insurance Company of North
America and Pacific Employees Insurance Company, the face amount
of which was decreased by Amendment Number 1 thereto dated as of
May 1, 1995 to a reduced face amount of $3,970,226.00, the
current expiry date of which has been amended to April 30, 1997.
"Specified Place" is defined in Section 2.12.2.
"Standby Letter of Credit" means an irrevocable standby
Letter of Credit issued by an Issuing Bank pursuant to Section
3.1, that is either a Financial Letter of Credit or a Performance
Letter of Credit.
"Status" means, at any date of determination thereof,
whichever of Level I Status, Level II Status, Level III Status,
Level IV Status, Level V Status or Level VI Status exists at such
date.
"Subject Country" is defined in Section 5A.4.
"Subordinated Debt" means the Borrower's $69,000,000
original principal amount Convertible Subordinated Debentures due
2003, issued pursuant to that certain Indenture dated May 27,
1993, between the Borrower and Harris Trust and Savings Bank, as
Trustee.
"Subordinated Indebtedness" of a Person means any
Indebtedness of such Person the payment of which is subordinated
to payment of the Obligations to the written satisfaction of the
Required Lenders. In the case of the Borrower, such Subordinated
Indebtedness shall include, but shall not be limited to, the
Subordinated Debt.
"Subsidiary" of a Person means (i) any corporation more than
50% of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its Subsidiaries
or by such Person and one or more of its Subsidiaries, or (ii)
any partnership, association, limited liability company, joint
venture or similar business organization more than 50% of the
ownership interests having ordinary voting power of which shall
at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall
mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of
the Borrower and its Subsidiaries, Property which (i) represents
more than 10% of the consolidated assets of the Borrower and its
Subsidiaries as would be shown in the consolidated financial
statements of the Borrower and its Subsidiaries as at the
beginning of the twelve-month period ending with the month in
which such determination is made, or (ii) is responsible for more
than 10% of the consolidated net sales or of the consolidated net
income of the Borrower and its Subsidiaries as reflected in the
financial statements referred to in clause (i) above.
"Target" means, (i) when used with respect to (x) an
Acquisition of securities of a corporation which have ordinary
voting power for the election of directors (other than securities
having such power only by reason of the happening of a
contingency) or (y) ownership interests in any partnership or
joint venture, such corporation, partnership or joint venture,
and (ii) when used with respect to an Acquisition of any assets
other than those described in clause (i), the assets being so
acquired.
"Taxes" is defined in Section 2.20.1.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a
Alternate Base Rate Advance, Fixed CD Rate Advance, Eurodollar
Advance or other Eurocurrency Advance.
"Unfunded Liabilities" means the amount (if any) by which
the present value of all vested nonforfeitable benefits under all
Single Employer Plans exceeds the fair market value of all such
Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plans.
"Unmatured Default" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a
Default.
"Wholly-Owned Subsidiary" of a Person means (i) any
Subsidiary all of the outstanding voting securities of which
shall at the time be owned, directly or indirectly, by such
Person or one or more Wholly-Owned Subsidiaries of such Person,
or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture
or similar business organization 100% of the ownership interests
having ordinary voting power of which shall at the time be so
owned.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.
All references to the Subsidiaries of the Borrower in the
Representations, Warranties and Covenants contained herein shall
include Brenco and its Subsidiaries.
ARTICLE II
THE CREDITS
2.1. Commitment. From and including the date of this
Agreement and prior to the Facility Termination Date, each Lender
severally agrees, on the terms and conditions set forth in this
Agreement, to make Loans to any of the Borrowing Entities from
time to time in amounts such that the Dollar Equivalent of all
Advances (as of the respective dates of determination of such
Dollar Equivalent amounts) does not exceed in the aggregate at
any one time outstanding (after giving effect to the intended use
of proceeds of any Advance used to repay any outstanding
Reimbursement Obligations or previously-made Advances) the amount
of such Lender's Percentage of the Aggregate Available Commitment
(except to the extent such excess results from currency
fluctuations as permitted under Sections 2.7.2 and 2.9.3). The
Facility A Commitments to lend hereunder shall expire on the
Facility A Termination Date. The Facility B Commitments to lend
hereunder shall expire on the Facility B Termination Date. Each
Loan made pursuant to this Section 2.1 shall be either a Facility
A Loan or a Facility B Loan. Each Advance made pursuant to this
Section 2.1 shall be either a Facility A Advance or a Facility B
Advance.
2.1.1. Facility A Loans. (a) Amount of Facility A
Loans. Subject to the terms and conditions set forth
in this Agreement, each Lender severally and not
jointly agrees to make on each Facility A Borrowing
Date, a term loan, in Dollars, to the Borrower (each
individually, a "Facility A Loan" and, collectively,
the "Facility A Loans"). The aggregate amount of the
term loans made pursuant to this Section 2.1.1(a) by
any Lender shall not exceed such Lender's Facility A
Commitment.
(b) Borrowing Notice. The Borrower shall deliver to
the Agent a Borrowing Notice, signed by it, on or before
each Facility A Borrowing Date or shall provide telephonic
notice of borrowing (promptly confirmed in writing) in
accordance with the terms of Section 2.13. Such Borrowing
Notice shall specify instructions for the disbursement of
the proceeds of the Facility A Loans. Any Borrowing Notice
given pursuant to this Section 2.1.1(b) shall be
irrevocable.
(c) Making of Facility A Loans. Promptly after
receipt of a Borrowing Notice under Section 2.1.1(b) in
respect of the Facility A Loans, the Agent shall notify each
Lender by telex or telecopy, or other similar form of
transmission, of the proposed Advance. Each Lender shall
deposit an amount equal to its Facility A Loan with the
Agent at its office in Chicago, Illinois, in immediately
available funds, on the Facility A Borrowing Date specified
in the Borrowing Notice. Subject to the fulfillment of the
conditions precedent set forth in Article IV, the Agent
shall make the proceeds of such amounts received by it
available to the Borrower at the Agent's office in Chicago,
Illinois on the applicable Facility A Borrowing Date and
shall disburse such proceeds in accordance with the
Borrower's disbursement instructions set forth in such
Borrowing Notice.
(d) Repayment of the Facility A Loans. (i) The
Facility A Loans shall be repaid in twenty-four (24)
consecutive installments, the first twenty-three (23) of
which shall be payable quarterly on the last day of each
calendar quarter commencing October 31, 1996 and continuing
thereafter to and including April 30, 2002 and the final
installment shall be payable on the Facility A Termination
Date, and the Facility A Loans shall be permanently reduced
by the amount of each installment on the date payment
thereof is required to be made hereunder. The installments
shall be in the aggregate amounts set forth below:
Installment Date Installment Amount
October 31, 1996 $ 1,500,000
January 31, 1997 $ 1,500,000
April 30, 1997 $ 1,500,000
July 31, 1997 $ 1,500,000
October 31, 1997 $ 2,000,000
January 31, 1998 $ 2,000,000
April 30, 1998 $ 2,000,000
July 31, 1998 $ 2,000,000
October 31, 1998 $ 3,000,000
January 31, 1999 $ 3,000,000
April 30, 1999 $ 3,000,000
July 31, 1999 $ 3,000,000
October 31, 1999 $ 5,000,000
January 31, 2000 $ 5,000,000
April 30, 2000 $ 5,000,000
July 31, 2000 $ 5,000,000
October 31, 2000 $ 6,000,000
January 31, 2001 $ 6,000,000
April 30, 2001 $ 6,000,000
July 31, 2001 $ 6,000,000
October 31, 2001 $ 7,000,000
January 31, 2002 $ 7,000,000
April 30, 2002 $ 7,000,000
Facility A Termination Date $44,000,000
Notwithstanding the foregoing, the final installment payable on
the Facility A Termination Date shall be in the amount of the
then outstanding principal balance of the Facility A Loans. No
installment of any Facility A Loan shall be reborrowed once
repaid.
(ii) In addition to the scheduled payments on the
Facility A Loans, the Borrower (a) may make the voluntary
prepayments described in Section 2.7.1 for credit against the
scheduled payments on the Facility A Loans pursuant to Section
2.7.1 and (b) shall make the mandatory prepayments prescribed in
Section 2.7.4, for credit against such scheduled payments on the
Facility A Loans pursuant to Section 2.7.4(vi).
2.1.2. Facility B Loans. (a) From and including the
date of this Agreement and prior to the Facility B
Termination Date, each Lender severally agrees, on the terms
and conditions set forth in this Agreement (including,
without limitation, the terms and conditions of Section 2.6
and Section 8.1 relating to the reduction, suspension or
termination of the Aggregate Facility B Commitment), to make
revolving loans (each individually, a "Facility B Loan" and,
collectively, the "Facility B Loans") to any Borrowing
Entity from time to time provided that no such Facility B
Loans shall be required if after making any such Facility B
Loan the sum of (i) the Dollar Equivalent of the aggregate
unpaid principal balance of the Facility B Advances
attributable to such Lender then outstanding plus (ii) the
Dollar Equivalent of the Facility B Letter of Credit
Obligations attributable to such Lender then outstanding
would exceed such Lender's Facility B Commitment. Subject
to the terms of this Agreement (including, without
limitation, the terms and conditions of Section 2.6 and 8.1
relating to the reduction, suspension or termination of the
Aggregate Facility B Commitment), a Borrowing Entity may
borrow, repay and reborrow Facility B Loans at any time
prior to the Facility B Termination Date. Unless earlier
terminated in accordance with the terms and conditions of
this Agreement, the Facility B Commitments of the Lenders to
lend hereunder shall expire on the Facility B Termination
Date. All outstanding Facility B Loans shall be paid in
full by the applicable Borrowing Entity on the Facility B
Termination Date.
(b) Borrowing Notice. When a Borrowing Entity
desires to borrow under this Section 2.1.2, it shall deliver
to the Agent a Borrowing Notice, signed by it, specifying
that the Borrower is requesting a Facility B Loan pursuant
to this Section 2.1.2 or shall provide telephonic notice of
borrowing (promptly confirmed in writing) in accordance with
the terms of Section 2.13. Any Borrowing Notice given
pursuant to this Section 2.1.2(b) shall be irrevocable.
2.2. Ratable Loans; Types of Advances. Each Advance
hereunder shall consist of Loans made from the several Lenders
ratably in proportion to the ratio that their respective
Commitments bear to the Aggregate Commitment. The Advances may
be Alternate Base Rate Advances, Fixed CD Rate Advances or
Eurocurrency Advances, or a combination thereof, selected by the
relevant Borrowing Entity in accordance with Sections 2.8 and
2.9; provided, however, that (i) Eurocurrency Advances
denominated in a Foreign Currency may be outstanding in not more
than six Foreign Currencies at any one time; (ii) there shall not
be more than ten Fixed Rate Advances outstanding at any one time;
and (iii) notwithstanding anything herein to the contrary,
without the Agent's consent, no Borrowing Entity may select a
Fixed Rate with an Interest Period greater than one month for any
Advance made during the period (the "Initial Syndication Period")
ending on the earlier of (i) three months after the date hereof
and (ii) the date on which the initial Lenders parties to this
Agreement have completed the syndication of their rights and
obligations through the initial primary syndication to a select
group of financial institutions (which date the Agent agrees to
communicate to the Borrower promptly thereafter).
2.3. Minimum Amount of Each Advance. Each Fixed Rate
Advance shall be in an amount having a Dollar Equivalent of not
less than $1,000,000 (and in multiples of $500,000 if in excess
thereof), and each Alternate Base Rate Advance shall be in the
minimum amount of $200,000 (and in multiples of $100,000 if in
excess thereof); provided, however, that any Alternate Base Rate
Advance may be in the amount of the unused Aggregate Available
Commitment.
2.4. Fees. In addition to the Facility B Letter of
Credit Fees and issuance fees identified in Section 3.8, the
Borrower agrees to pay the following fees:
2.4.1. Commitment Fee. The Borrower agrees to
pay to the Agent for the ratable account of each
Lender, for the period from the date hereof to and
including the Facility Termination Date, a commitment
fee at a rate per annum equal to the annual percentage
rate indicated as the Applicable Margin for the
commitment fee hereinbelow on the average daily
unborrowed portion of such Lender's Percentage of the
Aggregate Commitment, the accrued but unpaid portion of
which shall be payable on each Payment Date hereafter
and on the Facility Termination Date. All accrued
commitment fees shall be payable on the effective date
of any termination of the obligations of the Lenders to
make Loans and issue or participate in Facility B
Letters of Credit hereunder, and commitment fees shall
cease to accrue thereafter. For purposes of
calculating the commitment fee hereunder, the principal
amount of each Foreign Currency Advance shall be the
Dollar Equivalent of such Foreign Currency Advance as
determined under clause (ii) of the definition herein
of "Dollar Equivalent".
2.4.2. Upfront Fee. The Borrower agrees to pay
to the Agent for the account of the Lenders (the amount
payable to each Lender to be as agreed between the
Agent and any Lender), on the date that this Agreement
is executed, an upfront fee in an amount set forth in
that certain fee letter between the Borrower and the
Agent dated March 20, 1996, as it may be amended from
time to time (the "Fee Letter").
2.4.3. Agent Fees. The Borrower agrees to pay
certain fees to the Agent, for its sole account, on the
dates and in the amounts set forth in the Fee Letter.
2.5. Applicable Margin. The Applicable Margin set forth
below, with respect to each Advance and for commitment fees and
Facility B Letter of Credit Fees payable hereunder, shall be
subject to adjustment (upwards or downwards, as appropriate)
based on the Borrower's Status as at the end of each fiscal
quarter in accordance with the table set forth below. The
Borrower's Status as at the last day of each fiscal quarter shall
be determined from the annual or quarterly financial statements
of the Borrower which first included such fiscal quarter
delivered by the Borrower to the Lenders pursuant to Section 6.1.
The Borrower's Status on the Effective Date shall be based upon
the Compliance Certificate delivered pursuant to Section 4.1.
The adjustment, if any, to the Applicable Margin shall be
effective five days after the Agent has received such annual or
quarterly financial statements, as the case may be. In the event
that the Borrower shall at any time fail to furnish to the
Lenders such financial statements within the time limitations
specified by Section 6.1, then the Borrower's Status shall be
Level I Status from the date of such failure until the fifth day
after such financial statements are so delivered.
Applicable Level I Level II Level Level Level V Level
Margin Status Status III IV Status VI
Status Status Status
Alternate Base .25% 0% 0% 0% 0% 0%
Rate
Eurocurrency 1.25% 1.00% 0.875% 0.75% 0.625% 0.50%
Rate
Fixed CD Rate 1.375% 1.125% 1.00% 0.875% 0.75% 0.625%
Commitment Fee 0.375% 0.25% 0.25% 0.20% 0.20% 0.175%
Standby Letter
of Credit Fee 1.25% 1.00% 0.875% 0.75% 0.625% 0.50%
(Financial)
Standby Letter
of Credit Fee 0.50% 0.50% 0.50% 0.375% 0.375% 0.375%
(Performance)
For purposes of this Agreement, the Borrower's Status will be
determined based on the following definitions:
"Level I Status" exists at any date if, as of the last day
of the then most recently ended fiscal quarter of the Borrower,
the Leverage Ratio is greater than 3.0 to 1.0.
"Level II Status" exists at any date if, as of the last day
of the then most recently ended fiscal quarter of the Borrower,
the Leverage Ratio is greater than 2.75 to 1.0 but less than or
equal to 3.0 to 1.0.
"Level III Status" exists at any date if, as of the last day
of the then most recently ended fiscal quarter of the Borrower,
the Leverage Ratio is greater than 2.5 to 1.0 but less than or
equal to 2.75 to 1.0.
"Level IV Status" exists at any date if, as of the last day
of the then most recently ended fiscal quarter of the Borrower,
the Leverage Ratio is greater than 2.0 to 1.0 but less than or
equal to 2.5 to 1.0.
"Level V Status" exists at any date if, as of the last day
of the then most recently ended fiscal quarter of the Borrower,
the Leverage Ratio is greater than 1.5 to 1.0 but less than or
equal to 2.0 to 1.0.
"Level VI Status" exists at any date if, as of the last day
of the then most recently ended fiscal quarter of the Borrower,
the Leverage Ratio is less than or equal to 1.5 to 1.0.
Notwithstanding the foregoing, the Applicable Margin for the
period from the date hereof until January 19, 1997 shall be the
Applicable Margin determined based upon the Leverage Ratio
applicable on the date hereof calculated as set forth in the
following sentence but in no event shall the Applicable Margin
for such period be less than the Applicable Margin as set forth
in Level III above. For purposes of calculating the Leverage
Ratio as of the date hereof, the Leverage Ratio shall be
calculated (i) after taking into account all borrowings on the
Effective Date and all anticipated borrowings necessary to
consummate the Brenco Acquisition and (ii) if the sale of
Precision Scientific, Inc.'s appliance business has not occurred
prior to the date hereof, by excluding from the calculation of
Indebtedness in the Leverage Ratio an amount, not to exceed
$12,000,000, equal to the anticipated Net Cash Proceeds from such
sale; provided, however, in the event that such sale is not
consummated on or before August 19, 1996, then the Applicable
Margin for the period from the date hereof through such date
shall be retroactively adjusted to be the higher of the
Applicable Margins set forth in Level III or the Applicable
Margins determined based upon the Leverage Ratio as of the date
of this Agreement without such exclusion from Indebtedness and
shall remain the Applicable Margin until January 19, 1997. On
January 19, 1997, the Applicable Margin shall be based upon the
Borrower's Status as at the end of the fiscal quarter ended
October 31, 1996, which Applicable Margin shall remain in effect
until adjusted pursuant to the provisions of this Section 2.5 set
forth above.
2.6. Reductions in Aggregate Facility B Commitment. The
Borrower may, at its option, permanently reduce the Aggregate
Facility B Commitment in whole, or in part ratably among the
Lenders in a minimum aggregate amount of at least $500,000 or any
integral multiple of $100,000 in excess thereof upon at least one
Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction; provided, however, that
the amount of the Aggregate Facility B Commitment may not be
reduced below the sum of (i) the Dollar Equivalent of the
aggregate principal amount of the then outstanding Facility B
Advances plus (ii) the Facility B Letter of Credit Obligations.
2.7. Principal Payments.
2.7.1. Optional Payments. Any Borrowing Entity may
from time to time pay or pre-pay, without penalty or
premium, all outstanding Alternate Base Rate Advances which
are Facility B Advances, or, in a minimum aggregate amount
of $200,000 or any integral multiple of $100,000 in excess
thereof, any portion of the outstanding Alternate Base Rate
Advances which are Facility B Advances upon same day notice
to the Agent. The Borrower may from time to time pre-pay,
without penalty (other than funding indemnification under
2.20.5) , all outstanding Facility A Advances, or, in a
minimum aggregate amount of at least $5,000,000 or any
integral multiple of $500,000 in excess thereof, any portion
of the outstanding Facility A Advances, upon one Business
Day's notice to the Agent. The amount of each voluntary
prepayment of Facility A Advances made pursuant to this
Section 2.7.1 shall be applied (i) first, to the next four
installments of the Facility A Loans occurring after the
date of such payment in the order of maturity and (ii) then,
after payment in full of such four installments, to the
remaining unpaid installments of the Facility A Loans in the
inverse order of maturity. A Fixed Rate Advance may be paid
or prepaid prior to the last day of the applicable Interest
Period, subject to Section 2.20.5.
2.7.2. Currency Fluctuations; Permitted Excess over
Aggregate Commitment. If at any time the Agent shall
determine that the aggregate principal amount of outstanding
Advances and Facility B Letter of Credit Obligations (after
determining the Dollar Equivalent thereof) is greater than
110% of the Aggregate Commitment then in effect, one or more
of the Borrowing Entities shall, upon one (1) Business Day's
written notice to the Borrower from the Agent, prepay an
aggregate principal amount of Advances such that the Dollar
Equivalent of the aggregate principal amount of outstanding
Advances and Facility B Letter of Credit Obligations does
not exceed 110% of the Aggregate Commitment then in effect,
provided that this Section 2.7.2 shall not be interpreted to
permit any Borrowing Entity to request the making of a new
Advance or the issuance or extension of a Facility B Letter
of Credit if the aggregate principal amount of outstanding
Advances and Facility B Letter of Credit Obligations would,
after giving effect to such new Advance or Facility B Letter
of Credit, exceed the Aggregate Commitment then in effect;
provided further, however, that a Borrowing Entity may
request continuations and conversions of existing Advances
as described in Section 2.9 when the Dollar Equivalent of
the aggregate principal amount of outstanding Advances and
Facility B Letter of Credit Obligations would, after giving
effect to such continuation or conversion, exceed the
Aggregate Commitment so long as the Dollar Equivalent of the
aggregate principal amount of outstanding Advances and
Facility B Letter of Credit Obligations would not, after
giving effect to such continuation or conversion, exceed
110% of the Aggregate Commitment.
2.7.3. Termination. Each Borrowing Subsidiary shall
repay, on the Facility B Termination Date, the entire unpaid
principal amount of the Facility B Advances made to it and
repay (or cash collateralize) all other Borrowing Subsidiary
Obligations applicable to it. The Borrower shall pay in
full, on the Facility B Termination Date, the entire unpaid
principal amount of the Facility B Advances made to it and
repay (or cash collateralize) all other unpaid Obligations,
all as more fully set forth in Section 3.9 and Article XIV.
2.7.4. Mandatory Prepayments.
(i) Upon the consummation of any Asset Sale (other
than Excluded Asset Sales) by the Borrower or any Subsidiary
of the Borrower, the Net Cash Proceeds of which are greater
than $1,000,000, within three (3) Business Days after the
Borrower's or any of its Subsidiaries' receipt of any Net
Cash Proceeds from any such Asset Sale (including upon
conversion to cash or Marketable Securities of non-cash
proceeds (whether principal or interest and including
securities, release of escrow arrangements or lease
payments) received from any Asset Sale), the Borrower shall
make or cause to be made a mandatory prepayment of the
Obligations in an amount equal to one hundred percent (100%)
of such Net Cash Proceeds or such proceeds converted from
non-cash to Marketable Securities.
(ii) Within five (5) Business Days after the receipt
by the Borrower or any Subsidiary of any proceeds of
Indebtedness for borrowed money (other than Permitted
Indebtedness), the Borrower shall make or cause to be made a
mandatory prepayment of the Obligations in an amount equal
to one hundred percent (100%) of the Net Cash Proceeds of
such Indebtedness.
(iii) Nothing in this Section 2.7.4 shall be construed
to constitute the Lenders' consent to any transaction
referred to in clause (i) or (ii) above which is not
otherwise expressly permitted by the terms of this
Agreement.
