<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
BRENCO, INCORPORATED
(Name of Subject Company)
BAS, INC.,
GRANTLEY CORPORATION
AND
VARLEN CORPORATION
(Bidders)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
107061 10 3
(CUSIP Number of Class of Securities)
Vicki L. Casmere
Vice President, General Counsel and Secretary
Varlen Corporation
55 Shuman Boulevard
P.O. Box 3089
Naperville, Illinois 60556-7089
(708) 420-0400 (ext. 304)
(Name, Address and Telephone Numbers of Person Authorized to
Receive Notices and Communications on Behalf of Bidders)
Copies to:
Claude A. Baum, Esq.
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022
(212) 326-3576
June 15, 1996
(Date of Event which Requires Filing of Statement on Schedule 13D)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION
VALUATION(1) AMOUNT OF FILING FEE(2)
<S> <C>
$157,177,470 $31,535.49
</TABLE>
(1) Determined in accordance with Rule 0-11(d) of the Securities Exchange Act of
1934, as amended. This Transaction Valuation assumes, solely for purposes of
calculating the filing fee for this Schedule 14D-1, the purchase of
9,747,440 shares of common stock, par value $1.00 per share (the "Shares")
of Brenco, Incorporated at $16.125 per Share net to seller in cash. Such
number of Shares represents all of the Shares outstanding as of June 14,
1996, other than 460,000 shares owned by Grantley Corporation, a wholly
owned subsidiary of Varlen Corporation.
(2) Includes a Schedule 13D filing fee of $100.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
(Page 1 of 10 Pages)
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<PAGE>
CUSIP NO. 107061 10 3 14D-1 PAGE 2 OF 10 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BAS, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK/AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Virginia
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,568,343**
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES* / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
25.2% of the Shares outstanding as of June 14, 1996**
10 TYPE OF REPORTING PERSON*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE NOTE ON PAGE 4
<PAGE>
CUSIP NO. 107061 10 3 14D-1 PAGE 3 OF 10 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Grantley Corporation
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,568,343**
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES* / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
25.2% of the Shares outstanding as of June 14, 1996**
10 TYPE OF REPORTING PERSON*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE NOTE ON PAGE 4
<PAGE>
CUSIP NO. 107061 10 3 14D-1 PAGE 4 OF 10 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Varlen Corporation
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
BK, WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) or 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,568,343**
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES* / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
25.2% of the Shares outstanding as of June 14, 1996**
10 TYPE OF REPORTING PERSON*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
**SEE NOTE ON PAGE 4
<PAGE>
EXPLANATORY NOTE
Varlen Corporation ("Varlen") and certain of the shareholders of Brenco,
Incorporated (the "Company") entered into a Shareholder Tender Agreement, dated
as of June 15, 1996 (the "Shareholder Tender Agreement") pursuant to which, upon
the terms and conditions set forth therein, certain shareholders of the Company
(the "Tendering Shareholders"), including Needham B. Whitfield, Chairman and
Chief Executive Officer of the Company, Anne Whitfield Kenny (whose husband,
John C. Kenny, is a director of the Company), and certain members (and trusts
for the benefit of members) of their families have each agreed to tender (and
not withdraw, subject to certain exceptions) pursuant to the Purchaser's Offer
to Purchase dated June 20, 1996 (the "Offer to Purchase") and before the
Expiration Date (as defined in the Offer to Purchase) all of the Shares owned of
record or beneficially by such Tendering Shareholders (except for 50,000 Shares
in the aggregate which may be contributed to charity) on the date of the
Shareholder Tender Agreement, together with any Shares acquired by any such
Tendering Shareholder prior to the termination of the Shareholder Tender
Agreement. The Tendering Shareholders own in the aggregate 2,108,343 Shares,