(iv) Each mandatory prepayment required by clause (i)
and (ii) of this Section 2.7.4 shall be referred to herein
as a "Designated Prepayment". Designated Prepayments shall
be allocated and applied to the Obligations as follows:
(I) the amount of each Designated Prepayment made in
connection with an Asset Sale described in subsection
(i) of the definition of Asset Sale shall be applied to
the unpaid installments of the Facility A Loans pro
rata, and the amount of each Designated Prepayment made
in connection with an Asset Sale described in
subsection (ii) of the definition of Asset Sale or in
connection with the receipt of proceeds of any
Indebtedness shall be applied (a) first to the final
installment of the Facility A Loans payable on the
Facility A Termination Date until such installment has
been paid in full and (b) thereafter pro rata to the
unpaid installments of the Facility A Loans; and
(II) except as set forth below, following the payment in
full of the Facility A Loans, the amount of each
Designated Prepayment shall be applied to repay
Facility B Loans (but shall reduce Facility B
Commitments only at the option of the Borrower).
Notwithstanding the foregoing or anything herein to the
contrary, after the payment in full of the Facility A
Loans, no Designated Prepayment shall be required to be
made or paid with respect to the Facility B Loans if at
the time such Designated Prepayment would otherwise
required to be paid and applied to the Facility B
Loans, all conditions precedent to borrowing under
Section 4.2 can be met.
(v) On the date any Designated Prepayment is received
by the Agent, such prepayment shall be applied first to
Alternate Base Rate Loans and to any Fixed Rate Loans
maturing on such date. At the Borrower's option, (a) the
Agent shall hold the remaining portion of such Designated
Prepayment as cash collateral in an interest bearing deposit
account and shall apply funds from such account to repay
subsequently maturing Fixed Rate Loans in order of maturity
(which Fixed Rate Loans shall continue to accrue interest at
the applicable Fixed Rate until such repayment has been
made) or (b) the Agent shall apply the remaining portion of
such Designated Prepayment to unmatured Fixed Rate Loans in
the order of maturity together with amounts payable in
respect thereof pursuant to Section 2.20.5.
2.8. Method of Selecting Types and Interest Periods for
New Advances. A Borrowing Entity shall select the Type of
Advance and, in the case of each Eurocurrency Advance, the
Eurocurrency applicable thereto and, in the case of each Fixed
Rate Advance, the Interest Period applicable thereto from time to
time. A Borrowing Entity shall give the Agent irrevocable notice
(a "Borrowing Notice") not later than 10:00 a.m. (Chicago time)
on the Borrowing Date of each Alternate Base Rate Advance, at
least one Business Day before the Borrowing Date of each Fixed CD
Rate Advance and at least three Business Days before the
Borrowing Date for each Eurocurrency Advance, specifying:
(i) the name of the Borrowing Entity,
(ii) the Borrowing Date, which shall be a Business Day, of
such Advance,
(iii) the aggregate amount of such Advance,
(iv) the Type of Advance selected,
(v) in the case of each Eurocurrency Advance, the
Eurocurrency applicable thereto, and
(vi) in the case of each Fixed Rate Advance, the
Interest Period applicable thereto.
In the case of Eurocurrency Advances (other than Eurodollar
Advances), not later than 11:00 a.m. (London time) on the
Borrowing Date thereof, each Lender shall make available its
Eurocurrency Loan or Eurocurrency Loans, in funds immediately
available in London, in the Foreign Currency selected by the
Borrowing Entity, to the Agent at its London address specified in
Schedule 2 attached hereto or at any other Lending Installation
of the Agent specified in writing by the Agent to the Borrower.
In the case of all other Advances, not later than noon (Chicago
time) on each Borrowing Date, each Lender shall make available
its Loan or Loans, in funds immediately available in Chicago, in
Dollars, to the Agent at its Chicago address specified in
Schedule 2 or at any other Lending Installation of the Agent
specified in writing by the Agent to the Borrower. The Agent
will make the funds so received from the Lenders immediately
available to the Borrower at the Agent's aforesaid address, as
applicable.
2.9. Conversion and Continuation of Outstanding
Advances.
2.9.1. Dollar Advances. Alternate Base Rate Advances
shall continue as Alternate Base Rate Advances unless and
until such Alternate Base Rate Advances are converted into
Fixed Rate Advances, in Dollars. Each Fixed Rate Advance,
in Dollars, of any Type shall continue as a Fixed Rate
Advance, in Dollars, of such Type until the end of the then
applicable Interest Period therefor, at which time such
Fixed Rate Advance shall be automatically converted into an
Alternate Base Rate Advance unless repaid or unless the
applicable Borrowing Entity shall have given the Agent a
Conversion/Continuation Notice requesting that, at the end
of such Interest Period, such Fixed Rate Advance either
continue as a Fixed Rate Advance, in Dollars, of such Type
for the same or another Interest Period or be converted into
an Advance, in Dollars, of another Type. Subject to the
terms of Sections 2.20.5 and 2.3, the Borrower may elect
from time to time to convert all or any part of an Advance,
in Dollars, of any Type into any other Type or Types of
Advances, in Dollars.
2.9.2. Foreign Currency Advances. Each Eurocurrency
Advance, in a Foreign Currency, shall continue as such until
the end of the then applicable Interest Period therefor, at
which time such Eurocurrency Advance shall automatically be
deemed to be continued as a Eurocurrency Advance in the same
amount and the same Foreign Currency with a Eurocurrency
Interest Period of one month (commencing on the last day of
the expiring Interest Period), unless the applicable
Borrowing Entity shall have given the Agent a
Conversion/Continuation Notice requesting that, at the end
of such Interest Period, such Eurocurrency Advance continue
as a Eurocurrency Advance in the same Foreign Currency for
the same or another Eurocurrency Interest Period.
2.9.3. General Provisions. The applicable Borrowing
Entity shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an
Advance or continuation of a Fixed Rate Advance (as
permitted by the provisions of Sections 2.9.1 and 2.9.2) not
later than 10:00 a.m. (Chicago time) on, in the case of a
conversion into an Alternate Base Rate Advance, at least one
Business Day prior to, in the case of a conversion into a
Fixed CD Rate Advance or a continuation of a Fixed CD Rate
Advance, or three Business Days prior to, in the case of a
conversion into or continuation of a Eurocurrency Advance,
the date of the requested conversion or continuation,
specifying:
(i) the requested date, which shall be a Business
Day, of such conversion or continuation;
(ii) the aggregate amount, Eurocurrency and Type
of the Advance which is to be converted or
continued; and
(iii) the amount and Type(s) of Advance(s)
into which such Advance is to be converted or
continued and, in the case of a conversion into or
continuation of a Fixed Rate Advance, the duration
of the Interest Period applicable thereto.
Notwithstanding the provisions of Sections 2.9.1 and 2.9.2,
no Fixed Rate Advance shall be continued as or converted
into a Fixed Rate Advance for a new Interest Period if the
Dollar Equivalent of the aggregate principal amount of
Advances and Facility B Letter of Credit Obligations to be
outstanding after giving effect to such continuation or
conversion would exceed 110% of the Aggregate Commitment
then in effect.
2.10. Changes in Interest Rate, etc. Each Alternate Base
Rate Advance shall bear interest on the outstanding principal
amount thereof, for each day from and including the date such
Advance is made or is converted from a Fixed Rate Advance into an
Alternate Base Rate Advance pursuant to Section 2.9.1 to (but
excluding) the date it becomes due or is converted into a Fixed
Rate Advance pursuant to Section 2.9.1 hereof, at a rate per
annum equal to the Alternate Base Rate for such day. Changes in
the rate of interest on that portion of any Advance maintained as
an Alternate Base Rate Advance will take effect simultaneously
with each change in the Alternate Base Rate. Each Fixed Rate
Advance shall bear interest from and including the first day of
the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the interest rate determined
as applicable to such Fixed Rate Advance. No Interest Period
applicable to a Facility A Advance may end after the Facility A
Termination Date. No Interest Period applicable to a Facility B
Advance may end after the Facility B Termination Date.
2.11. Rates Applicable After Default. Notwithstanding
anything to the contrary contained in Section 2.8 or 2.9, during
the continuance of a Default or Unmatured Default no Advance may
be made as, converted into or continued as (as such terms are
used in Section 2.9) a Fixed Rate Advance (except with the
consent of the Required Lenders). During the continuance of a
Default the Required Lenders may, at their option, by notice to
the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest
rates), declare that (i) each Fixed Rate Advance shall bear
interest for the remainder of the applicable Interest Period at
the rate otherwise applicable to such Interest Period plus 2% per
annum and (ii) each Alternate Base Rate Advance shall bear
interest at a rate per annum equal to the Alternate Base Rate
otherwise applicable to the Alternate Base Rate Advance plus 2%
per annum.
2.12. Method of Payment.
2.12.1. General. All payments of the Obligations
hereunder shall be made, without setoff, deduction, or
counterclaim, in immediately available funds, to the Agent,
in Dollars, at the Agent's address for Dollar Advances, as
specified in Schedule 2 hereto (or, in the case of payments
of principal of and interest on Foreign Currency Advances,
in the Foreign Currency borrowed, at the Agent's address for
Foreign Currency Advances, as specified in Schedule 2
hereto), or at any other Lending Installation of the Agent
specified in writing by the Agent to the Borrower, by noon
(local time) on the date when due and shall be applied
ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall
be delivered promptly by the Agent to such Lender, in the
same type of funds that the Agent received, at such Lender's
address for Dollar Advances or for Foreign Currency
Advances, as specified in Schedule 2 hereto, or at any other
Lending Installation specified in a notice received by the
Agent from such Lender. The Agent is hereby authorized,
upon prior notice to the Borrower, to charge the loan
account of the Borrower maintained with First Chicago for
each payment of principal, interest and fees as it becomes
due hereunder.
2.12.2. Currency of Payment. All payments of
principal of and interest on any Advance or of Reimbursement
Obligations or any other Obligations hereunder shall be made
by the Borrowing Entity responsible therefor in the currency
borrowed (the "Specified Currency") in the manner and at the
address (the "Specified Place") specified in Section 2.12.1.
Payment of the Obligations shall not be discharged by an
amount paid in another currency or in another place, whether
pursuant to a judgment or otherwise, to the extent that the
amount so paid on conversion to the Specified Currency and
transfer to the Specified Place under normal banking
procedures does not yield the amount of the Specified
Currency at the Specified Place due hereunder. If, for the
purpose of obtaining judgment in any court, it is necessary
to convert a sum due hereunder in the Specified Currency
into another currency (the "Judgment Currency"), the rate of
exchange which shall be applied shall be that at which in
accordance with normal banking procedures the Agent could
purchase the Specified Currency with that amount of the
Judgment Currency on the Business Day next preceding that on
which such judgment is rendered. The obligation of the
Borrower in respect of any such sum due from it to the Agent
or any Lender hereunder (an "Entitled Person") shall,
notwithstanding the rate of exchange actually applied in
rendering such judgment, be discharged only to the extent
that on the Business Day following receipt by such Entitled
Person of any sum adjudged to be due hereunder or under the
Notes in the Judgment Currency, such Entitled Person may in
accordance with normal banking procedures purchase and
transfer to the Specified Place the Specified Currency with
the amount of the Judgment Currency so adjudged to be due;
and the Borrower hereby, as a separate Obligation and
notwithstanding any such judgment, agrees to indemnify such
Entitled Person against, and to pay such Entitled Person on
demand, in the Specified Currency, any difference between
the sum originally due to such Entitled Person in the
Specified Currency and the amount of the Specified Currency
so purchased and transferred.
2.13. Notes; Telephonic Notices. Each Lender is hereby
authorized to record the principal amount of each of its Loans
and each repayment thereof on the schedule attached to its Notes;
provided, however, that the failure to so record shall not affect
the Borrowing Entities' obligations under such Notes. Each
Borrowing Entity hereby authorizes the Lenders and the Agent to
make, convert or continue its Advances, effect selections of
Types of its Advances and to transfer funds, and the Issuing Bank
to issue Facility B Letters of Credit for its account, based on
telephonic notices made by any person or persons the Agent or any
Lender in good faith believes to be acting on behalf of such
Borrowing Entity. Each Borrowing Entity agrees to deliver
promptly to the Agent a written confirmation, if such
confirmation is requested by the Agent or any Lender, of each
telephonic notice signed by any of its Authorized Officers. If
the written confirmation differs in any material respect from the
action taken by the Agent and the Lenders, the records of the
Agent and the Lenders shall govern absent manifest error.
2.14. Interest Payment Dates; Interest and Fee Basis.
Interest accrued on each Alternate Base Rate Advance shall be
payable on each Payment Date, commencing with the first such date
to occur after the date hereof, on any date on which the
Alternate Base Rate Advance is prepaid due to acceleration and at
maturity. Interest accrued on each Fixed Rate Advance shall be
payable on the last day of its applicable Interest Period, on any
date on which the Fixed Rate Advance is prepaid, whether by
acceleration or otherwise, and at maturity. Interest accrued on
each Fixed Rate Advance having an Interest Period longer than
three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest and
fees shall be calculated for actual days elapsed on the basis of
a 360-day year. Interest shall be payable for the day an Advance
is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time) at the place of
payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such
payment.
2.15. Notification by Agent. Promptly after receipt
thereof, the Agent will notify each Lender of the contents of
each Aggregate Facility B Commitment reduction notice, Borrowing
Notice, Conversion/Continuation Notice, Letter of Credit Request,
Issuance Notice and repayment notice received by it hereunder.
The Agent will notify each Lender of the interest rate applicable
to each Fixed Rate Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each
change in the Alternate Base Rate.
2.16. Lending Installations. Subject to Section 2.20.6,
each Lender may book its Loans at any Lending Installation
selected by such Lender and may change its Lending Installation
from time to time, provided that such Lender shall remain the
legal entity exclusively entitled to all rights and responsible
for all obligations of a Lender hereunder unless such Lender
enters into an assignment in compliance with the provisions of
Section 12.3. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by
each Lender for the benefit of such Lending Installation.
Subject to Section 2.20.6, each Lender may, by written or telex
notice to the Agent and the Borrower, designate a Lending
Installation through which Loans will be made by it and for whose
account Loan payments are to be made.
2.17. Non-Receipt of Funds by the Agent. Unless any
Borrowing Entity or a Lender, as the case may be, notifies the
Agent prior to the date on which it is scheduled to make payment
to the Agent of (i) in the case of a Lender, the proceeds of a
Loan or (ii) in the case of any Borrowing Entity, a payment of
principal, interest or fees to the Agent for the account of the
Lenders, that it does not intend to make such payment, the Agent
may assume that such payment has been made. The Agent may, but
shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such
assumption. If such Lender or any Borrowing Entity, as the case
may be, has not in fact made such payment to the Agent, the
recipient of such payment shall, on demand by the Agent, repay to
the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on
the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to
(i) in the case of payment by a Lender, the Federal Funds
Effective Rate for such day or (ii) in the case of payment by any
Borrowing Entity, the interest rate applicable to the relevant
Loan.
2.18. Withholding Tax Exemption. At least five Business
Days prior to the first date on which interest or fees are
payable hereunder for the account of any Lender, each Lender that
is not incorporated under the laws of the United States of
America, or a state thereof, agrees that it will deliver to each
of the Borrower and the Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in
either case that such Lender is entitled to receive payments
under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each
Lender which so delivers a Form 1001 or 4224 further undertakes
to deliver to each of the Borrower and the Agent two additional
copies of such form (or a successor form) on or before the date
that such form expires (currently, three successive calendar
years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a
change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrower or the Agent, in each case
certifying that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of
any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and
such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or
withholding of United States federal income tax. In the event
that any Foreign Subsidiary becomes a Borrowing Subsidiary
hereunder, each Lender will (i) cooperate with the Borrower and
such Foreign Subsidiary to determine which tax and withholding
forms, if any, may be required by the laws of the country of
incorporation of such Borrowing Subsidiary in order to establish
that payments under this Agreement and the other Loan Documents
from such Foreign Subsidiary to such Lender can be made without
deduction or withholding for (or any other liability to pay) any
Taxes of such country or any Governmental Agency thereof and (ii)
file any such forms described in clause (i) as may be applicable
to such Lender, advantageous to the Borrowing Entities and not,
in the opinion of such Lender, disadvantageous to such Lender.
2.19. Extension of Facility B Termination Date. The
Borrower may request an extension of the then current Facility B
Termination Date for a period of one year, by submitting a
request for an extension to the Agent (an "Extension Request")
not more than 90 days, but not less than 60 days, prior to the
then current Extension Date. Promptly upon receipt of an
Extension Request, the Agent shall deliver a copy thereof to the
Lenders. Each Lender may, by an irrevocable notice (a "Consent
Notice") to the Borrower and the Agent given within 30 days after
receipt of the Extension Request by the Agent, consent to such
Extension Request of the Borrower, which consent may be given or
withheld by each Lender in its absolute and sole discretion.
Failure by any Lender to give its consent in writing within such
30 day period shall be deemed a refusal by such Lender of such
Extension Request. If less than all of the Lenders consent to
the Extension Request, the Borrower's request shall be denied and
the Facility B Termination Date shall remain unchanged. If
consent is obtained from all of the Lenders prior to the then
current Extension Date, the Facility B Termination Date shall be
so extended and all references in the Loan Documents to "Facility
B Termination Date" shall refer to the Facility B Termination
Date, as so extended.
2.20. Change in Circumstances.
2.20.1. Taxes.
(a) Payments to be Free and Clear. All sums
payable by any Borrowing Entity whether in respect of
principal, interest, fees or otherwise shall be paid
without deduction for any present and future taxes,
levies, imposts, deductions, charges or withholdings
imposed by any country, any Governmental Agency thereof
or therein, any jurisdiction from which any or all such
payments are made and any political subdivision or
taxing authority thereof or therein, excluding income
and franchise taxes (and deductions and withholdings
therefor) imposed on the Agent or any Lender (x) by the
jurisdiction under the laws of which the Agent or such
Lender is organized or any Governmental Agency or
taxing authority thereof or therein, or (y) by any
jurisdiction in which the Agent's or such Lender's
Lending Installations are located or any Governmental
Agency or taxing authority thereof or therein (such
excluded taxes, deductions and withholdings,
collectively, "Excluded Taxes"; and all such taxes,
levies, imposts, deductions, charges and withholdings
(including Excluded Taxes), collectively, "Taxes"),
which amounts shall be paid by any Borrowing Entity as
provided in Section 2.20.1(b). Any Borrowing Entity
will pay each Lender the amounts necessary such that
the net amount of the principal, interest, fees or
other sums received and retained by each Lender is not
less than the amount payable under this Agreement.
(b) Grossing-up of Payments. If: (a) any
Borrowing Entity or any other Person is required by law
to make any deduction or withholding on account of any
Tax (other than Excluded Taxes) or other amount from
any sum paid or expressed to be payable by any
Borrowing Entity to any Lender under this Agreement; or
(b) any party to this Agreement (or any Person on its
behalf) other than any Borrowing Entity is required by
law to make any deduction or withholding from, or
(other than on account of any Excluded Tax) any payment
on or calculated by reference to the amount of, any
such sum received or receivable by any Lender under
this Agreement:
(i) such Borrowing Entity shall notify the Agent of
any such requirement or any change in any such
requirement as soon as any Borrowing Entity
becomes aware of it;
(ii) such Borrowing Entity shall pay any such Tax or
other amount before the date on which penalties
attached thereto become due and payable, such
payment to be made (if the liability to pay is
imposed on such Borrowing Entity) for its own
account or (if that liability is imposed on any
other party to this Agreement) on behalf of and in
the name of that party;
(iii) the sum payable by such Borrowing Entity in
respect of which the relevant deduction,
withholding or payment is required shall (except,
in the case of any such payment, to the extent
that the amount thereof is not ascertainable when
that sum is paid) be increased to the extent
necessary to ensure that, after the making of that
deduction, withholding or payment, that party
receives on the due date and retains (free from
any liability in respect of any such deduction,
withholding or payment) a sum equal to that which
it would have received and so retained had no such
deduction, withholding or payment been required or
made; and
(iv) within thirty (30) days after payment of any sum
from which such Borrowing Entity is required by
law to make any deduction or withholding, and
within thirty (30) days after the due date of
payment of any Tax or other amount which it is
required by Section 2.20.1(b)(ii) to pay, it shall
deliver to the Agent all such certified documents
and other evidence as to the making of such
deduction, withholding or payment as (a) are
reasonably satisfactory to other affected parties
as proof of such deduction, withholding or payment
and of the remittance thereof to the relevant
taxing or other authority and (b) are reasonably
required by any such party to enable it to claim a
tax credit with respect to such deduction,
withholding or payment.
2.20.2. Yield Protection (a) If the adoption or
promulgation on or after the date hereof of any law or any
governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of
law), or any change on or after the date hereof in the
interpretation thereof, or the compliance of any Lender with
any such adoption, promulgation or change in interpretation,
(i) subjects any Lender or any applicable Lending
Installation to any Tax on or from payments due from
any Borrowing Entity (excluding Excluded Taxes), or
changes the basis of taxation of payments to any Lender
in respect of its Loans, its interest in the Facility B
Letters of Credit or other amounts due it hereunder
(excluding Excluded Taxes), or
(ii) imposes, increases or deems applicable any reserve,
assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Lender
or any applicable Lending Installation (other than
reserves and assessments taken into account in
determining the interest rate applicable to Fixed Rate
Advances), or
(iii) imposes any other condition (except with respect
to Excluded Taxes) the result of which is to increase
the cost to any Lender or any applicable Lending
Installation of making, funding or maintaining Loans or
issuing Facility B Letters of Credit or reduces any
amount receivable by any Lender or any applicable
Lending Installation in connection with Loans or
Facility B Letters of Credit, or requires any Lender or
any applicable Lending Installation to make any payment
calculated by reference to the amount of Loans held,
Facility B Letters of Credit issued or participated in
or interest received by it, by an amount deemed
material by such Lender,
then, within 15 days of demand by such Lender, the Borrower
shall pay such Lender that portion of such increased expense
incurred or reduction in an amount received which such
Lender reasonably determines is attributable to making,
funding and maintaining its Loans, its interest in the
Facility B Letters of Credit, and its Commitment.
(b) In addition to any other amounts payable by the
Borrowing Entities hereunder, each Lender may require the
relevant Borrowing Entity to pay, contemporaneously with
each payment of interest on Eurocurrency Advances of such
Borrowing Entity which are denominated in pounds sterling,
additional interest on the related Eurocurrency Loan of such
Lender at the percentage calculated from time to time by
such Lender to be the percentage required to fully
compensate such Lender for all reserve costs, liabilities,
expenses and assessments (other than reserve costs,
liabilities, expenses and assessments taken into account in
determining the interest rate applicable to such
Eurocurrency Advance) which have been incurred by such
Lender (or its applicable Lending Installation) in complying
with any and all requirements of any relevant United Kingdom
banking authority or authorities applicable to such Lender
(or its applicable Lending Installation) regarding the
making, funding or maintaining of such Eurocurrency Loan
(including, without limitation, any and all liquid asset
maintenance requirements of the Bank of England). A
certificate of any Lender claiming compensation under the
preceding sentence, setting forth the additional interest to
be paid to it thereunder and setting forth in reasonable
detail a reasonable basis therefor, shall be conclusive in
the absence of manifest error, and in determining the amount
of such interest, such Lender may use any reasonable
averaging and attribution methods. Any Lender wishing to
require payment of such additional interest (x) shall so
notify the relevant Borrowing Entity and the Agent, in which
case such additional interest on the Eurocurrency Loans of
such Lender denominated in pounds sterling shall be payable
in pounds sterling to such Lender at the place indicated in
such notice with respect to each Interest Period commencing
at least five Business Days after the giving of such notice
and (y) shall notify the relevant Borrowing Entity at least
five Business Days prior to each date on which interest is
payable on such Eurocurrency Loans of the amount then due it
under this Section.
2.20.3. Changes in Capital Adequacy Regulations. If
a Lender determines the amount of capital required or
expected to be maintained by such Lender, any applicable
Lending Installation of such Lender or any corporation
controlling such Lender is increased as a result of a
Change, then, within 15 days of demand by such Lender, the
Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the
portion of such increased capital which such Lender
determines is attributable to this Agreement, its Loans, its
interest in the Facility B Letters of Credit, or its
obligation to make Loans, participate in or issue Facility B
Letters of Credit hereunder (after taking into account such
Lender's policies as to capital adequacy). "Change" means
(i) any change after the date of this Agreement in the
Risk-Based Capital Guidelines or (ii) any adoption of or
change in any other law, governmental or quasi-governmental
rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any
Lender. "Risk-Based Capital Guidelines" means (i) the
risk-based capital guidelines in effect in the United States
on the date of this Agreement, including transition rules,
and (ii) the corresponding capital regulations promulgated
by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices entitled
"International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of
this Agreement.
2.20.4. Availability of Types of Advances. If any
Lender determines that maintenance of its Eurocurrency Loans
at a suitable Lending Installation would violate any
applicable law, rule, regulation, or directive, whether or
not having the force of law, or if the Required Lenders
determine that (i) deposits of a type and maturity
appropriate to match fund Fixed Rate Advances of any Type
are not available or (ii) the interest rate applicable to
any Type of Fixed Rate Advance does not accurately reflect
the cost of making or maintaining such Advance, then the
Agent shall suspend the availability of the affected Type of
Advance and require any Fixed Rate Advances of the affected
Type to be repaid.
2.20.5. Funding Indemnification. If any payment of a
Fixed Rate Advance occurs on a date which is not the last
day of the applicable Interest Period, whether because of
acceleration, prepayment or otherwise, or a Fixed Rate
Advance is not made on the date specified by the Borrower
for any reason other than default by the Lenders, the
Borrower will indemnify each Lender for any loss or cost
(including lost profits) incurred by it resulting therefrom,
including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or
maintain the Fixed Rate Advance. In connection with any
assignment by any Lender pursuant to Section 12.3 of any
portion of the Loans made during the Initial Syndication
Period, if any Borrowing Entity has Fixed Rate Loans
outstanding, such Borrowing Entity shall be deemed to have
repaid all outstanding Fixed Rate Advances as of such date
and reborrowed such amount as a Floating Rate Advance and/or
Fixed Rate Advance (chosen in accordance with the provisions
of Section 2.2) and the indemnification provisions under
this Section 2.20.5 shall apply.
2.20.6. Lender Statements; Survival of Indemnity. To
the extent reasonably possible, each Lender shall designate
an alternate Lending Installation with respect to its Fixed
Rate Loans to reduce any liability or obligation of the
Borrowing Entities to such Lender under Sections 2.20.1,
2.20.2 and 2.20.3 or to avoid the unavailability of a Type
of Advance under Section 2.20.4, so long as such designation
is not disadvantageous to such Lender. Each Lender shall
deliver a written statement of such Lender as to the amount
due, if any, under Sections 2.20.1, 2.20.2, 2.20.3 or
2.20.5. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender
determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in
connection with a Fixed Rate Loan shall be calculated as
though each Lender funded its Fixed Rate Loan through the
purchase of a deposit of the type and maturity corresponding
to the deposit used as a reference in determining the Fixed
Rate applicable to such Loan, whether in fact that is the
case or not. Unless otherwise provided herein, the amount
specified in the written statement shall be payable on
demand after receipt by the Borrower of the written
statement. The obligations of the parties under Sections
2.20.1, 2.20.2, 2.20.3 and 2.20.5 shall survive payment of
the Obligations and termination of this Agreement.
ARTICLE III
THE LETTER OF CREDIT SUBFACILITY
3.1. Obligation to Issue. Subject to the terms and
conditions of this Agreement, upon completion of an application
in the form of that set forth in Exhibit C hereto (or, in the
case of a Commercial Letter of Credit, a form acceptable to the
Issuing Bank (as defined below) and not inconsistent with the
terms hereof) by a Borrowing Entity and in reliance upon the
representations and warranties of the Borrowing Entities herein
set forth, First Chicago (and, at the discretion of each other
Lender in each such instance, each such Lender) hereby agrees to
issue for the account of the applicable Borrowing Entities
through such of the applicable issuing Lender's branches as it
and the applicable Borrowing Entities may jointly agree (provided
that, absent any agreement with the applicable Borrowing Entity
to the contrary, First Chicago will issue Facility B Letters of
Credit through its offices in Chicago, Illinois), one or more
Facility B Letters of Credit in accordance with this Article III,
from time to time during the period, commencing on the Effective
Date and ending on the last Business Day prior to the Facility B
Termination Date (upon receipt of an application for the issuance
of a Facility B Letter of Credit, the Lender to which such
application is made shall herein be referred to as the "Issuing
Bank" with respect to such prospective or actual Facility B
Letter of Credit). To the extent that any term or provision of
an application for a Facility B Letter of Credit hereunder or
with respect to any Existing Letter of Credit conflicts with the
terms and provisions of this Agreement, the terms and provisions
of this Agreement shall control.
3.2. Types and Amounts. An Issuing Bank shall not:
(i) issue any Facility B Letter of Credit if the aggregate
maximum amount then available for drawing under Letters
of Credit issued by such Issuing Bank, after giving
effect to the Facility B Letter of Credit requested
hereunder, shall exceed any limit imposed by law or
regulation upon such Issuing Bank;
(ii) issue any Facility B Letter of Credit if, after giving
effect thereto, the sum of (a) the Dollar Equivalent of
the aggregate unpaid principal balance of the Facility
B Advances then outstanding plus (b) the Facility B
Letter of Credit Obligations then outstanding would
exceed the Aggregate Facility B Commitment as then in
effect;
(iii) issue or extend the expiration date of any Letter
of Credit which has an expiration date after the
Facility B Termination Date;
(iv) issue any Facility B Letter of Credit having an
expiration date, or containing automatic extension
provisions to extend such date to a date which is, more
than twelve (12) months after the date of its issuance;
(v) issue any Facility B Letter of Credit if the Facility B
Letter of Credit Obligations, after giving effect to
any Facility B Letter of Credit requested hereunder,
would exceed $15,000,000; or
(vi) issue any Facility B Letter of Credit if any Default or
Unmatured Default exists.
3.3. Conditions. In addition to being subject to the
satisfaction of the conditions contained in Section 4.2, the
obligation of an Issuing Bank to issue any Facility B Letter of
Credit is subject to the satisfaction in full of the following
conditions:
(i) the applicable Borrowing Entity shall have delivered to
such Issuing Bank at such times and in such manner as
such Issuing Bank may reasonably prescribe such
documents and materials as may be required pursuant to
the terms of the proposed Facility B Letter of Credit
(it being understood that if any inconsistency exists
between such documents and the Loan Documents, the
terms of the Loan Documents shall control) and the
proposed Facility B Letter of Credit shall be
reasonably satisfactory to the Issuing Bank as to form
and content; and
(ii) as of the date of issuance, no order, judgment or
decree of any court, arbitrator or governmental
authority shall purport by its terms to enjoin or
restrain that Issuing Bank from issuing the requested
Facility B Letter of Credit and no law, rule or
regulation applicable to that Issuing Bank and no
request or directive (whether or not having the force
of law) from any governmental authority with
jurisdiction over that Issuing Bank shall prohibit or
request that such Issuing Bank refrain from the
issuance of Letters of Credit generally or the issuance
of the requested Facility B Letter of Credit in
particular.
3.4. Procedure for Issuance of Facility B Letters of Credit
(a) The applicable Borrowing Entity shall give the
Issuing Bank and the Agent at least two (2) Business Days'
prior written notice of any requested issuance of a Facility
B Letter of Credit under this Agreement (a "Letter of Credit
Request") (except that, in lieu of such written notice, the
applicable Borrowing Entity may give the Issuing Bank and
the Agent telephonic notice of such request if confirmed in
writing by delivery to the Issuing Bank and the Agent (i)
immediately (A) of a telecopy of the written notice required
hereunder which has been signed by an Authorized Officer or
(B) of a telex containing all information required to be
contained in such written notice and (ii) promptly (but in
no event later than the requested date of issuance) of the
written notice required hereunder containing the original
signature of an Authorized Officer); such notice shall be
irrevocable and shall specify:
(1) whether the requested Facility B Letter of Credit
is a Commercial Letter of Credit or a Standby
Letter of Credit and, if it is a Standby Letter of
Credit, whether the applicable Borrowing Entity
believes it to be a Financial Letter of Credit or
a Performance Letter of Credit;
(2) the stated amount of the Facility B Letter of
Credit requested (which stated amount shall not be
less than $50,000);
(3) the effective date (which day shall be a
Business Day) of issuance of such requested
Facility B Letter of Credit (the "Issuance Date");
(4) the date on which such requested Facility B
Letter of Credit is to expire (which date shall be
a Business Day and shall in no event be later than
the Facility B Termination Date);
(5) the name of the Issuing Bank chosen by the
Borrower to issue the requested Facility B Letter
of Credit;
(6) the purpose for which such Facility B Letter
of Credit is to be issued; and
(7) the Person(s) for whose benefit the requested
Facility B Letter of Credit is to be issued.
At the time such request is made, the applicable Borrowing
Entity shall also provide the Agent and the Issuing Bank a
copy of the form of the Facility B Letter of Credit it is
requesting be issued. Such notice, to be effective, must be
received by such Issuing Bank and the Agent not later than
2:00 p.m. (Chicago time) on the last Business Day on which
notice can be given under this Section 3.4(a).
(b) Subject to the terms and conditions of this
Article III and provided that the applicable conditions set
forth in Section 4.2 hereof have been satisfied, the Issuing
Bank shall, on the Issuance Date, issue a Facility B Letter
of Credit on behalf of the applicable Borrowing Entity in
accordance with the Issuing Bank's usual and customary
business practices unless the Issuing Bank has actually
received (i) written or telephonic notice from the
applicable Borrowing Entity specifically revoking the Letter
of Credit Request with respect to such Facility B Letter of
Credit, (ii) written notice from the Agent, which complies
with the provisions of Section 3.6(a) or (iii) written or
telephonic notice from the Agent stating that the issuance
of such Facility B Letter of Credit would violate Section
3.2.
(c) Each Issuing Bank shall give the Agent and the
applicable Borrowing Entity written or telex notice, or
telephonic notice confirmed promptly thereafter in writing,
of the issuance of a Facility B Letter of Credit (the
"Issuance Notice"), which shall indicate, in the case of the
issuance of a Standby Letter of Credit, the Issuing Bank's
reasonable determination as to whether such Standby Letter
of Credit is a Financial Letter of Credit or a Performance
Letter of Credit, which determination shall be conclusive
absent manifest error.
(d) An Issuing Bank shall not extend or amend any
Facility B Letter of Credit (except in accordance with the
specific terms of such Facility B Letter of Credit) unless
the requirements of this Section 3.4 are met as though a new
Facility B Letter of Credit was being requested and issued.
3.5. Reimbursement Obligations; Automatic Alternate Base
Rate Advance; Duties of Issuing Banks
(a) (i) Each Issuing Bank shall promptly notify the
applicable Borrowing Entity and the Agent of any draw under
a Facility B Letter of Credit (including, without
limitation, under any Existing Letter of Credit). The
applicable Borrowing Entity or the Borrower shall reimburse
the Issuing Bank for drawings under a Facility B Letter of
Credit issued by it no later than the next succeeding
Business Day after the payment by that Issuing Bank
(including through the application of proceeds of Advances
requested for such purpose); and (ii) any Reimbursement
Obligation with respect to any Facility B Letter of Credit
not so reimbursed shall bear interest from the date of the
relevant drawings under the pertinent Facility B Letter of
Credit until payment in full is received by such Issuing
Bank at the Default interest rate for Alternate Base Rate
Advances calculated in accordance with Section 2.11. If the
Borrower or applicable Borrowing Entity has not reimbursed
the Issuing Bank by 10:00 a.m. on such next succeeding
Business Day (whether with the proceeds of an Advance
requested hereunder or otherwise), then the Issuing Bank
shall immediately notify the Agent of such failure.
Provided that the conditions precedent set forth in Section
4.2 and other requirements of this Agreement for the making
of an Alternate Base Rate Advance in the aggregate principal
amount of such Reimbursement Obligation (other than the
requirement that the Borrowing Entity affirmatively request
such Advance) are, in the opinion of the Agent, met, the
Agent will then promptly notify the Lenders that the
Borrower is deemed to have made a request for an Alternate
Base Rate Advance in the aggregate principal amount of such
Reimbursement Obligation, and each Lender shall make
available its Loan or Loans in the manner prescribed for
Alternate Base Rate Advances herein. Loans made pursuant to
this Section 3.5 shall be Facility B Loans. The Agent shall
then transfer the aggregate principal amount of such
Alternate Base Rate Advance to the relevant Issuing Bank in
satisfaction of the unpaid Reimbursement Obligation.
Thereafter, such Advance shall be treated as an Alternate
Base Rate Advance requested by the Borrower hereunder.
(b) Any action taken or omitted to be taken by an
Issuing Bank under or in connection with any Facility B
Letter of Credit, if taken or omitted in the absence of
willful misconduct or Gross Negligence, shall not put that
Issuing Bank under any resulting liability to any Lender or,
assuming that such Issuing Bank has complied with the
procedures specified in Section 3.4 and the Agent has not
given a notice contemplated by Section 3.6(a) that continues
in full force and effect, relieve that Lender of its
obligations hereunder to that Issuing Bank. In determining
whether to pay under any Facility B Letter of Credit, an
Issuing Bank shall have no obligation relative to the
Lenders other than to confirm that any documents required to
be delivered under such Facility B Letter of Credit appear
to have been delivered in compliance and that they appear to
comply on their face, with the requirements of such Facility
B Letter of Credit.
3.6. Participation
(a) Immediately upon issuance by an Issuing Bank of
any Facility B Letter of Credit in accordance with the
procedures set forth in Section 3.4 and immediately upon the
date hereof for the Existing Letters of Credit (including,
without limitation, the Specified Letter of Credit), each
Lender shall be deemed to have irrevocably and
unconditionally purchased and received from that Issuing
Bank, without recourse, representation or warranty, an
undivided interest and participation equal to its Percentage
in such Facility B Letter of Credit (including, without
limitation, all obligations of the applicable Borrowing
Entity with respect thereto) and any security therefor or
guaranty pertaining thereto; provided, that a Letter of
Credit issued by any Issuing Bank shall not be deemed to be
a Facility B Letter of Credit for purposes of this Section
3.6 if such Issuing Bank shall have received written notice
from the Agent on or before the Business Day prior to the
date of its issuance of such Letter of Credit that one or
more of the conditions contained in Section 4.2 is not then
satisfied, and, in the event an Issuing Bank receives such a
notice, it shall have no further obligation to issue any
Facility B Letter of Credit until such notice is withdrawn
by the Agent or it subsequently receives a notice from the
Agent that such condition has been effectively waived in
accordance with the provisions of this Agreement.
(b) In the event that any Issuing Bank makes any
payment under any Facility B Letter of Credit and the
applicable Borrowing Entity or the Borrower shall not have
repaid such amount to such Issuing Bank pursuant to Sections
3.5 and 3.7 hereof, such Issuing Bank shall promptly notify
the Agent, which shall promptly notify each Lender, of such
failure, and each Lender shall, unless a deemed Alternate
Base Rate Advance in the full amount of such unpaid
Reimbursement Obligation has been or is to be made pursuant
to Section 3.5(a), promptly and unconditionally pay to the
Agent for the account of such Issuing Bank such Lender's
Percentage of the amount of such payment which has not been
reimbursed (whether directly or through a deemed Alternate
Base Rate Advance), and the Agent shall promptly pay such
amount to the Issuing Bank. The failure of any Lender to
make available to the Agent for the account of any Issuing
Bank its Percentage of the unreimbursed amount of any such
payment shall not relieve any other Lender of its obligation
hereunder to make available to the Agent for the account of
such Issuing Bank its Percentage of the unreimbursed amount
of any payment on the date such payment is to be made, but
no Lender shall be responsible for the failure of any other
Lender to make available to the Agent its Percentage of the
unreimbursed amount of any payment on the date such payment
is to be made.
(c) Whenever an Issuing Bank receives a payment on
account of a Reimbursement Obligation, including any
interest thereon, it shall promptly pay to the Agent and the
Agent shall promptly pay to each Lender which has funded its
participating interest therein, in immediately available
funds, an amount equal to such Lender's Percentage thereof.
(d) Upon the request of the Agent or any Lender, an
Issuing Bank shall furnish to such Agent or Lender copies of
any Facility B Letter of Credit to which that Issuing Bank
is party and such other documentation as may reasonably be
requested by the Agent or Lender.
(e) The obligations of a Lender to make payments to
the Agent for the account of each Issuing Bank with respect
to a Facility B Letter of Credit shall be absolute,
unconditional and irrevocable, not subject to any
counterclaim, set-off, qualification or exception whatsoever
and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances.
3.7. Payment of Reimbursement Obligations.
(a) The applicable Borrowing Entity agrees to pay to
each Issuing Bank the amount of all of its Reimbursement
Obligations, interest and other amounts payable to such
Issuing Bank under or in connection with any Facility B
Letter of Credit (including, without limitation, any
Existing Letter of Credit) of which it is the account party
immediately when due, irrespective of any claim, set-off,
defense or other right which the Borrower or any Subsidiary
may have at any time against any Issuing Bank or any other
Person, under all circumstances, including without
limitation any of the following circumstances:
(i) any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense
or other right which the applicable Borrowing
Entity, the Borrower or any Subsidiary may have at
any time against a beneficiary named in a Facility
B Letter of Credit or any permitted transferee of
any Facility B Letter of Credit (or any Person for
whom any such transferee may be acting), the
Agent, the Issuing Bank, any Lender, or any other
Person, whether in connection with this Agreement,
any Facility B Letter of Credit, the transactions
contemplated herein or any unrelated transactions
(including any underlying transactions between the
Borrower or any Subsidiary and the beneficiary
named in any Facility B Letter of Credit);
(iii) any draft, certificate or any other
document presented under the Facility B Letter of
Credit (and accepted by the Issuing Bank without
Gross Negligence or willful misconduct) proving to
be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue
or inaccurate in any respect;
(iv) the surrender or impairment of any security
for the performance or observance of any of the
terms of any of the Loan Documents; or
(v) the occurrence of any Default or Unmatured
Default.
(b) In the event any payment by or for the account of
any Borrowing Entity or any Subsidiary received by an
Issuing Bank with respect to a Facility B Letter of Credit
(including, without limitation, any Existing Letter of
Credit) and distributed by the Agent to the Lenders on
account of their participations is thereafter set aside,
avoided or recovered from that Issuing Bank in connection
with any receivership, liquidation, reorganization or
bankruptcy proceeding, each Lender which received such
distribution shall, upon demand by that Issuing Bank,
contribute such Lender's Percentage of the amount set aside,
avoided or recovered together with interest at the rate
required to be paid by that Issuing Bank upon the amount
required to be repaid by it.
3.8. Compensation for Facility B Letters of Credit
(a) The Borrower shall pay to the Agent, for the
ratable account of the Lenders, based upon the Lenders'
respective Percentages, a fee (the "Facility B Letter of
Credit Fee") with respect to each Facility B Letter of
Credit that is:
(i) a Standby Letter of Credit, for the period
from the Issuance Date thereof to but including
the final expiration date thereof, in a per annum
amount equal to the product of (A) the average
daily undrawn amount of such Facility B Letter of
Credit during such period times (B) either (1)
with respect to a Financial Letter of Credit, the
percentage indicated in Section 2.5 as the
Applicable Margin for the Standby Letter of Credit
Fee (Financial) or (2) with respect to a
Performance Letter of Credit, the percentage
indicated as the Applicable Margin for the Standby
Letter of Credit Fee (Performance), and
(ii) a Commercial Letter of Credit, in a one-time
amount equal to the greater of $150 or .25% of the
face amount of such Facility B Letter of Credit;
provided, however, that, with respect to the Specified
Letter of Credit, for the period from the date hereof
through and including the expiration date of such Specified
Letter of Credit (without taking into account any extensions
thereof (whether pursuant to any automatic extension
provisions or so-called "evergreen" provisions)) the
Facility B Letter of Credit Fee shall be the fee that would
have been payable under the terms of the Credit Agreement
dated as of December 6, 1993 (the "Prior Agreement") among
the Borrower, The First National Bank of Chicago, as agent,
and the lenders party thereto applicable to Performance
Letters of Credit issued under and as defined in the Prior
Agreement.
The Facility B Letter of Credit Fee relating to any (i)
Standby Letter of Credit shall be due and payable in arrears
on each Payment Date and, to the extent any such fees are
then due and unpaid, on the Facility B Termination Date and
(ii) Commercial Letter of Credit shall be due and payable on
the Issuance Date. The Agent shall promptly remit such
Facility B Letter of Credit Fees, when paid, to the other
Lenders in accordance with their Percentages thereof.
(b) Each Issuing Bank shall have the right to receive
solely for its own account (i) an issuance fee of .15% of
the face amount of each Standby Letter of Credit issued by
such Issuing Bank, payable by the applicable Borrowing
Entity on the Issuance Date and (ii) such amounts as it and
the applicable Borrowing Entity may agree, in writing, to
pay to such Issuing Bank with respect to issuance fees for
any Commercial Letter of Credit. In either case, each
Issuing Bank shall be entitled to receive its reasonable
out-of-pocket costs of issuing and servicing Facility B
Letters of Credit. In addition, the Borrowing Entity which
is the account party on any Facility B Letter of Credit
shall pay to the Issuing Bank, upon any transfer of such
Facility B Letter of Credit by the beneficiary thereof to a
new beneficiary, a transfer commission equal to the greater
of $100 or .25% of the amount transferred, provided that
such transfer commission shall not in any event exceed $750.
3.9. Letter of Credit Collateral Account. The Borrower
hereby agrees that it will, until the Facility B Termination
Date, maintain a special collateral account (the "Letter of
Credit Collateral Account") at the Agent's office at the address
specified pursuant to Article XIII, in the name of the Borrower
but under the sole dominion and control of the Agent, for the
benefit of the Lenders, and in which the Borrower shall have no
interest other than as set forth in Section 8.1. In addition to
the foregoing, the Borrower hereby grants to the Agent, for the
benefit of the Lenders, a security interest in and to the Letter
of Credit Collateral Account and any funds that may hereafter be
on deposit in such account.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance and Facility B Letter of Credit. The
initial Advances hereunder shall occur no later than September
30, 1996. The Lenders shall not be required to make the initial
Advance hereunder (if Facility Letters of Credit shall not
previously have been issued) and (if the initial Advance shall
not previously have been made) an Issuing Bank shall not be
obligated to issue any Facility B Letter of Credit hereunder
unless the Borrower has furnished to the Agent with sufficient
copies for the Lenders, the following items (and the date upon
which all such items shall have been so furnished is hereinafter
referred to as the "Effective Date"):
(i) Copies of the certificate or articles of
incorporation, together with all amendments, and a
certificate of good standing for the Borrower and each
of the Guarantors, both certified by the appropriate
governmental officer in its jurisdiction of
incorporation.
(ii) Copies, certified by the Secretary, Assistant
Secretary or Authorized Officer of the Borrower and the
Guarantors, of their respective by-laws and of their
respective Board of Directors' resolutions authorizing
the execution of the Loan Documents to which it is a
party.
(iii) An incumbency certificate, executed by the
Secretary, Assistant Secretary or Authorized Officer of
the Borrower and the Guarantors, which shall identify
by name and title and bear the signature of the
officers and/or Authorized Officers of the Borrower or
Guarantor, as applicable, authorized to sign the Loan
Documents and to make borrowings and request Facility B
Letters of Credit on its behalf hereunder, upon which
certificate the Agent and the Lenders shall be entitled
to rely until informed of any change in writing by the
Borrower.
(iv) A compliance certificate, signed by the President
or Chief Financial Officer of the Borrower, in
substantially the form attached hereto as Exhibit F.
(v) A written opinion of counsel to the Borrower,
addressed to the Lenders in substantially the form of
Exhibit D-1.
(vi) Borrower Notes payable to the order of each of the
Lenders.
(vii) Written money transfer instructions, in
substantially the form of Exhibit E hereto, addressed
to the Agent and signed by an Authorized Officer of the
Borrower, together with such other related money
transfer authorizations as the Agent may have
reasonably requested.
(viii) The Guaranty executed by each Guarantor.
(ix) The insurance certificate described in Section
5.18.
(x) Evidence of the termination, effective as of the
Effective Date, of the Borrower's Credit Agreement
dated as of December 6, 1993 and provision for the
repayment of all amounts outstanding or payable
thereunder.
(xi) Such other documents as any Lender or its counsel
may have reasonably requested, including, without
limitation, the documents set forth on the list of
closing documents attached hereto as Exhibit I.
Notwithstanding anything herein to the contrary, the provisions
of this Agreement shall not be effective with respect to any
Existing Letters of Credit until the Effective Date of this
Agreement.
4.2. Each Advance and Facility B Letter of Credit. The
Lenders shall not be required to make any Advance (other than an
Advance that, after giving effect thereto and to the application
of the proceeds thereof, does not increase the aggregate amount
of the sum of (x) outstanding Advances and (y) outstanding
Reimbursement Obligations, provided that, notwithstanding the
foregoing provisions of this parenthetical clause, the conditions
set forth below in this Section 4.2 shall (unless waived in
accordance with the terms of this Agreement) be fulfilled in
connection with any automatic Alternate Base Rate Advance under
Section 3.5) and the Issuing Bank shall not be obligated to issue
any Facility B Letter of Credit, unless on the applicable
Borrowing Date or Issuance Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in
Article V are true and correct in all material respects
as of such Borrowing Date or Issuance Date, as the case
may be, except to the extent any such representation or
warranty is stated to relate solely to an earlier date,
in which case such representation or warranty shall
remain true and correct in all material respects on and
as of such earlier date.
(iii) If such Advance or Facility B Letter of
Credit is requested by a Borrowing Subsidiary, (a) the
representations and warranties of such Borrowing
Subsidiary contained in Article V-A are true and
correct in all material respects as of such Borrowing
Date or Issuance Date, as the case may be, except to
the extent any such representation or warranty is
stated to relate solely to an earlier date, in which
case such representation or warranty shall remain true
and correct in all material respects on and as of such
earlier date and (b) it has complied with the
provisions of Section 4.3.
(iv) All legal matters incident to the making of such
Advance or issuance of such Facility B Letter of Credit
shall be satisfactory to the Agent and its counsel (in
their reasonable discretion).
Each Borrowing Notice with respect to each such Advance and
each Letter of Credit Request with respect to each Facility B
Letter of Credit shall constitute a representation and warranty
by (a) the Borrower that the conditions contained in Sections
4.2(i) and (ii) have been satisfied and (b) the applicable
Borrowing Subsidiary if such Advance or Facility B Letter of
Credit is requested by it, that the conditions contained in
Sections 4.2(i) and (iii) have been satisfied.
4.3. First Advance or Facility B Letter of Credit to
New Borrowing Subsidiaries. The obligations of the Lenders to
make Advances and an Issuing Bank to issue Facility B Letters of
Credit on the occasion of the first request for either by each
Borrowing Subsidiary are subject to the satisfaction of the
conditions set forth in Section 4.2 hereof with respect to such
Borrowing Subsidiary and the Borrower and the following
additional conditions:
(i) The Agent shall have received, in sufficient
number of original counterparts for each Lender, an
Election to Participate dated on or before the date of
such first Advance or Facility B Letter of Credit
issuance (as the case may be) and duly executed by the
relevant Borrowing Subsidiary and the Borrower.
(ii) On or before the date of such first Advance or
Facility B Letter of Credit issuance (as the case may
be), the relevant Borrowing Subsidiary shall deliver to
the Agent (a) its Borrowing Subsidiary Notes, all of
which shall be duly executed by such Borrowing
Subsidiary and dated on or before the date of such
Advance, (b) the corporate documentation and
certificates identified in Sections 4.1(i)-(iii) with
respect to such Borrowing Subsidiary and (c) a written
opinion addressed to the Lenders, dated the date of
such Advance or Facility B Letter of Credit issuance
(as the case may be), of counsel to such Borrowing
Subsidiary acceptable to the Agent, such opinion to be,
in the case of a Domestic Borrowing Subsidiary, in
substantially the form of Exhibit D-2 hereto (or as
otherwise approved by the Agent), and in the case of a
Foreign Borrowing Subsidiary, in form and substance
acceptable to the Agent. Promptly after receipt
thereof, the Agent agrees to supply copies of such
documentation to each of the Lenders.
(iii) All legal details and proceedings in
connection with the transactions contemplated by this
Agreement with respect to the relevant Borrowing
Subsidiary shall be satisfactory to the Lenders (in
their reasonable discretion), and the Agent shall have
received all such counterpart originals or certified or
other copies of such documents and proceedings in
connection with such transactions, in form and
substance satisfactory to the Agent, as the Agent may
reasonably request.
4.4. Facility A Advance in connection with Offer to
Purchase. The Lenders shall not be required to make any Facility
A Advance in connection with the Offer to Purchase unless:
(i) All requisite regulatory and legal approvals for
the Offer to Purchase shall have been obtained,
including, without limitation, those required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder;
all applicable appeal periods shall have expired and
there shall be no governmental or judicial action,
actual or threatened, that has or would have a
reasonable likelihood of restraining, preventing or
imposing burdensome conditions on the Brenco
Acquisition.
(ii) There shall be no injunction or temporary
restraining order which, in the judgment of the Agent
or the Required Lenders, would prohibit the making of
such Advance or the purchase of shares pursuant to the
Offer to Purchase nor shall there be any litigation or
administrative proceedings or other legal or regulatory
developments, actual or threatened, which could
reasonably be expected to (a) have a Material Adverse
Effect or (b) have a material adverse effect on the
business, Property, condition (financial or otherwise),
results of operations, or prospects of Brenco and its
Subsidiaries taken as a whole.
(iii) The amount of consideration paid by the
Acquisition Subsidiary for shares of common stock of
Brenco in connection with the Offer to Purchase shall
not exceed $16.125 per share in cash unless and to the
extent otherwise agreed to by the Lenders.
(iv) The terms of the Offer to Purchase shall not be
amended without the consent of the Required Lenders in
any way except (i) to extend the expiration date
thereof to a date not to exceed the last date which
would allow the initial funding for the purpose of
purchasing tendered shares to take place by September
30, 1996 and (ii) in other respects not adverse to the
interests of the Lenders.
(v) Holders of not less than 66-2/3% of the
outstanding shares of common stock of Brenco (or such
greater percentage of holders as may be required under
applicable state law or Brenco's certificate of
incorporation or by-laws to vote for and effect the
Merger) shall have tendered such shares pursuant to the
Offer to Purchase.
(vi) The representations and warranties set forth in
the Acquisition Agreement shall be accurate in all
material respects as of the initial Facility A
Borrowing Date, the conditions precedent to the
purchase of shares set forth in Annex I of the
Acquisition Agreement and in the Offer to Purchase
shall have been satisfied (or if not satisfied, waived
by the Borrower, which waiver shall be consented to by
the Agent and the Required Lenders if such waiver could
be adverse to the interests of the Lenders ).
(vii) All fees required to be paid to the Agent and
the Lenders shall have been paid in full.
(viii) The Agent shall have received evidence of the
termination of Brenco's revolving credit facility dated
as of May 31, 1995, and provision for the repayment of
all amounts outstanding or payable thereunder, if any.
4.5. Facility A Advance in connection with Merger. The
Lenders shall not be required to make any Facility A Advance in
connection with the Merger unless:
(i) The Agent has received evidence in a form
satisfactory to the Agent and the Required Lenders that
the Borrower's directors and, if required by applicable
law, Brenco's directors and shareholders, shall have
approved the Merger on terms substantially similar to
those set forth in the Acquisition Agreement dated as
of June 15, 1996 between the Borrower, the Acquisition
Subsidiary and Brenco (the "Acquisition Agreement").
(ii) All requisite regulatory and legal approvals for
the Merger shall have been obtained, including, without
limitation, those required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder; all applicable appeal
periods shall have expired and there shall be no
governmental or judicial action, actual or threatened,
that has or would have a reasonable likelihood of
restraining, preventing or imposing burdensome
conditions on the transactions contemplated hereby.
(iii) There shall be no injunction or temporary
restraining order which, in the judgment of the Agent
or the Required Lenders, would prohibit the making of
such Advance or the consummation of the Merger nor
shall there be any litigation or administrative
proceedings or other legal or regulatory developments,
actual or threatened, which could reasonably be
expected to have a Material Adverse Effect on the
Borrower and its Subsidiaries, taken as a whole or on
Brenco and its Subsidiaries, taken as a whole.
(iv) All documents, instruments and agreements
necessary to consummate the Merger shall have been
filed with the applicable secretaries of state and no
conditions to completion of the Merger shall be
unsatisfied (unless waived by the Borrower, which
waiver shall be consented to by the Agent and the
Required Lenders if such waiver could be adverse to the
interests of the Lenders ).
(v) The representations and warranties set forth in
the Acquisition Agreement in connection with the Merger
shall be accurate in all material respects as of the
Facility A Borrowing Date, the conditions precedent to
the Merger set forth in Article VI of the Acquisition
Agreement shall have been satisfied (except for the
condition that payment for the shares to be purchased
in connection with the Merger be made) and the Required
Lenders shall have received an opinion or opinions of
counsel in form and substance reasonably satisfactory
to the Agent and the Required Lenders.
(vi) Each of Brenco and its Domestic Subsidiaries shall have
taken all necessary corporate action to become a
Guarantor under the Guaranty and shall have delivered
to the Agent such documentation as the Agent deems
reasonably necessary to effect the addition of Brenco
and its Domestic Subsidiaries as Guarantors under the
Guaranty. Promptly after receipt thereof, the Agent
agrees to supply copies of such documentation to each
of the Lenders.
(vii) The Agent shall have received such corporate
documentation pertaining to Brenco and its Subsidiaries
as the Agent shall reasonably request. Promptly after
receipt thereof, the Agent agrees to supply copies of
such documentation to each of the Lenders.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to the Lenders that:
5.1. Corporate Existence and StandingError! Bookmark
not defined. Each of the Borrower and its Subsidiaries is a
corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and
has all requisite authority to conduct its business as a foreign
corporation in each jurisdiction in which its business is
conducted, except where the failure to have such requisite
authority would not have a Material Adverse Effect.
5.2. Authorization and Validity. The Borrower has the
corporate power and authority and legal right to execute and
deliver the Loan Documents to which it is a party and to perform
its obligations thereunder. The execution and delivery by the
Borrower of the Loan Documents and the performance by it of its
obligations thereunder have been duly authorized by proper
corporate proceedings, and the Loan Documents constitute legal,
valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights
generally.
5.3. No Conflict; Government Consent. Except as set
forth on Schedule 5.3, neither the execution and delivery by the
Borrower of the Loan Documents to which it is a party, nor the
consummation by the Borrower of the transactions therein
contemplated to be consummated by it (including, without
limitation the Brenco Acquisition), nor compliance by the
Borrower with the provisions thereof, will violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award
binding on the Borrower or any of its Subsidiaries or the
Borrower's or any Subsidiary's certificate or articles of
incorporation or by-laws or the provisions of any indenture,
instrument or agreement to which the Borrower or any of its
Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien
in, of or on the Property of the Borrower or a Subsidiary
pursuant to the terms of any such indenture, instrument or
agreement. No order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with, or
exemption by, any Governmental Agency, is required to authorize,
or is required in connection with the execution, delivery and
performance by the Borrower of, or the legality, validity,
binding effect or enforceability against the Borrower of, any of
the Loan Documents, provided that the Borrower is required to
file a copy of this Agreement and other Loan Documents and to
otherwise list or describe this Agreement and other Loan
Documents as part of its periodic filings under the Exchange Act
(although the failure to so file, list or describe this Agreement
or any other Loan Documents would not affect the legality,
validity, binding effect or enforceability of any of the Loan
Documents against the Borrower).
5.4. Financial Statements The consolidated financial
statements of the Borrower and its Subsidiaries as of and for the
periods ended January 31, 1996 and for Brenco and its
Subsidiaries for the period ended December 31, 1995 heretofore
delivered to the Lenders were prepared in accordance with
generally accepted accounting principles in effect on the date
such statements were prepared and fairly present the consolidated
financial condition of the Borrower and its Subsidiaries and
Brenco and its Subsidiaries, respectively, at the respective
dates thereof and the consolidated results of their operations
for the periods then ended.
5.5. Material Adverse Change. Since January 31, 1996,
there has been no change in the business, Property, prospects,
condition (financial or otherwise) or results of operations of
the Borrower and its Subsidiaries, taken as a whole, which could
reasonably be expected to have a Material Adverse Effect. Since
December 31, 1995, there has been no change in the business,
Property, prospects, condition (financial or otherwise) or
results of operations of Brenco and its Subsidiaries, taken as a
whole, which could reasonably be expected to have a Material
Adverse Effect.
5.6. Taxes. The Borrower and its Subsidiaries have
filed all United States federal tax returns and all other
material tax returns which are required to be filed by them and
have paid all taxes due pursuant to said returns or pursuant to
any assessment received by the Borrower or any of its
Subsidiaries, except such taxes, if any, as are being contested
in good faith and as to which adequate reserves have been
provided. As of the date of this Agreement, the United States
income tax returns of the Borrower and its Subsidiaries have been
audited by the Internal Revenue Service, or the time for audit
has expired, through the fiscal year ended January 31, 1992. No
tax liens have been filed and no claims are being asserted with
respect to any such taxes. The charges, accruals and reserves on
the books of the Borrower and its Subsidiaries in respect of any
taxes or other governmental charges are adequate.
5.7. Litigation and Contingent Obligations. Except as
set forth on Schedule 3 hereto, there is no litigation,
arbitration, governmental investigation, proceeding or inquiry
pending or, to the knowledge of any of their respective officers,
threatened against or affecting the Borrower or any of its
Subsidiaries which could reasonably be expected to have a
Material Adverse Effect. Other than any liability incident to
such litigation, arbitration or proceedings, as of the date of
this Agreement the Borrower has no material contingent
obligations not provided for or disclosed in the financial
statements referred to in Section 5.4.
5.8. Subsidiaries. Schedule 4 hereto (as the same may
have been revised in accordance with Section 6.16) contains an
accurate list of all of the presently existing Subsidiaries of
the Borrower, setting forth their respective jurisdictions of
incorporation and the percentage of their respective capital
stock owned by the Borrower or other Subsidiaries. All of the
issued and outstanding shares of capital stock of such
Subsidiaries have been duly authorized and issued and are fully
paid and non-assessable.
5.9. ERISA. As of December 31, 1995, the Unfunded
Liabilities of all Single Employer Plans do not in the aggregate
exceed $3,000,000. As of December 31, 1995, neither the Borrower
nor any other member of the Controlled Group has incurred any
withdrawal liability to Multiemployer Plans. As of December 31,
1995, neither the Borrower nor any other member of the Controlled
Group had incurred any withdrawal liability to Multiemployer
Plans. Each Single Employer Plan complies in all material
respects with all applicable requirements of law and regulations
and, as of the date of this Agreement, no Reportable Event has
occurred with respect to any Single Employer Plan. As of the
date of this Agreement, (i) neither the Borrower nor any other
member of the Controlled Group has withdrawn from any Plan or
initiated steps to do so, (ii) except with respect to the planned
split of the Precision Scientific Instruments and Precision
Scientific Petroleum Instruments Defined Benefit Plan, no steps
have been taken to reorganize any Plan and (iii) no steps have
been taken to terminate any Plan. As of the date of this
Agreement, neither the Borrower nor any other member of the
Controlled Group has been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of
Title IV of ERISA.
5.10. Accuracy of Information. No information, exhibit
or report furnished by the Borrower or any of its Subsidiaries to
the Agent or to any Lender in connection with the negotiation of,
or compliance with, the Loan Documents contained any misstatement
of a material fact or omitted to state a material fact or any
fact necessary to make the statements contained therein not
materially misleading.
5.11. Regulations G, T, U, and X. The Borrower and its
Subsidiaries are in compliance with all applicable requirements
of Regulations G, T, U, and X. Other than with respect to the
stock of Brenco for the period from the Effective Date through
the date of the Merger, Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge,
or other restriction hereunder.
5.12. Material Agreements. As of the date of this
Agreement, neither the Borrower nor any Subsidiary is a party to
any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have
a Material Adverse Effect. As of the date of this Agreement,
neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in (i) any agreement to which
it is a party, which default could reasonably be expected to have
a Material Adverse Effect or (ii) any agreement or instrument
evidencing or governing Indebtedness.
5.13. Compliance With Laws. The Borrower and its
Subsidiaries have complied in all material respects with all
applicable statutes, rules, regulations, orders and restrictions
of any domestic or foreign government or Government Agency
thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property.
Neither the Borrower nor any Subsidiary has received any notice
to the effect that its operations are not in material compliance
with any of the requirements of applicable federal, state and
local environmental, health and safety statutes and regulations
or the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of
any toxic or hazardous waste or substance into the environment,
which non-compliance or remedial action could reasonably be
expected to have a Material Adverse Effect.
5.14. Ownership of Properties. Except as set forth on
Schedule 5 hereto, on the date of this Agreement, the Borrower
and its Subsidiaries will have good title, free of all Liens
other than those permitted by Section 6.17, to all of the
Property and assets reflected in the financial statements as
owned by it.
5.15. Investment Company Act. Neither the Borrower nor
any Subsidiary is an "investment company" or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
5.16. Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company" or a
"subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
5.17. Subordinated Indebtedness. The Obligations
constitute senior indebtedness which is entitled to the benefits
of the subordination provisions of all outstanding Subordinated
Debt.
5.18. Insurance. The certificate signed by the
President or Chief Financial Officer of the Borrower, that
attests to the existence and adequacy of, and summarizes, the
property and casualty insurance program carried by the Borrower
and that has been furnished by the Borrower to the Agent and the
Lenders, is complete and accurate in all material respects as of
the date of this Agreement. This summary includes the insurer's
or insurers' name(s), policy number(s), expiration date(s),
amount(s) of coverage, type(s) of coverage, exclusion(s), and
deductibles. This summary also includes similar information, and
describes any reserves, relating to any self-insurance program
that is in effect.
5.19. Solvency. Immediately following the making of
each Loan, if any, made on the (i) Effective Date and after
giving effect to the application of the proceeds of such Loans,
and (ii) date of the Brenco Acquisition or any Permitted
Acquisition and after giving effect to the application of the
proceeds of such Loans,
(a) the fair value of the assets of the Borrower and
the Subsidiaries on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities,
subordinated, contingent or otherwise, of the Borrower and
the Subsidiaries on a consolidated basis;
(b) the then present fair saleable value of the
property and assets of the Borrower and the Subsidiaries on
a consolidated basis will be greater than the amount that
will be required to pay the probable liability of the
Borrower and the Subsidiaries on a consolidated basis on
their debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become
absolute and matured;
(c) the Borrower and the Subsidiaries on a consolidated
basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and
(d) the Borrower and the Subsidiaries on a consolidated
basis will not have unreasonably small capital with which to
conduct the businesses in which they are engaged as such
businesses are now conducted and are now proposed to be
conducted.
The Borrower does not intend to, or to permit any of its
Subsidiaries to, incur debts beyond its ability to pay such debts
as they mature, taking into account the timing of and amounts of
cash to be received by it or any such Subsidiary and the timing
of the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
5.20. Benefits. Each of the Borrower and its
Subsidiaries will benefit from the financing arrangement
established by this Agreement. The Agent and the Lenders have
stated and the Borrower acknowledges that, but for the agreement
by each of the Guarantors to execute and deliver the Guaranty,
the Agent and the Lenders would not have made available the
credit facilities established hereby on the terms set forth
herein.
ARTICLE V-A
REPRESENTATIONS AND WARRANTIES OF BORROWING SUBSIDIARIES
Each Foreign Borrowing Subsidiary represents and warrants to
the Lenders as provided in this Article V-A, and each Domestic
Borrowing Subsidiary represents and warrants to the Lenders as
provided in Sections 5A.1, 5A.2, 5A.3, 5A.6, 5A.7 and 5A.8 of
this Article V-A that:
5A.1. Corporate Existence and Standing. Such Borrowing
Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of
incorporation and has all requisite authority to conduct its
business in each jurisdiction in which its business is conducted
except where the failure to have such requisite authority would
not have a Material Adverse Effect.
5A.2. Authorization and Validity. Such Borrowing
Subsidiary has the corporate power and authority and legal right
to execute and deliver the Loan Documents to which it is a party
and to perform its obligations thereunder. The execution and
delivery by such Borrowing Subsidiary of the Loan Documents to
which it is a party and the performance by it of its obligations
thereunder have been duly authorized by proper corporate
proceedings, and such Loan Documents constitute legal, valid and
binding obligations of such Borrowing Subsidiary enforceable
against such Borrowing Subsidiary in accordance with their
respective terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally.
5A.3. No Conflict; Government Consent. Neither the
execution and delivery by such Borrowing Subsidiary of the Loan
Documents to which it is a party, nor the consummation by it of
the transactions therein contemplated to be consummated by it,
nor compliance by such Borrowing Subsidiary with the provisions
thereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on such Borrowing
Subsidiary or any of its Subsidiaries or such Borrowing
Subsidiary's or any of its Subsidiary's certificate or articles
of incorporation or by-laws (or similar documents) or the
provisions of any indenture, instrument or agreement to which
such Borrowing Subsidiary or any of its Subsidiaries is a party
or is subject, or by which it, or its Property, is bound, or
conflict with or constitute a default thereunder, or result in
the creation or imposition of any Lien in, of or on the Property
of such Borrowing Subsidiary or any of its Subsidiaries pursuant
to the terms of any such indenture, instrument or agreement. No
order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by,
any Governmental Agency is required to authorize, or is required
in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, any
of the Loan Documents.
5A.4. Filing. To ensure the enforceability or
admissibility in evidence of this Agreement and the Borrowing
Subsidiary Notes of such Foreign Borrowing Subsidiary in such
Foreign Borrowing Subsidiary's country of organization or
incorporation and country which is its principal place of
business (each, a "Subject Country"), it is not necessary that
this Agreement or the Borrowing Subsidiary Notes of such Foreign
Borrowing Subsidiary or any other document be filed or recorded
with any court or other authority in any Subject Country or that
any stamp or similar tax be paid to or in respect of this
Agreement or the Borrowing Subsidiary Notes of such Foreign
Borrowing Subsidiary. The qualification by any Lender or the
Agent for admission to do business under the laws of any Subject
Country does not constitute a condition to, and the failure to so
qualify does not affect, the exercise by any Lender or the Agent
of any right, privilege, or remedy afforded to any Lender or the
Agent in connection with the Loan Documents to which such Foreign
Borrowing Subsidiary is a party or the enforcement of any such
right, privilege, or remedy against such Foreign Borrowing
Subsidiary. The performance by any Lender or the Agent of any
action required or permitted under the Loan Documents will not
(i) violate any law or regulation of any Subject Country or any
political subdivision thereof, (ii) result in any tax or other
monetary liability to such party pursuant to the laws of any such
Subject Country or political subdivision or taxing authority
thereof (provided that, should any such action result in any such
tax or other monetary liability to the Lender or the Agent, the
Borrower hereby agrees to indemnify such Lender or the Agent, as
the case may be, against (x) any such tax or other monetary
liability which is not an Excluded Tax and (y) any increase in an
Excluded Tax which results from such action by such Lender or the
Agent and, to the extent the Borrower makes such indemnification,
the incurrence of such liability by the Agent or any Lender will
not constitute a Default) or (iii) violate any rule or regulation
of any federation or organization or similar entity of which such
Subject Country is a member.
5A.5. No Immunity. Neither such Foreign Borrowing
Subsidiary nor any of its assets is entitled to immunity from
suit, execution, attachment or other legal process. Such Foreign
Borrowing Subsidiary's execution and delivery of the Loan
Documents to which it is a party constitute, and the exercise of
its rights and performance of and compliance with its obligations
under such Loan Documents will constitute, private and commercial
acts done and performed for private and commercial purposes.
5A.6. Investment Company Act. Neither such Borrowing
Subsidiary nor any Subsidiary thereof is an "investment company"
or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
5A.7. Public Utility Holding Company Act. Neither such
Borrowing Subsidiary nor any Subsidiary thereof is a "holding
company" or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
5A.8. Regulation U. Margin stock (as defined in
Regulation U) constitutes less than 25% of those assets of such
Borrowing Subsidiary and its Subsidiaries which are subject to
any limitation on sale, pledge, or other restriction hereunder.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required
Lenders shall otherwise consent in writing, the Borrower hereby
agrees that:
6.1. Financial Reporting. The Borrower will maintain,
for itself and each Subsidiary, a system of accounting
established and administered such that consolidated financial
statements therefor can be prepared in accordance with generally
accepted accounting principles, and furnish to the Lenders:
(i) Within 91 days after the close of each of its fiscal
years, an unqualified audit report certified by a "Big
6" firm of independent certified public accountants or
other accountants reasonably acceptable to the Lenders,
prepared in accordance with generally accepted
accounting principles on a consolidated and (for itself
and the Subsidiaries) consolidating basis
(consolidating statements need not be certified by such
accountants), including balance sheets as of the end of
such period, related profit and loss and changes in
shareholders' equity statements, and a statement of
cash flows, accompanied by a certificate of said
accountants that, in the course of their examination
necessary for their certification of the foregoing,
they have obtained no knowledge of any Default or
Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall
exist, stating the nature and status thereof.
(ii) Within 60 days after the close of the first three
quarterly periods of each of its fiscal years,
condensed consolidated and (for itself and its
Subsidiaries) consolidating unaudited balance sheets as
at the close of each such period and condensed
consolidated and (for itself and its Subsidiaries)
consolidating unaudited profit and loss and changes in
shareholders' equity statements and a statement of cash
flows for the period from the beginning of such fiscal
year to the end of such quarter, all certified by its
President or Chief Financial Officer.
(iii) Together with the financial statements
required hereunder, a compliance certificate in
substantially the form of Exhibit F hereto signed by
its President or Chief Financial Officer showing the
calculations necessary to determine compliance with
Sections 6.11, 6.13, 6.18, 6.19, 6.22 and 6.23 of this
Agreement and stating that no Default or Unmatured
Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.
(iv) Within 270 days after the close of each fiscal
year, a statement of the Unfunded Liabilities of each
Single Employer Plan, certified as correct by an
actuary enrolled under ERISA.
(v) As soon as possible and in any event within 20
days after the Borrower knows that any Reportable Event
has occurred with respect to any Plan, a statement,
signed by the Chief Financial Officer of the Borrower,
describing said Reportable Event and the action which
the Borrower proposes to take with respect thereto.
(vi) As soon as possible and in any event within 20
days after receipt by the Borrower, a copy of (a) any
written notice or claim to the effect that the Borrower
or any of its Subsidiaries is or may be liable to any
Person as a result of the release by the Borrower, any
of its Subsidiaries, or any other Person of any toxic
or hazardous waste or substance into the environment,
and (b) any written notice alleging any violation of
any federal, state or local environmental, health or
safety law or regulation by the Borrower or any of its
Subsidiaries, which, in either case, could reasonably
be expected to have a Material Adverse Effect.
(vii) Promptly upon the furnishing thereof to the
stockholders of the Borrower, copies of all financial
statements, reports and proxy statements so furnished.
(viii) Promptly upon the filing thereof, copies of
all definitive registration statements and annual,
quarterly or other regular reports which the Borrower
or any of its Subsidiaries files with the Securities
and Exchange Commission.
(ix) As soon as available, but in any event within 90
days after the beginning of each fiscal year of the
Borrower, a copy of the plan and forecast (including a
projected consolidated balance sheet, income statement
and funds flow statement) of the Borrower for such
fiscal year.
(x) Such other information (including non-financial
information) as the Agent or any Lender may from time
to time reasonably request including, without
limitation, a copy of any management letter prepared by
the Borrower's certified public accountants in
connection with their examination of the Borrower's
annual audited financial statements.
6.2. Use of Proceeds. The Borrower will use the
proceeds of the Facility A Advances (a) for the payment of its
and the Acquisition Subsidiary's expenses incurred in connection
with the Brenco Acquisition, (b) to make intercompany loans to
the Acquisition Subsidiary the proceeds of which will be used to
provide funds for the purchase of the shares of common stock of
Brenco tendered in connection with the Offer to Purchase and (c)
for the payment by the Borrower of the merger consideration in
connection with the Merger or to make intercompany loans to the
Acquisition Subsidiary the proceeds of which will be used for the
payment of the merger consideration in connection with the
Merger. The Borrower will, and will cause each Subsidiary to,
use the Facility B Letters of Credit and the proceeds of the
Facility B Advances for general corporate purposes (including
Investments, Acquisitions and Indebtedness refinancings permitted
hereunder), to repay outstanding Advances and Reimbursement
Obligations, to provide funds for the Brenco Acquisition and for
the payment of expenses incurred in connection with the Brenco
Acquisition. The Borrower will not, nor will it permit any
Subsidiary to, use any of the Facility B Letters of Credit or the
proceeds of the Advances to purchase or carry any "margin stock"
(as defined in Regulation U) except in compliance with Regulation
X.
6.3. Notice of Default. The Borrower will give prompt
notice in writing to the Lenders of the occurrence of any Default
or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material
Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will
cause each Subsidiary to, (i) carry on and conduct its business
in substantially the same manner and in substantially the same
fields of enterprise as it is presently conducted (it being
understood that its fields of enterprise means the manufacturing
of industrial products and the provision of related services) and
(other than sales of Subsidiaries and mergers of the Borrower or
any Subsidiary which are otherwise permitted under this
Agreement) do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation
in its jurisdiction of incorporation and maintain (where
material) all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
6.5. Taxes. The Borrower will, and will cause each
Subsidiary to, pay when due all taxes, assessments and
governmental charges and levies upon it or its income, profits or
Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate
reserves have been set aside.
6.6. Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable
insurance companies insurance on all their material, insurable
Property in such amounts and covering such risks as is consistent
with sound business practice, and the Borrower will furnish to
any Lender upon request full information as to the insurance
carried.
6.7. Compliance with Laws. The Borrower will, and will
cause each Subsidiary to, comply in all material respects with
all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject and
obtain and maintain in effect all consents, licenses, permits,
orders or other governmental approvals necessary in order to
perform its obligations under the Loan Documents to which it is a
party.
6.8. Maintenance of Properties. The Borrower will, and
will cause each Subsidiary to, do all things reasonably necessary
to maintain, preserve, protect and keep its used and useful
Property in good repair, working order and condition (ordinary
wear and tear excepted), and make all reasonably necessary and
proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at
all times.
6.9. Inspection. The Borrower will, and will cause
each Subsidiary to, permit the Lenders, by their respective
representatives and agents, to inspect any of the Property,
corporate books and financial records of the Borrower and each
Subsidiary, to examine and make copies of the books of accounts
and other financial records of the Borrower and each Subsidiary,
and to discuss the affairs, finances and accounts of the Borrower
and each Subsidiary with, and to be advised as to the same by,
their respective officers at such reasonable times and intervals
as the Lenders may designate upon reasonable notice to the
Borrower. Any information, copies or records obtained by the
Lenders or any of their respective representatives or agents
under this Agreement that is proprietary or confidential in
nature will be maintained in accordance with the terms of Section
9.18.
6.10. Dividends. The Borrower will not, nor will it
permit any Subsidiary to, declare or pay any dividends on its
capital stock (other than dividends payable in its own capital
stock) or redeem, repurchase or otherwise acquire or retire for
value any of its then outstanding capital stock at any time at
which a Default or Unmatured Default exists or would exist after
giving effect to such dividend, redemption, repurchase,
acquisition or retirement; provided, however, that any Subsidiary
may at any time declare and pay dividends to, and redeem,
repurchase or otherwise acquire or retire for value its capital
stock held by, the Borrower or a Wholly-Owned Subsidiary.
6.11. Indebtedness. The Borrower will not, nor will it
permit any Subsidiary to, create, incur or suffer to exist any
Indebtedness, except:
(i) The Obligations.
(ii) Indebtedness existing on the date hereof and
described in Schedule 5 hereto.
(iii) Financial Guaranties.
(iv) The Guaranty.
(v) Contingent Obligations (a) arising from
endorsements of instruments for deposit or collection
in the ordinary course of business, (b) in respect of
Indebtedness of the types described in clauses (i)
through (v) of the definition thereof which
Indebtedness is otherwise permitted hereunder
(including, without limitation, under clause (vii) of
this Section 6.11) and (c) with respect to Letters of
Credit coming within clauses (i) and (ii) of the
definition of "LC Contingent Reimbursement Value".
(vi) Indebtedness of the Borrower to any Subsidiary, of
any Subsidiary to the Borrower or of any Subsidiary to
any other Subsidiary, provided, however, that only the
Borrower may lend to Foreign Subsidiaries.
(vii) Indebtedness of the Borrower as a result of
the replacement by the Borrower of the Specified Letter
of Credit.
(viii) Indebtedness (in addition to the Indebtedness
under clauses (i) through (vii) and clause (ix)) not to
exceed an aggregate amount outstanding at any one time
of (a) $20,000,000 plus (b) the lesser of (1)
$10,000,000 and (2) the aggregate amount of all
payments, repayments and prepayments made with respect
to the Facility A Loans pursuant to Section 2.1.1(d),
Section 2.7.1 or Section 2.7.4 hereof.
(ix) Indebtedness of the Borrower or any of its Subsidiaries
on terms and conditions acceptable to the Required
Lenders all of the Net Cash Proceeds of which have been
applied as a prepayment of the Loans in accordance with
Section 2.7 hereof
6.12. Merger. The Borrower will not, nor will it permit
any Subsidiary to, merge or consolidate with or into any other
Person, except (i) that a Subsidiary may merge with and into the
Borrower or a Wholly-Owned Subsidiary, (ii) pursuant to a
Permitted Acquisition or the Brenco Acquisition and (iii) in the
case of a Subsidiary, in order to effect a sale or other
disposition of assets permitted under Section 6.13.
6.13. Sale of Assets. (a) The Borrower will not, nor
will it permit any Subsidiary to, lease, sell or otherwise
dispose of its Property, to any other Person except for (i)
leases, sales and other dispositions (as used in this Section
6.13, each a "disposition") of inventory in the ordinary course
of business, (ii) dispositions of equipment in the ordinary
course of business in connection with the replacement of such
equipment, (iii) sales of receivables in connection with a sale
permitted under Section 6.14 and (iv) dispositions (in each case
so long as no Default or Unmatured Default exists or would exist
after giving effect thereto) of:
(x) Property which comprises substantially all of the
assets of an entire business entity, product line or
manufacturing facility, provided that the value of all
Property so disposed of pursuant to this clause (x),
based upon the Borrower's financial statements most
recently delivered prior to any such disposition, does
not exceed $46,000,000 in the aggregate, provided
further that (except in the case of a disposition of
Precision Scientific, Inc.'s appliance business) this
clause (x) may only be relied upon if the Borrower has
demonstrated to the Lenders that no Default would have
existed under the Operating Cash Flow to Senior Debt
covenant contained in Section 6.22.3 (as of the most
recently ended fiscal quarter for which the Borrower's
financial statements have been delivered pursuant to
Section 6.1), calculated by assuming that the
contemplated disposition had taken place at the
beginning of the twelve (12) month calculation period
related to such covenant;
(y) any Property other than the type covered by clause
(x), provided that the value of all Property so
disposed of pursuant to this clause (y), based upon the
Borrower's financial statements most recently delivered
prior to any such disposition, does not exceed the
greater of (I) $19,000,000 in the aggregate and (II)
10% of the Borrower's Net Assets as reflected on those
audited financial statements of the Borrower delivered
pursuant to Section 6.1(i) showing the highest level of
Net Assets of any such financial statements delivered
pursuant to such Section during the term of this
Agreement; and
(z) any Property, provided that, in connection with
such disposition the Borrower is in compliance with the
terms of Section 2.7.4.
(b) The Agent and Lenders hereby acknowledge and agree that
(i) the Property that may be sold or otherwise disposed of under
the foregoing Section 6.13(a) includes shares of capital stock of
a Subsidiary, and (ii) in the event of such a sale or other
disposition of capital stock of a Subsidiary permitted under
Section 6.13(a) that results in such Person no longer being a
Subsidiary they shall take such actions as may be reasonably
requested by the Borrower to thereupon release and discharge such
former Subsidiary from all liabilities and obligations under any
Loan Document to which it may then be a party.
6.14. Sale of Accounts. The Borrower will not, nor will
it permit any Subsidiary to, sell or otherwise dispose of any
notes receivable or accounts receivable, with or without
recourse, except (i) as part of a transaction permitted under
Sections 6.12 or 6.13, or (ii) in any other transaction or series
of transactions provided that the aggregate amount of such notes
and accounts receivable sold pursuant to this clause (ii) in any
fiscal year of the Borrower does not exceed $5,000,000.
6.15. Sale and Leaseback. The Borrower will not, nor
will it permit any Subsidiary to, sell or transfer any of its
Property in order to concurrently or subsequently lease as lessee
such or similar Property provided that the Borrower and its
Subsidiaries may consummate sale and leaseback transactions;
provided the aggregate amount of assets sold in connection with
all such sale and leaseback transactions after the date of this
Agreement shall not exceed $3,000,000.
6.16. Investments and Acquisitions. The Borrower will
not, nor will it permit any Subsidiary to,
(a) make or suffer to exist any Investments (including
without limitation, loans and advances to, and other
Investments in, Subsidiaries), or commitments therefor, or
to create any Subsidiary or to become or remain a partner in
any partnership or joint venture, except:
(i) Marketable Securities.
(ii) Investments in Subsidiaries and other
Investments (in each case) in existence on the
date hereof (excluding Investments of Brenco and
its Subsidiaries in existence as of the date
hereof) and described in Schedule 4 hereto.
(iii) Investments in Subsidiaries and non-
Subsidiary Affiliates made after the date hereof;
provided, however, that (x) only the Borrower may
make loans or advances to Foreign Subsidiaries and
to foreign non-Subsidiary Affiliates and (y) any
loans or advances to any domestic non-Subsidiary
Affiliates must be evidenced by promissory notes
which are pledged to the Agent, for the benefit of
the Lenders, pursuant to a pledge agreement
satisfactory in form and substance to the Agent.
(iv) At any time that (I) Loans outstanding do not
exceed $7,500,000 in aggregate principal amount,
any Investments in any debt instruments or stock
of any Person, and (II), at any time that Loans
outstanding exceed $7,500,000 in aggregate
principal amount, Investments of up to (x)
$15,000,000 in debt instruments or stock of any
Person with a long term debt rating of BBB or
higher by S&P or Baa or higher by Moody's plus (y)
an additional $7,500,000 in debt instruments or
stock of any Person permitted under the foregoing
clause (x) or (1) with a long term debt rating of
less than BBB by S&P and Baa by Moody's or (2)
that is not rated.
(v) Investments, consisting of the capital stock of
new Subsidiaries (a) acquired pursuant to a
Permitted Acquisition or the Brenco Acquisition,
(b) created for the purpose of facilitating a
Permitted Acquisition or (c) created by the
Borrower and not otherwise prohibited hereunder,
provided that (i) the Borrower will cause any such
new Domestic Subsidiary created pursuant to this
clause (c) to deliver to the Agent, prior to the
transfer of any assets to such new Domestic
Subsidiary, an executed counterpart to become a
Guarantor under the Guaranty, in the form of
Exhibit G attached hereto, and appropriate
corporate resolutions authorizing such execution
and delivery and (ii) upon the creation of any
such new Domestic Subsidiary, the Borrower shall
deliver to the Lenders a revised Schedule 4
listing such new Subsidiary, and such revised
Schedule shall replace the old Schedule and shall
be deemed to have become part of the Agreement.
Notwithstanding anything herein to the contrary,
until consummation of the Merger, neither Brenco
nor any of its Subsidiaries shall be required to
become a Guarantor under the Guaranty. On the
effective date of the Merger Brenco and each of
its Domestic Subsidiaries shall become a Guarantor
under the Guaranty.
(vi) Investments consisting of notes or other
Properties received as part of the sales proceeds
of Asset Sales permitted pursuant to the terms of
Section 6.13.
(vii) Investments in other Persons represented
by Financial Guaranties and other Contingent
Obligations permitted under Section 6.11.
(viii) Investments held by a Subsidiary
acquired through a Permitted Acquisition, provided
that such Investments existed at the date of such
Permitted Acquisition, were not created as part of
or in anticipation of such Permitted Acquisition
and do not, in the aggregate, exceed $7,500,000 at
any one time outstanding (disregarding those
acquired in the Brenco Acquisition).
(ix) Investments held by Brenco and its
Subsidiaries acquired through the Brenco
Acquisition, provided that such Investments
existed as of the date hereof, were not created as
part of or in anticipation of the Brenco
Acquisition and in connection with which the
Borrower shall, on or prior to the date of the
Merger, deliver to the Lenders a revised Schedule
4 setting forth all such Investments.
(b) make any Acquisition of any Person, except for
Permitted Acquisitions and the Brenco Acquisition. Upon
the consummation of any Permitted Acquisition or the Brenco
Acquisition, as applicable, (i) the Borrower may deliver to
the Lenders a revised Schedule 4 listing any new Subsidiary,
if any, formed in connection with or acquired pursuant to
such Permitted Acquisition or the Brenco Acquisition (each,
a "New Subsidiary"), and such revised Schedule shall replace
the old Schedule and shall be deemed to have become part of
the Agreement and (ii) the Borrower shall or shall cause any
such New Subsidiary that is a Domestic Subsidiary to deliver
to the Agent, promptly but in any event within 15 days, an
executed counterpart to become a Guarantor under the
Guaranty, in the form of Exhibit G attached hereto, and
appropriate corporate resolutions authorizing such execution
and delivery; provided, however, in connection with the
Brenco Acquisition, Brenco and each of its Domestic
Subsidiaries shall, on the effective date of the Merger
deliver to the Agent an executed counterpart to become a
Guarantor under the Guaranty in the form of Exhibit G
attached hereto, accompanied by the corporate resolutions
and opinions of counsel as required pursuant to Section 4.5.
6.17. Liens. The Borrower will not, nor will it permit
any Subsidiary to, create, incur, or suffer to exist any Lien in,
of or on the Property of the Borrower or any of its Subsidiaries,
except:
(i) Liens for taxes, assessments or governmental
charges or levies on its Property if the same shall not
at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith
and by appropriate proceedings and for which adequate
reserves in accordance with generally accepted
accounting principles shall have been set aside.
(ii) Liens imposed by law, such as bankers' setoff
rights, carriers', warehousemen's and mechanics' liens
and other similar statutory or common law liens arising
in the ordinary course of business which secure payment
of obligations not more than 60 days past due, or are
being contested in good faith and by appropriate
proceedings and for which adequate reserves in
accordance with generally accepted accounting
principles shall have been set aside.
(iii) Liens arising out of pledges, bonds or
deposits under worker's compensation laws, unemployment
insurance, old age pensions, or other social security
or retirement benefits or similar legislation and
deposits securing obligations for self-insurance
arrangements in connection with any of the foregoing.
(iv) Easements, rights of way, building restrictions,
minor defects or irregularities in title and such other
encumbrances or charges against real property as are of
a nature generally existing with respect to properties
of a similar character and which do not in any material
and adverse way affect the marketability of the same or
interfere with the use thereof in the business of the
Borrower or the Subsidiaries, and minor defects or
irregularities in title to personal property as are of
a nature generally existing with respect to properties
of a similar character and which do not in any material
and adverse way affect the marketability of the same or
interfere with the use thereof in the business of the
Borrower or the Subsidiaries.
(v) Liens existing on the date hereof and described in
Schedule 5 hereto.
(vi) Liens which relate to Industrial Revenue Bond
financings existing at entities acquired as a Permitted
Acquisition.
(vii) Liens on the Property of any Foreign
Subsidiary incurred in connection with Indebtedness
permitted pursuant to Section 6.11(vii).
(viii) Deposits to secure the performance of bids,
trade contracts, government contracts, leases,
statutory and warranty obligations, surety, appeal and
performance bonds and other obligations of a like
nature incurred in the ordinary course of business,
provided that the aggregate amount of all appeal bonds
in connection with which Liens exist on Property of the
Borrower or its Subsidiaries shall not exceed
$3,000,000 at any one time outstanding.
(ix) Liens arising under Capitalized Leases and other
leases permitted under this Agreement (under which the
Borrower or any Subsidiary is lessee).
(x) Leases and subleases granted to other Persons in
the ordinary course of business.
(xi) Liens in favor of customs and revenue authorities
arising under law to secure payments of customs duties
in connection with the importation of goods and
incurred in the ordinary course of business.
(xii) Any attachment or judgment Liens not giving
rise to a Default.
(xiii) Liens granted in favor of the Agent and the
Lenders under any of the Loan Documents.
(xiv) (a) Purchase money Liens incurred in the
ordinary course of business, (b) Liens securing
Indebtedness of any Subsidiary which Subsidiary is
acquired after the date of this Agreement provided that
such Indebtedness is not incurred in contemplation of
the acquisition by the Borrower or any Subsidiary of
its interest in such Subsidiary, and (c) Liens incurred
in order to finance the purchase by the Borrower or any
Subsidiary of equity interests in any Subsidiary or
Affiliate after the date of this Agreement in favor of
the seller of such equity interests to secure the
purchase price thereof, provided that the principal
amount of the obligations secured by all Liens
permitted under this clause (xiv) shall not in the
aggregate exceed $7,500,000 at any time outstanding.
6.18. Fixed Asset Expenditures. The Borrower will not,
nor will it permit any Subsidiary to, expend, or be committed to
expend, as of any date of determination, on a cumulative basis
from and after the Effective Date, an amount for the acquisition
of fixed assets ("Fixed Asset Expenditures") that, when expended,
will exceed the sum of (i) $12,000,000 plus (ii) 150% of the
Borrower's cumulative depreciation expense, in the aggregate for
the Borrower and its Subsidiaries.
6.19. Rentals. The Borrower will not, nor will it
permit any Subsidiary to, create, incur or suffer to exist
obligations for Rentals in excess of (a) $4,000,000 during any of
the fiscal years ending January 31, 1997, January 31, 1998 and
January 31, 1999, respectively, and (b) $6,000,000 during any one
fiscal year thereafter, in each case on a non-cumulative basis in
the aggregate for the Borrower and its Subsidiaries.
6.20. Affiliates. The Borrower will not, and will not
permit any Subsidiary to, enter into any transaction (including,
without limitation, the purchase or sale of any Property or
service) with, or make any payment or transfer to, any Affiliate
except for (i) transactions involving (x) only the Borrower
and/or one or more Domestic Subsidiaries or Wholly-Owned
Subsidiaries or (y) the Brenco Acquisition, (ii) transactions
which are pursuant to the reasonable requirements of the
Borrower's or such Subsidiary's business, are transacted upon
fair and reasonable terms and have a net effect on the
consolidated financial position of the Borrower and its
Subsidiaries no less favorable than if the Borrower or such
Subsidiary had entered into such transaction with an unrelated
third-party (rather than with such Affiliate) on market terms and
(iii) compensatory arrangements with officers, directors and
employees (including, without limitation, the payment of
dividends, severance and "change in control" payments or making
of loans to or investments in, such officers, directors and
employees) not otherwise prohibited under this Agreement.
6.21. Subordinated Indebtedness. The Borrower will not,
and will not permit any Subsidiary to, (i) make any amendment or
modification which would in any way disadvantage the Lenders to
the indenture, note or other agreement evidencing or governing
any Subordinated Indebtedness, or (ii) directly or indirectly
voluntarily prepay, defease or in substance defease, purchase,
redeem, retire or otherwise acquire for value (except in exchange
for equity of the Borrower), any Subordinated Indebtedness (other
than the Subordinated Debt, which may be prepaid, defeased,
purchased, redeemed, retired or otherwise acquired at any time,
so long as no Default or Unmatured Default exists or would exist
after giving effect thereto).
6.22. Financial Covenants. The Borrower shall maintain,
on a consolidated basis with its Subsidiaries, each of the
following financial covenants, each calculated in accordance with
Agreement Accounting Principles:
6.22.1. Interest Coverage Ratio. As of the end of each
fiscal quarter, an Interest Coverage Ratio greater than or
equal to 3.0 to 1.0.
6.22.2. Leverage Ratio. At all times during each of
the fiscal quarters set forth below, a Leverage Ratio not
exceeding the maximum Leverage Ratio set forth below for
such periods:
Quarters Ending Maximum Leverage Ratio
(on or about)
October 31, 1996 through July 31, 1997 4.00 to 1.0
October 31, 1997 through July 31, 1998 3.75 to 1.00
October 31, 1998 through July 31, 1999 3.50 to 1.00
Each fiscal quarter thereafter 3.25 to 1.00
6.22.3. Operating Cash Flow to Senior Debt. As of the
end of each fiscal quarter, a ratio of (i) Operating Cash
Flow for such fiscal quarter and the three immediately
preceding fiscal quarters to (ii) Senior Debt as of the end
of such fiscal quarter, greater than or equal to 0.20 to
1.0.
6.22.4. Net Worth. The Borrower shall maintain, on a
consolidated basis, at all times a Net Worth (plus any
non-cash charges and expenses related to the disposition of
businesses or entire facilities or to the revaluation of
intangibles and minus any cash payments with respect to any
non-cash charges and expenses related to the disposition of
businesses or entire facilities previously taken into
account) that is greater than or equal to the sum of (i)
$83,260,000 plus (ii) 50% of the Borrower's quarterly Net
Income, if positive, for each fiscal quarter ending after
the Effective Date plus (iii) repurchases of Subordinated
Debt plus (iv) (or minus, as appropriate) the amount
necessary to eliminate the effects of cumulative translation
adjustments, but only to the extent included in Net Worth.
6.22.5 Fixed Charge Coverage Ratio. The Borrower
shall maintain a ratio ("Fixed Charge Coverage Ratio")
calculated as set forth below of: (i) the sum of the amounts
of (a) EBITDA, minus (b) Fixed Asset Expenditures to
(ii) the sum of the amounts of (a) Net Interest expense,
plus (b) historical scheduled amortization of the principal
portion of the Facility A Loans (excluding any optional
prepayments made under Section 2.7.1 or mandatory
prepayments made under Section 2.7.4) and the historical
scheduled amortization of the principal portion of all other
Indebtedness for money borrowed of the Borrower and its
Subsidiaries, plus (c) the income tax provision of the
Borrower and its Subsidiaries plus (d) all payments
consisting of cash dividends on the Borrower's common or
preferred capital stock during of at least:
(1) 1.00 to 1.00 calculated as of the end of each
fiscal quarter commencing with the fiscal quarter ended on
or about October 31, 1996 through the fiscal quarter ending
on or about April 30, 1998;
(2) 1.05 to 1.00 calculated as of the end of each
fiscal quarter commencing with the fiscal quarter ended on
or about July 31, 1998 through the fiscal quarter ending on
or about April 30, 1999;
(3) 1.10 to 1.00 calculated as of the end of each
fiscal quarter commencing with the fiscal quarter ended on
or about July 31, 1999 through the fiscal quarter ending on
or about April 30, 2001; and
(4) 1.15 to 1.00 calculated as of the end of each
fiscal quarter thereafter.
In each case the Fixed Charge Coverage Ratio shall be determined
as of the last day of each fiscal quarter above-referenced for
the four-quarter period ending on such day.
6.23. Foreign Assets. The aggregate net assets of all
Foreign Subsidiaries and foreign non-Subsidiary Affiliates of the
Borrower, as shown on the most recent balance sheet of the
Borrower delivered pursuant to Section 6.1, shall not exceed
$78,000,000 at any time during the term of this Agreement.
6.24. Rate Hedging Obligations. The Borrower shall not
and shall not permit any of its Subsidiaries to enter into any
interest rate, commodity or foreign currency exchange, swap,
collar, cap or similar agreements other than interest rate,
foreign currency or commodity exchange, swap, collar, cap or
similar agreements pursuant to which the Borrower has hedged its
actual interest rate, foreign currency or commodity exposure
(such hedging agreements are sometimes referred to herein as
"Interest Rate Agreements").
6.25. Interest Rate Agreements. Within 120 days after
the date hereof, the Borrower shall enter into, and shall
thereafter maintain, Interest Rate Agreements on terms and with
counterparties determined by the Borrower and, if such
counterparties are other than a Lender, reasonably acceptable to
the Agent by which the Borrower is protected against increases in
interest rates from and after the date of such contracts as to a
notional amount to be determined by the Agent after consultation
with the Borrower, but which notional amount shall not be
required to exceed $35,000,000.
6.26. Consummation of Merger. If as a result of the Offer
to Purchase, the Acquisition Subsidiary, the Borrower, and any
Affiliates of the Borrower shall beneficially own more than
ninety percent (90%) of the outstanding shares of Brenco, the
Borrower and the Acquisition Subsidiary shall consummate the
Merger as soon as reasonably possible but in no event later than
thirty (30) days after the purchase of shares pursuant to the
Offer to Purchase.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events
shall constitute a Default:
7.1. Any representation or warranty made or deemed made
by or on behalf of the Borrower or any of its Subsidiaries to the
Lenders or the Agent under or in connection with this Agreement,
any Loan, any Facility B Letter of Credit, or any certificate or
information delivered in connection with this Agreement or any
other Loan Document shall be materially false on the date as of
which made.
7.2. Nonpayment of principal of any Note when due,
nonpayment of any Reimbursement Obligation when due or nonpayment
of interest upon any Note or of any fee or other obligation under
any of the Loan Documents within five days after the same becomes
due.
7.3. The breach by the Borrower of any of the terms or
provisions of Section 6.2, 6.3 or 6.10-6.23, inclusive.
7.4. The breach by any Borrowing Entity (other than a
breach which constitutes a Default under Section 7.1, 7.2 or 7.3)
of any of the terms or provisions of this Agreement which is not
remedied within ten days after written notice from the Agent.
7.5. Failure of the Borrower or any of its Subsidiaries
to pay any Indebtedness in excess of $3,000,000 in the aggregate
when due; or the default by the Borrower or any of its
Subsidiaries in the performance of any term, provision or
condition contained in any agreement under which any Indebtedness
in excess of $3,000,000 in the aggregate was created or is
governed, or any other event shall occur or condition exist, the
effect of which is to cause, or to permit the holder or holders
of such Indebtedness in excess of $3,000,000 in the aggregate to
cause, such Indebtedness to become due prior to its stated
maturity; or any Indebtedness of the Borrower or any of its
Subsidiaries in excess of $3,000,000 in the aggregate shall be
declared to be due and payable or required to be prepaid (other
than by a regularly scheduled payment) prior to the stated
maturity thereof; or the Borrower or any of its Subsidiaries
shall become generally unable to, or shall admit in writing its
inability to, pay its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries shall (i)
have an order for relief entered with respect to it under the
Federal bankruptcy laws as now or hereafter in effect, (ii) make
an assignment for the benefit of creditors, (iii) apply for,
seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for
it or any portion of its Property that constitutes a Substantial
Portion, (iv) institute any proceeding seeking an order for
relief under the Federal bankruptcy laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed
against it, (v) take any corporate action to authorize or effect
any of the foregoing actions set forth in this Section 7.6 or
(vi) fail to contest in good faith any appointment or proceeding
described in Section 7.7.
7.7. Without the application, approval or consent of
the Borrower or any of its Subsidiaries, a receiver, trustee,
examiner, liquidator or similar official shall be appointed for
the Borrower or any of its Subsidiaries or any portion of its
Property that constitutes a Substantial Portion, or a proceeding
described in Section 7.6(iv) shall be instituted against the
Borrower or any of its Subsidiaries and such appointment
continues undischarged or such proceeding continues undismissed
or unstayed for a period of 60 consecutive days.
7.8. The Borrower or any of its Subsidiaries shall fail
within 45 days of its final entry to pay, bond or otherwise
discharge any judgment or order for the payment of money in
excess of $3,000,000, which is not stayed on appeal or otherwise
being appropriately contested in good faith.
7.9. The Unfunded Liabilities of all Single Employer Plans
shall exceed in the aggregate $20,000,000 or any Reportable Event
shall occur in connection with any Single Employer Plan that
reasonably could be expected to result in liability of the
Borrower or any of its Subsidiaries to the PBGC or to such Plan
in excess of $3,000,000.
7.10. The Borrower or any other member of the Controlled
Group shall have been notified by the sponsor of a Multiemployer
Plan that it has incurred withdrawal liability to such
Multiemployer Plan in an amount which, when aggregated with all
other amounts required to be paid to Multiemployer Plans by the
Borrower or any other member of the Controlled Group as
withdrawal liability (determined as of the date of such
notification), exceeds $3,000,000 or requires payments exceeding
$1,500,000 per annum.
7.11. The Borrower or any of its Subsidiaries shall be
the subject of any proceeding or investigation pertaining to the
release by the Borrower or any of its Subsidiaries, or any other
Person of any toxic or hazardous waste or substance into the
environment, or any violation of any federal, state or local
environmental, health or safety law or regulation, which, in
either case, could reasonably be expected to have a Material
Adverse Effect.
7.12. Any Change in Control shall occur.
7.13. The occurrence of any "default", as defined in any
Loan Document (other than this Agreement or the Notes) or the
breach of any of the terms or provisions of any Loan Document
(other than this Agreement or the Notes), which default or breach
continues beyond any period of grace therein provided.
7.14. Any Guaranty shall fail to remain in full force or
effect (except as expressly permitted by its terms or as
contemplated pursuant to a transaction in compliance with Section
6.13 which results in a release of the Guarantor from its
liability under the Guaranty as described in Section 6.13(b)) or
any action shall be taken by the Borrower or any Subsidiary to
discontinue or to assert the invalidity or unenforceability of
any Guaranty (except as expressly permitted by its terms or as
contemplated pursuant to a transaction in compliance with Section
6.13 which results in a release of the Guarantor from its
liability under the Guaranty as described in Section 6.13(b)), or
any Guarantor shall fail to comply with any of the terms or
provisions of any Guaranty to which it is a party, or any
Guarantor denies that it has any further liability under any
Guaranty to which it is a party, or gives notice to such effect.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section
7.6 or 7.7 occurs with respect to the Borrower, the obligations
of the Lenders to make Loans and of an Issuing Bank to issue
Facility B Letters of Credit hereunder shall automatically
terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Agent
or any Lender. If any other Default occurs and is continuing,
the Required Lenders may terminate or suspend the obligations of
the Lenders to make Loans and of an Issuing Bank to issue
Facility B Letters of Credit hereunder, or declare the
Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which
each Borrowing Entity hereby expressly waives. In addition to
the foregoing following the occurrence and during the continuance
of a Default, so long as any Facility B Letter of Credit has not
been fully drawn and has not been canceled or expired by its
terms, upon demand by the Agent the Borrower shall deposit in the
Letter of Credit Collateral Account cash in an amount equal to
the aggregate undrawn face amount of all outstanding Facility B
Letters of Credit and all fees and other amounts due or which may
become due with respect thereto. The Borrower shall have no
control over funds in the Letter of Credit Collateral Account,
which funds shall be invested by the Agent from time to time in
its discretion in certificates of deposit of First Chicago having
a maturity not exceeding thirty days. Such funds shall be
promptly applied by the Agent to reimburse any Issuing Bank for
drafts drawn from time to time under the Facility B Letters of
Credit. Such funds, if any, remaining in the Letter of Credit
Collateral Account following the payment of all Obligations in
full shall, unless the Agent is otherwise directed by a court of
competent jurisdiction, be promptly paid over to the Borrower.
8.2. Amendments. Subject to the provisions of this
Article VIII, the Required Lenders (or the Agent with the consent
in writing of the Required Lenders) and the Borrowing Entities
may enter into agreements supplemental hereto for the purpose of
amending, adding, deleting or modifying any provisions to the
Loan Documents or waiving or changing in any manner the rights of
the Agent, the Lenders, the Borrowing Entities or the Guarantors
hereunder or thereunder or waiving any Default or Unmatured
Default hereunder or thereunder; provided, however, that no such
supplemental agreement shall, without the consent of each Lender
affected thereby:
(i) Extend the maturity of any Loan or Note or forgive
all or any portion of the principal amount thereof, or
reduce the rate or extend the time of payment of
interest or fees thereon (except as permitted under
Section 2.11).
(ii) Reduce the percentage specified in the definition
of Required Lenders.
(iii) Reduce the amount or extend the payment date
for, the mandatory payments required under Section 2.7,
or increase the amount of the Commitment of any Lender
hereunder, or permit any Borrowing Entity to assign its
rights under this Agreement.
(iv) Amend (a) this Section 8.2, (b) Sections 3.2, 7.6
or 7.7 or (c) Article XIV.
(v) Increase the maximum drawable amount or extend the
expiration date of any outstanding Facility B Letter of
Credit (except as expressly permitted by its terms or
except within the limitations permissible under this
Agreement if a new Facility B Letter of Credit would be
permitted for such amount or on such terms) or reduce
the principal amount of or extend the time of payment
of any Reimbursement Obligation or fee associated with
any Facility B Letter of Credit.
(vi) Release any Guarantor of any of the Obligations
(except as contemplated by and in accordance with
Section 6.13(b)) or, except as provided in any pledge
agreement which may be entered into in connection
herewith, release all or substantially all of the
Collateral (as defined therein) or any other
collateral, if any.
No amendment of any provision of this Agreement relating to the
Agent as such shall be effective without the written consent of
the Agent. The Agent may waive payment of the fees required
under Sections 2.4.3 and 12.3.2 without obtaining the consent of
any other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of
the Lenders or the Agent to exercise any right under the Loan
Documents shall impair such right or be construed to be a waiver
of any Default or an acquiescence therein, and the making of a
Loan notwithstanding the existence of a Default or the inability
of the Borrower to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or
further exercise thereof or the exercise of any other right, and
no waiver, amendment or other variation of the terms, conditions
or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Lenders required pursuant to
Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be
available (in accordance with the respective terms thereof) to
the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations
and warranties of the Borrowing Entities contained in this
Agreement shall survive delivery of the Notes and the making of
the Loans and the issuance of the Facility B Letters of Credit
herein contemplated.
9.2. Governmental Regulation. Anything contained in
this Agreement to the contrary notwithstanding, no Lender shall
be obligated to extend credit to any of the Borrowing Entities in
violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Taxes. Any taxes (excluding Excluded Taxes) or
other similar assessments or charges ruled payable by any
governmental or revenue authority in respect of the Loan
Documents shall be paid by the relevant Borrowing Subsidiary, if
applicable to its Borrowing Subsidiary Obligations, and the
Borrower, together with interest and penalties, if any.
9.4. Headings. Section headings in the Loan Documents
are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
9.5. Entire Agreement. The Loan Documents embody the
entire agreement and understanding among the Borrowing Entities,
the Agent and the Lenders and supersede all prior agreements and
understandings among any of the Borrowing Entities, the Agent and
the Lenders relating to the subject matter thereof.
9.6. Several Obligations; Benefits of this Agreement.
The respective obligations of the Lenders hereunder are several
and not joint and no Lender shall be the partner or agent of any
other (except to the extent to which the Agent is authorized to
act as such). The failure of any Lender to perform any of its
obligations hereunder (including, without limitation, those under
Sections 2.8 and 3.6) shall not relieve any other Lender from any
of its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective
successors and permitted assigns.
9.7. Expenses; Indemnification. The Borrowing Entities
shall reimburse the Agent for any reasonable costs, internal
charges and out-of-pocket expenses (including attorneys' fees and
time charges of attorneys for the Agent, which attorneys may be
employees of the Agent) paid or incurred by the Agent or First
Chicago Capital Markets, Inc. in connection with the preparation,
negotiation, execution, delivery, amendment and modification
(including modifications required to add new Borrowing Entities)
of the Loan Documents; provided, however, the maximum amount for
which the Borrowing Entities shall be liable to reimburse the
Agent for the fees of Sidley & Austin as counsel to the Agent for
the preparation, negotiation and execution of this Agreement
shall be as set forth in the letter from Sidley & Austin to the
Agent dated June 5, 1996. The Borrowing Entities also agree to
reimburse the Agent and the Lenders for any reasonable costs,
internal charges and out-of-pocket expenses (including attorneys'
fees and time charges of attorneys for the Agent and the Lenders,
which attorneys may be employees of the Agent or the Lenders)
paid or incurred by the Agent or any Lender in connection with
the collection and enforcement of the Loan Documents. The
Borrowing Entities further agree to indemnify the Agent and each
Lender, its directors, officers and employees against all losses,
claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent or any Lender is a
party thereto) which any of them may pay or incur arising out of
or relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Loan
or the use or intended use of any Facility B Letter of Credit
hereunder; provided that in no event shall any Person be entitled
to indemnification for any such losses, claims, damages,
penalties, judgments, liabilities or expenses arising out of the
Gross Negligence or willful misconduct of such Person or any of
its Affiliates. The obligations of the Borrowing Entities under
this Section shall survive the termination of this Agreement.
9.8. Numbers of Documents. All statements, notices,
closing documents, and requests hereunder shall be furnished to
the Agent with sufficient counterparts so that the Agent may
furnish one to each of the Lenders.
9.9. Accounting. Except as expressly provided to the
contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be
made in accordance with Agreement Accounting Principles.
9.10. Severability of Provisions. Any provision in any
Loan Document that is held to be inoperative, unenforceable, or
invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the
remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan
Documents are declared to be severable.
9.11. Nonliability of Lenders. The relationship between
the Borrowing Entities and the Lenders and the Agent shall be
solely that of borrower and lender. Neither the Agent nor any
Lender shall have any fiduciary responsibilities to the Borrowing
Entities. Neither the Agent nor any Lender undertakes any
responsibility to the Borrowing Entities to review or inform the
Borrowing Entities of any matter in connection with any phase of
the Borrowing Entities' business or operations.
9.12. Language. The Loan Documents and all notices,
communications, opinions and other documents to be furnished by
or on behalf of any Borrowing Entity pursuant to the Loan
Documents shall be in the English language or, in the case of any
notices, communications, opinions or other documents submitted in
another language, accompanied by a certified English translation
thereof and in the event of any conflict between the English text
and such other text of any such document, the English text shall
prevail.
9.13. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN
THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION)
SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT
THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT
TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.14. CONSENT TO JURISDICTION. THE BORROWING ENTITIES
EACH HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION
OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENTS AND THE BORROWING ENTITIES EACH HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVE ANY OBJECTION THEY MAY NOW OR HEREAFTER HAVE AS
TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER
TO BRING PROCEEDINGS AGAINST THE BORROWING ENTITIES IN THE COURTS
OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY OF THE
BORROWING ENTITIES AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN CHICAGO, ILLINOIS.
9.15. SERVICE OF PROCESS. EACH BORROWING SUBSIDIARY
HEREBY AGREES THAT SERVICE OF ALL WRITS, PROCESS AND SUMMONSES IN
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN THE STATE OF
ILLINOIS MAY BE MADE UPON THE BORROWER (THE "PROCESS AGENT"),
PRESENTLY LOCATED AT THE ADDRESS APPLICABLE PURSUANT TO ARTICLE
XIII HEREOF. EACH BORROWING SUBSIDIARY HEREBY IRREVOCABLY
APPOINTS THE PROCESS AGENT ITS TRUE AND LAWFUL AGENT IN ITS NAME,
PLACE AND STEAD TO ACCEPT SUCH SERVICE OF ANY AND ALL SUCH WRITS,
PROCESS AND SUMMONSES, AND AGREES THAT THE FAILURE OF THE PROCESS
AGENT TO GIVE ANY NOTICE OF ANY SUCH SERVICE OF PROCESS TO ANY
SUCH BORROWING SUBSIDIARY SHALL NOT IMPAIR OR AFFECT THE VALIDITY
OF SUCH SERVICE OR OF ANY JUDGMENT BASED THEREON. EACH BORROWING
SUBSIDIARY HEREBY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURTS BY THE
MAILING THEREOF BY THE AGENT OR THE LENDERS BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO EACH BORROWING SUBSIDIARY
ADDRESSED AS PROVIDED HEREIN. NOTHING HEREIN SHALL IN ANY WAY BE
DEEMED TO LIMIT THE ABILITY OF THE AGENT OR THE LENDERS TO SERVE
ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE
BORROWING ENTITIES IN SUCH OTHER JURISDICTION, AND IN SUCH
MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
9.16. WAIVER OF JURY TRIAL. EACH OF THE BORROWING
ENTITIES, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
9.17. ERISA Representation. Each Lender hereby
represents, warrants and agrees that none of the funds, monies,
assets or other consideration being used to make its Loans or
acquire its participating interest in any Facility B Letters of
Credit (or any funding in respect thereof) hereunder, to acquire
its rights and interests in and under any of the Loan Documents,
or to acquire any participation in the foregoing from any other
Lender are or will constitute "plan assets" of any "employee
benefit plan" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not
be "plan assets" of any "employee benefit plan" under ERISA.
9.18. Confidentiality. Each Lender agrees to hold any
confidential information which it may receive from the Borrower
or any Subsidiary pursuant to this Agreement in confidence,
except for disclosure (i) to other Lenders and their respective
Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee on a need-
to-know basis, (iii) upon request from regulatory officials, (iv)
to any Person as required by law, regulation, or legal process,
(v) to any Person as required in connection with any legal
proceeding to which that Lender is a party, and (vi) permitted by
Section 12.4.
9.19. Joint and Several Liability. Each Borrowing
Subsidiary that is a Domestic Subsidiary agrees that it shall be
jointly and severally liable for all Obligations under this
Agreement to the same extent as if it were the Borrower or other
Borrowing Entity that incurred the same.
ARTICLE X
THE AGENT
10.1. Appointment. The First National Bank of Chicago
is hereby appointed Agent hereunder and under each other Loan
Document, and each of the Lenders irrevocably authorizes the
Agent to act as the contractual representative of such Lender.
The Agent agrees to act as such upon the express conditions
contained in this Article X. The Agent shall not have a
fiduciary relationship in respect of any Borrowing Entity or any
Lender by reason of this Agreement. Notwithstanding the use of
the defined term "Agent," it is expressly understood and agreed
that the Agent shall not have any fiduciary responsibilities to
any Lender by reason of this Agreement and that the Agent is
merely acting as the representative of the Lenders with only
those duties as are expressly set forth in this Agreement and the
other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not assume any
fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-
105 of the Uniform Commercial Code and (iii) is acting as an
independent contractor, the rights and duties of which are
limited to those expressly set forth in this Agreement and the
other Loan Documents. Each of the Lenders agrees to assert no
claim against the Agent on any agency theory or any other theory
of liability for breach of fiduciary duty, all of which claims
each Lender waives.
10.2. Powers. The Agent shall have and may exercise
such powers under the Loan Documents as are specifically
delegated to the Agent by the terms of each thereof, together
with such powers as are reasonably incidental thereto. The Agent
shall have no implied duties or fiduciary duties to the Lenders,
or any obligation to the Lenders to take any action hereunder or
under any of the other Loan Documents except any action
specifically provided by the Loan Documents required to be taken
by the Agent.
10.3. General Immunity. Neither the Agent nor any of
its directors, officers, agents, affiliates or employees shall be
liable to any Borrowing Entity, the Lenders or any Lender for any
action taken or omitted to be taken by it or them hereunder or
under any other Loan Document or in connection herewith or
therewith except to the extent such action or inaction is found
in a final judgment by a court of competent jurisdiction to have
arisen solely from (i) the Gross Negligence or willful misconduct
of such Person or an Affiliate thereof or (ii) breach of contract
by such Person with respect to the Loan Documents.
10.4. No Responsibility for Loans, Recitals, etc.
Neither the Agent, First Chicago Capital Markets, Inc. nor any of
their respective directors, officers, agents or employees shall
be responsible for or have any duty to ascertain, inquire into,
or verify (i) any statement, warranty or representation made in
connection with any Loan Document or any borrowing hereunder,
including statements made in any offering memorandum or "Bank
Book"; (ii) the performance or observance of any of the covenants
or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish
information directly to each Lender (provided that the Agent
will, upon request, verify to the extent feasible the various
transfers of funds which take place under the Agreement); (iii)
the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to the Agent; or (iv)
the validity, effectiveness or genuineness of any Loan Document
or any other instrument or writing furnished in connection
therewith. The Agent and First Chicago Capital Markets, Inc.
shall have no duty to disclose to the Lenders information that is
not required to be furnished by any Borrowing Entity to the Agent
at such time, but is voluntarily furnished by any Borrowing
Entity to the Agent (either in its capacity as Agent or in its
individual capacity).
10.5. Action on Instructions of Lenders. The Agent
shall in all cases be fully protected in acting, or in refraining
from acting, hereunder and under any other Loan Document in
accordance with written instructions signed by the Required
Lenders, and such instructions and any action taken or failure to
act pursuant thereto shall be binding on all of the Lenders and
on all holders of Notes. The Agent shall be fully justified in
failing or refusing to take any action hereunder and under any
other Loan Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking
or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may
execute any of its duties as Agent hereunder and under any other
Loan Document by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders,
except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Agent
shall be entitled to advice of counsel concerning all matters
pertaining to the agency hereby created and its duties hereunder
and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall
be entitled to rely upon any Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document
believed by it to be genuine and correct and to have been signed
or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which
counsel may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The
Lenders agree to reimburse and indemnify the Agent ratably in
proportion to their respective Commitments (i) for any amounts
not reimbursed by any Borrowing Entity for which the Agent is
entitled to reimbursement by any Borrowing Entity under the Loan
Documents, (ii) for any other expenses incurred by the Agent on
behalf of the Lenders, in connection with the preparation,
execution, delivery and enforcement of the Loan Documents and
(iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender
shall be liable for any of the foregoing to the extent they arise
from the Gross Negligence or willful misconduct of the Agent.
The obligations of the Lenders under this Section 10.8 shall
survive payment of the Obligations and termination of this
Agreement.
10.9. Rights as a Lender. In the event the Agent is a
Lender (including its capacity as an Issuing Bank), the Agent
shall have the same rights and powers hereunder and under any
other Loan Document as any Lender and may exercise the same as
though it were not the Agent, and the term "Lender" or "Lenders"
shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other
transaction, in addition to those contemplated by this Agreement
or any other Loan Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a
Lender.
10.10. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or
any other Lender and based on the financial statements prepared
by the Borrower and such other documents and information as it
has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement and the other Loan Documents. Each
Lender also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Loan Documents.
10.11. Successor Agent. The Agent may resign at any time
by giving written notice thereof to the Lenders and the Borrowing
Entities, such resignation to be effective upon the appointment
of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice
of its intention to resign. Upon any such resignation, the
Required Lenders (with the consent of the Borrower) shall have
the right to appoint, on behalf of the Borrowing Entities and the
Lenders, a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders (with the consent of
the Borrower) within thirty days after the resigning Agent's
giving notice of its intention to resign, then the resigning
Agent may appoint, on behalf of the Borrowing Entities and the
Lenders, a successor Agent. If the Agent has resigned and no
successor Agent has been appointed, the Lenders may perform all
the duties of the Agent hereunder and the Borrowing Entities
shall make all payments in respect of the Obligations to the
applicable Lender and for all other purposes shall deal directly
with the Lenders. No successor Agent shall be deemed to be
appointed hereunder until such successor Agent has accepted the
appointment. Any such successor Agent shall be a commercial bank
having capital and retained earnings of at least $250,000,000.
Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and
duties of the resigning Agent. Upon the effectiveness of the
resignation of the Agent, the resigning Agent shall be discharged
from any further duties and obligations as Agent hereunder and
under the Loan Documents. After the effectiveness of the
resignation of an Agent, the provisions of this Article X shall
continue in effect for the benefit of such Agent in respect of
any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder and under the other Loan Documents.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation
of, any rights of the Lenders under applicable law, if the
Borrower becomes insolvent, however evidenced, or any Default
occurs and is continuing, any and all deposits (including all
account balances, whether provisional or final and whether or not
collected or available) and any other Indebtedness at any time
held or owing by any Lender to or for the credit or account of
the Borrower may be offset and applied toward the payment of the
Obligations owing to such Lender, whether or not the Obligations,
or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by
setoff or otherwise, has payment made to it upon its Loans (other
than payments received pursuant to Sections 2.20.1, 2.20.2,
2.20.3 or 2.20.5) in a greater proportion than that received by
any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans held by the other Lenders so that
after such purchase each Lender will hold its ratable proportion
of Loans. If any Lender, whether in connection with setoff or
amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such
amounts which may be subject to setoff, such Lender agrees,
promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in
proportion to their Loans. In case any such payment is disturbed
by legal process, or otherwise, appropriate further adjustments
shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions
of the Loan Documents shall be binding upon and inure to the
benefit of the Borrowing Entities and the Lenders and their
respective successors and assigns, except that (i) none of the
Borrowing Entities shall have the right to assign its rights or
obligations under the Loan Documents and (ii) any assignment by
any Lender must be made in compliance with Section 12.3.
Notwithstanding clause (ii) of this Section, any Lender may at
any time, without the consent of any of the Borrowing Entities or
the Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; provided,
however, that no such assignment shall release the transferor
Lender from its obligations hereunder. The Agent and the
Borrowing Entities may treat the payee of any Note as shown on
the Agent's records as the owner thereof (and as the "Lender"
hereunder) for all purposes hereof unless and until such payee
complies with Section 12.3 in the case of an assignment thereof
or, in the case of any other transfer, a written notice of the
transfer is filed with the Agent (with a copy to the Borrower).
Any assignee or transferee of a Note agrees by acceptance thereof
to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who
at the time of making such request or giving such authority or
consent is the holder as shown on the records of the Agent of any
Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
12.2. Participations.
12.2.1 Permitted Participants; Effect. Any Lender
may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or
more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Note held by
such Lender, any Lender's Percentage of Facility B Letters
of Credit, any Commitment of such Lender or any other
interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating
interests to a Participant, (a) such Lender's obligations
under the Loan Documents shall remain unchanged, (b) such
Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (c) such
Lender shall remain the holder of any such Note (and the
"Lender") for all purposes under the Loan Documents, (d) all
amounts payable by any of the Borrowing Entities under this
Agreement shall be determined as if such Lender had not sold
such participating interests, (e) the Borrowing Entities and
the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and
obligations under the Loan Documents and (f) no participant
under any such participation shall have any right to approve
any amendment or waiver of any provision of this Agreement,
or any consent to any departure by any Borrowing Entity or
other Person therefrom, except to the extent that such
amendment, waiver or consent involves the items specified in
clauses (i) through (vi) of Section 8.2.
.
12.2.2. Benefit of Setoff. Each of the Borrowing
Entities agrees that each Participant of which it has actual
notice shall be deemed to have the right of setoff provided
in Section 11.1 in respect of its participating interest in
amounts owing under the Loan Documents to the same extent as
if the amount of its participating interest were owing
directly to it as a Lender under the Loan Documents,
provided that each Lender shall retain the right of setoff
provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The
Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in
Section 11.1, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff,
such amounts to be shared in accordance with Section 11.2 as
if each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the
ordinary course of its business and in accordance with
applicable law, at any time assign to one or more banks or
other financial institutions ("Purchasers") all, or any part
in a minimum aggregate amount of $5,000,000, of its rights
and obligations under the Loan Documents. Such assignment
shall be effected by a document substantially in the form of
Exhibit H hereto or in such other form as may be agreed to
by the parties thereto. The consent of the Borrower and the
Agent shall be required prior to an assignment becoming
effective with respect to a Purchaser which is not a Lender;
provided, however, that if a Default has occurred and is
continuing, the consent of the Borrower shall not be
required and the minimum amount may be reduced with the
consent of the Agent. Such consent shall not be
unreasonably withheld or delayed.
12.3.2. Effect; Effective Date. Upon (i) delivery to
the Agent of a notice of assignment, substantially in the
form attached as Annex I to Exhibit H hereto (a "Notice of
Assignment"), together with any consents required by Section
12.3.1, and (ii) payment of a $4,500 fee to the Agent for
processing such assignment, such assignment shall become
effective on the effective date specified in such Notice of
Assignment. The Notice of Assignment shall contain (or to
the extent not contained, shall constitute) a representation
by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment,
Facility B Letters of Credit and Loans under the applicable
assignment agreement are "plan assets" as defined under
ERISA and that the rights and interests of the Purchaser in
and under the Loan Documents will not be "plan assets" under
ERISA. On and after the effective date of such assignment,
such Purchaser shall for all purposes be a Lender party to
this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a
Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or
action by any of the Borrowing Entities, the Lenders or the
Agent shall be required to release the transferor Lender
with respect to its Percentage of the Aggregate Commitment,
Facility B Letters of Credit and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3.2, the transferor
Lender, the Agent and the Borrowing Entities shall make
appropriate arrangements so that replacement Notes are
issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued (against receipt
of previously issued Notes for cancellation) to such
Purchaser, in each case in principal amounts reflecting
their Commitment, as adjusted pursuant to such assignment.
In addition, within a reasonable time after the effective
date of any assignment, the Agent shall, and is hereby
authorized and directed to, revise Schedule 1 reflecting the
revised Percentages of each of the Lenders and shall
distribute such revised Schedule 1 to the Lenders and the
Borrowing Entities and such revised Schedule 1 shall replace
the old Schedule 1 and become part of this Agreement.
12.4. Dissemination of Information. The Borrowing
Entities authorize each Lender to disclose to any Participant or
Purchaser or any other Person acquiring an interest in the Loan
Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's
possession concerning the creditworthiness of the Borrower and
its Subsidiaries, provided that each Transferee and prospective
Transferee agrees to be bound by the confidentiality restrictions
set forth in Section 9.18 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan
Document is transferred to any Transferee which is organized
under the laws of any jurisdiction other than the United States
or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer,
to comply with the provisions of Section 2.18.
ARTICLE XIII
NOTICES
13.1. Giving Notice. Except as otherwise permitted by
Sections 2.13 and 3.4, all notices and other communications
provided to any party hereto under this Agreement or any other
Loan Document shall be in writing or by telex or by facsimile and
addressed or delivered to such party at its address set forth
below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid,
shall be deemed given when received; any notice, if transmitted
by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes).
13.2. Change of Address. Any Borrowing Entity, the
Agent and any Lender may each change the address for service of
notice upon it by a notice in writing to the other parties
hereto.
ARTICLE XIV
BORROWER RESPONSIBILITY FOR BORROWING SUBSIDIARY OBLIGATIONS
14.1 Direct Obligations. The Borrower hereby
unconditionally and irrevocably affirms to the Lenders its direct
liability for, and guarantees to the Lenders, the due and
punctual payment of the Borrowing Subsidiary Obligations,
including, but not limited to, the due and punctual payment of
principal of and interest on the Borrowing Subsidiary Notes, and
punctual payment of all other sums now or hereafter owed by the
Borrowing Subsidiaries under the Loan Documents as and when the
same shall become due (whether by acceleration or otherwise) and
according to the terms hereof and thereof. In case of failure by
any Borrowing Subsidiary punctually to pay any Borrowing
Subsidiary Obligations, the Borrower hereby unconditionally
agrees to cause such payment to be made punctually as and when
the same shall become due and payable, whether at maturity or by
declaration or otherwise, and as if such payment were made by the
Borrowing Subsidiary.
14.2 Obligations Unconditional. The Obligations of the
Borrower under this Article XIV shall be irrevocable,
unconditional and absolute and, without limiting the generality
of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of any
Borrowing Subsidiary under any Loan Document by operation of
law or otherwise;
(b) any modification or amendment of or supplement to
any Loan Document;
(c) any compromise, settlement, modification,
amendment, waiver, release, non-perfection or invalidity of
or to any direct or indirect security, guarantee or other
liability of any third party, or Borrowing Subsidiary
Obligations;
(d) any change in the corporate existence, structure,
or ownership of, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any
Borrowing Subsidiary or its assets or any resulting release
or discharge of any Borrowing Subsidiary Obligations;
(e) the existence of any claim, set-off or other
rights which the Borrower may have at any time against any
Borrowing Subsidiary, the Agent, any Lender or any other
Person, whether or not arising in connection with this
Agreement, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;
(f) any invalidity or unenforceability relating to or
against any Borrowing Subsidiary for any reason of any Loan
Document, or any provision of applicable law or regulation
purporting to prohibit the payment by any Borrowing
Subsidiary of the principal of or interest on any Borrowing
Subsidiary Note or any other amount payable by it under this
Agreement; or
(g) to the extent permitted by applicable law, any
other act or omission to act or delay of any kind by any
Borrowing Subsidiary, the Agent, any Lender or any other
Person or any other circumstance whatsoever that might, but
for the provisions of this paragraph, constitute a legal or
equitable discharge of the obligations of the Borrower under
this Article XIV.
14.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances. The Borrower's obligations under this
Article XIV shall remain in full force and effect until the
Aggregate Commitment is terminated and the principal of and
interest on the Notes and all other Obligations payable under the
Loan Documents shall have been paid in full. If at any time any
payment of the principal of or interest on any Borrowing
Subsidiary Note or any other amount payable by any Borrowing
Subsidiary under any Loan Document is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Borrowing Subsidiary or otherwise, the
Borrower's obligations under this Article XIV with respect to
such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time. This
Section 14.3 shall survive the termination of this Agreement and
the payment in full of the Obligations.
14.4. Waiver. The Borrower irrevocably waives
acceptance hereof, presentment, demand, protest and any notice
not provided for herein, as well as any requirement that at any
time any action be taken by any Person against any Borrowing
Subsidiary or any other Person. The Borrower waives any claim,
as that term is defined in the Federal Bankruptcy Code, which the
Borrower might now have or hereafter acquire against any
Borrowing Subsidiary that arises from the existence or
performance of the Borrower's obligations under this Article XIV.
The Borrower waives any benefit of the collateral, if any, which
may from time to time secure the Obligations or any part thereof
and authorizes the Agent or the Lenders to take any action or
exercise any remedy with respect thereto, which the Agent or the
Lenders in its or their sole discretion shall determine, without
notice to the Borrower. In the event the Lenders in their sole
discretion elect to give notice of any action with respect to the
collateral, if any, securing the Obligations or any part thereof,
ten days' written notice mailed to the Borrower by certified mail
at the address shown hereon shall be deemed reasonable notice of
any matters contained in such notice.
14.5. Stay of Acceleration. If acceleration of the time
for payment of any amount payable by any Borrowing Subsidiary
under any of the Loan Documents is stayed upon the insolvency,
bankruptcy or reorganization of any Borrowing Subsidiary all such
amounts otherwise subject to acceleration under the terms of this
Agreement shall nonetheless be payable by the Borrower hereunder
forthwith on demand by the Agent.
14.6. Payments. All payments to be made by the Borrower
pursuant to this Article XIV shall be made at the times and in
the manner and in the currency prescribed for payments in this
Agreement.
14.7 Subrogation. The Borrower hereby agrees not to
assert any right, claim or cause of action, including, without
limitation, a claim for subrogation, reimbursement,
indemnification, contribution or otherwise against any Borrowing
Subsidiary, any Guarantor or any other Person arising out of or
by reason of the Borrower's obligations under this Article XIV
unless and until the Obligations are indefeasibly paid in full
and all Commitments of the Lenders shall have terminated or
expired.
ARTICLE XV
COUNTERPARTS
This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart. This Agreement shall
be effective when it has been executed by the Borrower, the Agent
and the Lenders and each party has notified the Agent by telex or
telephone, that it has taken such action.
In Witness Whereof, the Borrowing Entities, the Lenders and
the Agent have executed this Agreement as of the date first above
written.
VARLEN CORPORATION,
as the Borrower
By:
Print Name:
Title:
55 Shuman Boulevard
P.O. Box 3089
Naperville, Illinois
60566-7089
Attention: Richard A. Nunemaker, Vice
President, Finance, Chief
Financial Officer and
Treasurer
FAX: (708) 420-7123
Telephone: (708) 983-2942
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
Print Name:
Title:
Address: One First National Plaza,
Ste. 0173
Chicago, Illinois 60670
Attention: J. Garland Smith,
Vice President
FAX: (312) 732-1117
Telephone: (312) 732-2735
HARRIS TRUST AND SAVINGS BANK
By:
Print Name:
Title:
Address: 111 W. Monroe
Chicago, Illinois
60690
Attention: Division A/Patrick
J. McDonnell, Vice President
FAX: (312) 461-2591
Telephone: (312) 461-5054
NATIONSBANK, N.A.
By: /S/ Louise C. Comiskey
Print Name: Louise C.Comiskey
Title: Vice President
Address: Sears Tower
233 South Wacker Street
Suite 2800
Chicago, Illinois 60606-6308
Attention: Carter E. Smith, Vice President
FAX: (312) 372-9194
Telephone: (312) 234-5643
ABN AMRO BANK N.V., Chicago Branch
By:
Print Name:
Title:
By:
Print Name:
Title:
Address: 135 S. LaSalle Street
Chicago, Illinois
60603
Attention: Robert J. Graff
FAX: (312) 606-8425
Telephone: (312) 904-2675
RLF1-69102-1
September 11, 1996 (9:35AM)
[FORM OF INDEMNIFICATION AGREEMENT]
AGREEMENT
This Agreement, made and entered into this __ day of
__________________, 199_ ("Agreement"), by and between ______
____________________________, a Delaware corporation ("Company"),
and _____________________ ("Indemnitee"):
WHEREAS, highly competent persons have become more reluctant
to serve publicly-held corporations as directors or in other
capacities unless they are provided with adequate protection
through insurance or adequate indemnification against inordinate
risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the Board of Directors of the Company (the "Board")
has determined that, in order to attract and retain qualified
individuals, the Company will attempt to maintain on an ongoing
basis, at its sole expense, liability insurance to protect
persons serving the Company and its subsidiaries from certain
liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based
corporations and other business enterprises, the Company believes
that, given current market conditions and trends, such insurance
may be available to it in the future only at higher premiums and
with more exclusions. At the same time, directors, officers, and
other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming
litigation relating to, among other things, matters that
traditionally would have been brought only against the Company or
business enterprise itself; and
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and
retaining such persons; and
WHEREAS, the Board has determined that the increased
difficulty in attracting and retaining such persons is
detrimental to the best interests of the Company's stockholders
and that the Company should act to assure such persons that there
will be increased certainty of such protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the
Company contractually to obligate itself to indemnify such
persons to the fullest extent permitted by applicable law so that
they will serve or continue to serve the Company free from undue
concern that they will not be so indemnified; and
WHEREAS, this Agreement is a supplement to and in
furtherance of the Bylaws of the Company and any resolutions
adopted pursuant thereto, and shall not be deemed a substitute
therefore, nor to diminish or abrogate any rights of Indemnitee
thereunder; and
WHEREAS, the By-laws and the Delaware director
indemnification statute each is nonexclusive, and therefore
contemplates that contracts may be entered into with respect to
indemnification of directors, officers and employees; and
WHEREAS, it is reasonable, prudent and necessary for the
Company contractually to obligate itself to indemnify, and to
advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law so that they will serve or continue
to serve the Company free from undue concern that they will not
be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve
and to take on additional service for or on behalf of the Company
on the condition that he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the
covenants contained herein, the Company and Indemnitee do hereby
covenant and agree as follows:
Section 1. Services by Indemnitee. Indemnitee agrees to
serve [as a [director] [officer] [employee] [agent] of the
Company] [,at the request of the Company, as a [director]
[officer] [employee] [agent] [fiduciary] of [another corporation,
partnership, joint venture, trust employee benefit plan or other
enterprise]. Indemnitee may at any time and for any reason resign
from such position (subject to any other contractual obligation
or any obligation imposed by operation of law), in which event
the Company shall have no obligation under this Agreement to
continue Indemnitee in such position. This Agreement shall not
be deemed an employment contract between the Company (or any of
its subsidiaries) and Indemnitee. Indemnitee specifically
acknowledges that Indemnitee's employment with the Company (or
any of its subsidiaries), if any, is at will, and the Indemnitee
may be discharged at any time for any reason, with or without
cause, except as may be otherwise provided in any written
employment contract between Indemnitee and the Company (or any of
its subsidiaries), other applicable formal severance policies
duly adopted by the Board, or, with respect to service as a
director of the Company, by the Company's Certificate of
Incorporation, By-laws, and the General Corporation Law of the
State of Delaware. The foregoing notwithstanding, this Agreement
shall continue in force after Indemnitee has ceased to serve as
an [officer] [director] [agent] [employee] of the Company.
Section 2. Indemnification - General. The Company shall
indemnify, and advance Expenses (as hereinafter defined) to,
Indemnitee (a) as provided in this Agreement and (b) (subject to
the provisions of this Agreement) to the fullest extent permitted
by applicable law in effect on the date hereof and as amended
from time to time. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to,
the rights set forth in the other Sections of this Agreement.
Section 3. Proceedings Other Than Proceedings by or in the
Right of the Company. Indemnitee shall be entitled to the rights
of indemnification provided in this Section 3 if, by reason of
his Corporate Status (as hereinafter defined), he is, or is
threatened to be made, a party to or a participant in any
threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the
Company. Pursuant to this Section 3, Indemnitee shall be
indemnified against all Expenses, judgments, penalties, fines and
amounts paid in settlement (including all interest, assessments
and other charges paid or payable in connection with or in
respect of such Expenses, judgments, penalties, fines and amounts
paid in settlement) actually and reasonably incurred by him or on
his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the Company and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification
provided in this Section 4 if, by reason of his Corporate Status,
he is, or is threatened to be made, a party to or a participant
in any threatened, pending or completed Proceeding brought by or
in the right of the Company to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against
all Expenses (including all interest, assessments and other
charges paid or payable in connection with or in respect of such
Expenses) actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company; provided, however,
that, if applicable law so provides, no indemnification against
such Expenses shall be made in respect of any claim, issue or
matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company unless and to the extent
that the Court of Chancery of the State of Delaware, or the court
in which such Proceeding shall have been brought or is pending,
shall determine that such indemnification may be made.
Section 5. Partial Indemnification. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee
is, by reason of his Corporate Status, a party to (or a
participant in) and is successful, on the merits or otherwise, in
defense of any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf
in connection therewith. If Indemnitee is not wholly successful
in defense of such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully
resolved claim, issue or matter. For purposes of this Section
and without limitation, the termination of any claim, issue or
matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such
claim, issue or matter. If Indemnitee is entitled under any
provision of this agreement to indemnification by the Company for
some or a portion of the Expenses, judgments, penalties, fines
and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection with
or in respect of such Expenses, judgments, penalties, fines and
amounts paid in settlement) actually and reasonably incurred by
him or on his behalf in connection with such Proceeding or any
claim, issue or matter therein, but not, however, for the total
amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion to which Indemnitee is entitled.
Section 6. Indemnification for Additional Expenses.
(a) The Company shall indemnify Indemnitee against any
and all Expenses and, if requested by Indemnitee, shall (within
seven (7) business days of such request) advance such Expenses to
Indemnitee, which are incurred by Indemnitee in connection with
any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement
or any other agreement or by-law of the Company now or hereafter
in effect; or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company,
regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance expense payment or
insurance recovery, as the case may be.
(b) Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness in any Proceeding to which Indemnitee
is not a party, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 7. Advancement of Expenses. The Company shall
advance all reasonable Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within seven (7)
days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances
from time to time, whether prior to or after final disposition of
such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee and shall include or
be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified
against such Expenses. Notwithstanding the foregoing, the
obligation of the Company to advance Expenses pursuant to this
Section 7 shall be subject to the condition that, if, when and to
the extent that the Company determines that Indemnitee would not
be permitted to be indemnified under applicable law, the Company
shall be entitled to be reimbursed, within thirty (30) days of
such determination, by Indemnitee (who hereby agrees to reimburse
the Company) for all such amounts theretofore paid; provided,
however, that if Indemnitee has commenced or thereafter commences
legal proceedings in a court of competent jurisdiction to secure
a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Company that
Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be
required to reimburse the Company for any advance of Expenses
until a final judicial determination is made with respect thereto
(as to which all rights of appeal therefrom have been exhausted
or lapsed).
Section 8. Procedure for Determination of Entitlement to
Indemnification.
(a) To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request,
including therein or therewith such documentation and information
as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall,
promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for
indemnification pursuant to the first sentence of Section 8(a)
hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in the
specific case: (i) if a Change in Control (as hereinafter
defined) shall have occurred, by Independent Counsel (as
hereinafter defined) in a written opinion to the Board of
Directors, a copy of which shall be delivered to Indemnitee; or
(ii) if a Change of Control shall not have occurred, (A) by a
majority vote of the Disinterested Directors (as hereinafter de
fined), even though less than a quorum of the Board, or (B) if
there are no such Disinterested Directors or, if such
Disinterested Directors so direct, by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered
to Indemnitee or (C) if so directed by the Board, by the
stockholders of the Company; and, if it is so determined that
Indemnitee is entitled to indemnification, payment to Indemnitee
shall be made within seven (7) days after such determination.
Indemnitee shall cooperate with the person, persons or entity
making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any
documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements)
incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement
to indemnification) and the Company hereby indemnifies and agrees
to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 8(b) hereof, the Independent Counsel shall be selected as
provided in this Section 8(c). If a Change of Control shall not
have occurred, the Independent Counsel shall be selected by the
Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent
Counsel so selected. If a Change of Control shall have occurred,
the Independent Counsel shall be selected by Indemnitee (unless
Indemnitee shall request that such selection be made by the Board
of Directors, in which event the preceding sentence shall apply),
and Indemnitee shall give written notice to the Company advising
it of the identity of the Independent Counsel so selected. In
either event, Indemnitee or the Company, as the case may be, may,
within 10 days after such written notice of selection shall have
been given, deliver to the Company or to Indemnitee, as the case
may be, a written objection to such selection; provided, however,
that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 17 of this Agreement,
and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is so made
and substantiated, the Independent Counsel so selected may not
serve as Independent Counsel unless and until such objection is
withdrawn or a court has determined that such objection is
without merit. If, within 20 days after submission by Indemnitee
of a written request for indemnification pursuant to Section 8(a)
hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee may petition the
Court of Chancery of the State of Delaware for resolution of any
objection which shall have been made by the Company or Indemnitee
to the other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the
Court or by such other person as the Court shall designate, and
the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under
Section 8(b) hereof. The Company shall pay any and all reasonable
fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with acting pursuant to Section
8(b) hereof, and the Company shall pay all reasonable fees and
expenses incident to the procedures of this Section 8(c),
regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement of any judicial
proceeding or arbitration pursuant to Section 10(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved
of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
(d) The Company shall not be required to obtain the
consent of the Indemnitee to the settlement of any Proceeding
which the Company has undertaken to defend if the Company assumes
full and sole responsibility for such settlement and the
settlement grants the Indemnitee a complete and unqualified
release in respect of the potential liability. The Company shall
not be liable for any amount paid by the Indemnitee in settlement
of any Proceeding that is not defended by the Company, unless the
Company has consented to such settlement, which consent shall not
be unreasonably withheld.
Section 9. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to
entitlement to indemnification or the advancement of expenses
hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to
indemnification or advancement of expenses under this Agreement
if Indemnitee has submitted a request for indemnification or the
advancement of expenses in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to
overcome that presumption in connection with the making by any
person, persons or entity of any determination contrary to that
presumption. Neither the failure of the Company (including its
board of directors or independent legal counsel) to have made a
determination prior to the commencement of any action pursuant to
this Agreement that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard
of conduct, nor an actual determination by the Company (including
its board of directors or independent legal counsel) that
Indemnitee has not met such applicable standard of conduct, shall
be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or
selected under Section 8 of this Agreement to determine whether
Indemnitee is entitled to indemnification shall not have made a
determination within sixty (60) days after receipt by the Company
of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made
and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an
omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that
such 60-day period may be extended for a reasonable time, not to
exceed an additional thirty (30) days, if the person, persons or
entity making the determination with respect to entitlement to
indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information
relating thereto; and provided, further, that the foregoing
provisions of this Section 9(b) shall not apply (i) if the
determination of entitlement to indemnification is to be made by
the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of
the request for such determination the Board of Directors has
resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held
within seventy five (75) days after such receipt and such
determination is made thereat, or (B) a special meeting of
stockholders is called within fifteen (15) days after such
receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after
having been so called and such determination is made thereat, or
(ii) if the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 8(b) of this
Agreement.
(c) The termination of any Proceeding or of any claim,
issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this
Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Company or,
with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that his conduct was unlawful.
(d) Reliance as Safe Harbor. For purposes of any
determination of Good Faith, Indemnitee shall be deemed to have
acted in Good Faith if Indemnitee's action is based on the
records or books of account of the Company or relevant
enterprise, including financial statements, or on information
supplied to Indemnitee by the officers of the Company or relevant
enterprise in the course of their duties, or on the advice of
legal counsel for the Company or relevant enterprise or on
information or records given or reports made to the Company or
relevant enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care
by the Company or relevant enterprise. The provisions of this
Section 9(d) shall not be deemed to be exclusive or to limit in
any way the other circumstances in which the Indemnitee may be
deemed to have met the applicable standard of conduct set forth
in this Agreement.
(e) Actions of Others. The knowledge and/or actions,
or failure to act, of any director, officer, agent or employee of
the Company or relevant enterprise shall not be imputed to
Indemnitee for purposes of determining the right to
indemnification under this Agreement.
Section 10. Remedies of Indemnitee.
(a) In the event that (i) a determination is made
pursuant to Section 8 of this Agreement that Indemnitee is not
entitled to indemnification under this Agreement, (ii) advance
ment of Expenses is not timely made pursuant to Section 7 of this
Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 8(b) of
this Agreement within 90 days after receipt by the Company of the
request for indemnification, (iv) payment of indemnification is
not made pursuant to Section 5 or 6 of this Agreement within ten
(10) days after receipt by the Company of a written request
therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee
is entitled to indemnification, Indemnitee shall be entitled to
an adjudication by the Court of Chancery of the State of Delaware
of his entitlement to such indemnification or advancement of
Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator
pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration
within 180 days following the date on which Indemnitee first has
the right to commence such proceeding pursuant to this Section
10(a); provided, however, that the foregoing clause shall not
apply in respect of a proceeding brought by Indemnitee to enforce
his rights under Section 5 of this Agreement.
(b) In the event that a determination shall have been
made pursuant to Section 8(b) of this Agreement that Indemnitee
is not entitled to indemnification, any judicial proceeding or
arbitration commenced pursuant to this Section 10 shall be
conducted in all respects as a de novo trial, or arbitration, on
the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have
occurred, in any judicial proceeding or arbitration commenced
pursuant to this Section 10, the Company shall have the burden of
proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant
to Section 8(b) of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination
in any judicial proceeding or arbitration commenced pursuant to
this Section 10, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this
Section 10, seeks a judicial adjudication of or an award in
arbitration to enforce his rights under, or to recover damages
for breach of, this Agreement, Indemnitee shall be entitled to
recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the
definition of Expenses in Section 17 of this Agreement) actually
and reasonably incurred by him in such judicial adjudication or
arbitration, but only if he prevails therein. If it shall be
determined in said judicial adjudication or arbitration that
Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by Indemnitee in connection with such judicial
adjudication or arbitration shall be appropriately prorated. The
Company shall indemnify Indemnitee against any and all Expenses
and, if requested by Indemnitee, shall (within ten (10) days
after receipt by the Company of a written request therefor)
advance such expenses to Indemnitee, which are incurred by
Indemnitee in connection with any action brought by Indemnitee
for indemnification or advance of Expenses from the Company under
this Agreement or under any directors' and officers' liability
insurance policies maintained by the Company, regardless of
whether Indemnitee ultimately is determined to be entitled to
such indemnification, advancement of Expenses or insurance
recovery, as the case may be.
(e) The Company shall be precluded from asserting in
any judicial proceeding or arbitration commenced pursuant to this
Section 10 that the procedures and presumptions of this Agreement
are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Company is
bound by all the provisions of this Agreement.
Section 11. Non-Exclusivity; Survival of Rights; Insurance;
Subrogation.
(a) The rights of indemnification and to receive
advancement of Expenses as provided by this Agreement shall not
be deemed exclusive of any other rights to which Indemnitee may
at any time be entitled under applicable law, the Certificate of
Incorporation, the By-Laws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or of any provision hereof
shall limit or restrict any right of Indemnitee under this
Agreement in respect of any action taken or omitted by such
Indemnitee in his Corporate Status prior to such amendment,
alteration or repeal. To the extent that a change in the General
Corporation Law of the State of Delaware, whether by statute or
judicial decision, permits greater indemnification or advancement
of Expenses than would be afforded currently under the Company's
By-Laws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change. No right or remedy herein
conferred is intended to be exclusive of any other right or
remedy, and every other right and remedy shall be cumulative and
in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or
employment of any other right or remedy.
(b) To the extent that the Company maintains an
insurance policy or policies providing liability insurance for
directors, officers, employees, or agents of the Company or of
any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which such person
serves at the request of the Company, Indemnitee shall be covered
by such policy or policies in accordance with its or their terms
to the maximum extent of the coverage available for any such
director, officer, employee or agent under such policy or
policies.
(c) In the event of any payment under this Agreement,
the Company shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute
all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that Indemnitee has otherwise
actually received such payment under any insurance policy,
contract, agreement or otherwise.
(e) The Company's obligation to indemnify or advance
expenses hereunder to Indemnitee who is or was serving at the
request of the Company as a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise shall be reduced by any
amount Indemnitee has actually received as indemnification or
advancement of expenses from such other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.
Section 12. Duration of Agreement. This Agreement shall
continue until and terminate upon the later of: (a) 10 years
after the date that Indemnitee shall have ceased to serve as a
[director], [officer], [employee], [or agent] of the Company [or
of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which Indemnitee served
at the request of the Company]; or (b) the final termination of
any Proceeding then pending in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses
hereunder and of any proceeding commenced by Indemnitee pursuant
to Section 10 of this Agreement relating thereto. This Agreement
shall be binding upon the Company and its successors and assigns
and shall inure to the benefit of Indemnitee and his heirs,
executors and administrators.
Section 13. Severability. If any provision or provisions of
this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall not in any way be affected or
impaired thereby; (b) such provision or provisions shall be
deemed reformed to the extent necessary to conform to applicable
law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of
this Agreement (including, without limitation, each portion of
any Section of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested thereby.
Section 14. Exception to Right of Indemnification or
Advancement of Expenses. Except as provided in Section 6(a) of
this Agreement, Indemnitee shall not be entitled to
indemnification or advancement of Expenses under this Agreement
with respect to any Proceeding brought by Indemnitee (other than
a Proceeding by Indemnitee to enforce his rights under this
Agreement), or any claim therein prior to a Change in Control,
unless the bringing of such Proceeding or making of such claim
shall have been approved by the Board of Directors.
Section 15. Identical Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original but all of which together
shall constitute one and the same Agreement. Only one such
counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this
Agreement.
Section 16. Headings. The headings of the paragraphs of
this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the
construction thereof.
Section 17. Definitions. For purposes of this Agreement:
(a) "Change in Control" means a change in control of
the Company occurring after the Effective Date of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar
item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the
Company is then subject to such reporting requirement; provided,
however, that, without limitation, such a Change in Control shall
be deemed to have occurred if after the Effective Date (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities without the prior
approval of at least two-thirds of the members of the Board in
office immediately prior to such person attaining such percentage
interest; (ii) there occurs a proxy contest, or the Company is a
party to a merger, consolidation, sale of assets, plan of
liquidation or other reorganization not approved by at least
two-thirds of the members of the Board then in office, as a
consequence of which members of the Board in office immediately
prior to such transaction or event constitute less than a
majority of the Board thereafter; or (iii) during any period of
two consecutive years, other than as a result of an event
described in clause (a)(ii) of this Section 17, individuals who
at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination
for election by the Company's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who
were directors at the beginning of such period) cease for any
reason to constitute at least a majority of the Board.
(b) "Corporate Status" describes the status of a
person who is or was a director, officer, employee, fiduciary or
agent of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise
which such person is or was serving at the request of the
Company.
(c) "Disinterested Director" means a director of the
Company who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
(d) "Effective Date" means ___________________, 199_.
(e) "Expenses" shall include all reasonable attorneys'
fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees,
and all other disbursements or expenses of the types customarily
incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a
witness in, or otherwise participating in, a Proceeding.
(f) "Independent Counsel" means a law firm, or a
member of a law firm, that is experienced in matters of
corporation law and neither presently is, nor in the past five
years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii)
any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the
term "Independent Counsel" shall not include any person who,
under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement. The Company agrees to
pay the reasonable fees of the Independent Counsel referred to
above and to fully indemnify such counsel against any and all
Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
(g) "Proceeding" includes any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, inquiry, administrative hearing or any
other actual, threatened or completed proceeding, whether brought
by or in the right of the Corporation or otherwise and whether
civil, criminal, administrative or investigative, in which
Indemnitee was, is, may be or will be involved as a party or
otherwise, by reason of the fact that Indemnitee is or was a
director or officer of the Company, by reason of any action taken
by him or of any inaction on his part while acting as director or
officer of the Company, or by reason of the fact that he is or
was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; in each case whether or not
he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification or
advancement of expenses can be provided under this Agreement;
except one (i) initiated by an Indemnitee pursuant to Section 10
of this Agreement to enforce his rights under this Agreement or
(ii) pending on or before the Effective Date.
Section 18. Enforcement.
(a) The Company expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations
imposed on it hereby in order to induce Indemnitee to serve as a
director and officer of the Company, and the Company acknowledges
that Indemnitee is relying upon this Agreement in serving as a
director and officer of the Company.
(b) This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings,
oral, written and implied, between the parties hereto with
respect to the subject matter hereof.
Section 19. Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a
continuing waiver.
Section 20. Notice by Indemnitee. Indemnitee agrees
promptly to notify the Company in writing upon being served with
any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding or
matter which may be subject to indemnification or advancement of
Expenses covered hereunder. The failure of Indemnitee to so
notify the Company shall not relieve the Company of any
obligation which it may have to the Indemnitee under this
Agreement or otherwise.
Section 21. Notices. All notices, requests, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given if (i) delivered by hand and
receipted for by the party to whom said notice or other communica
tion shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee to:
(b) If to the Company to:
or to such other address as may have been furnished to Indemnitee
by the Company or to the Company by Indemnitee, as the case may
be.
Section 22. Contribution. To the fullest extent
permissible under applicable law, if the indemnification provided
for in this Agreement is unavailable to Indemnitee for any reason
whatsoever, the Company, in lieu of indemnifying Indemnitee,
shall contribute to the amount incurred by Indemnitee, whether
for judgments, fines, penalties, excise taxes, amounts paid or to
be paid in settlement and/or for Expenses, in connection with any
claim relating to an indemnifiable event under this Agreement, in
such proportion as is deemed fair and reasonable in light of all
of the circumstances of such Proceeding in order to reflect (i)
the relative benefits received by the Company and Indemnitee as a
result of the event(s) and/or transaction(s) giving cause to such
Proceeding; and/or (ii) the relative fault of the Company (and
its directors, officers, employees and agents) and Indemnitee in
connection with such event(s) and/or transaction(s).
Section 23. Governing Law; Submission to Jurisdiction;
Appointment of Agent for Service of Process. This Agreement and
the legal relations among the parties shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Delaware, without regard to its conflict of laws rules. Except
with respect to any arbitration commenced by Indemnitee pursuant
to Section 10(a) of this Agreement, the Company and Indemnitee
hereby irrevocably and unconditionally (i) agree that any action
or proceeding arising out of or in connection with this Agreement
shall be brought only in the Chancery Court of the State of
Delaware (the "Delaware Court"), and not in any other state or
federal court in the United States of America or any court in any
other country, (ii) consent to submit to the exclusive
jurisdiction of the Delaware Court for purposes of any action or
proceeding arising out of or in connection with this Agreement,
(iii) appoint, to the extent such party is not a resident of the
State of Delaware, irrevocably RL&F Service Corp., One Rodney
Square, 10th Floor, 10th and King Streets, Wilmington, Delaware
19801 as its agent in the State of Delaware as such party's agent
for acceptance of legal process in connection with any such
action or proceeding against such party with the same legal force
and validity as if served upon such party personally within the
State of Delaware, (iv) waive any objection to the laying of
venue of any such action or proceeding in the Delaware Court, and
(v) waive, and agree not to plead or to make, any claim that any
such action or proceeding brought in the Delaware Court has been
brought in an improper or otherwise inconvenient forum.
Section 24. Miscellaneous. Use of the masculine pronoun
shall be deemed to include usage of the feminine pronoun where
appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
ATTEST: COMPANY
By By
INDEMNITEE
Address:
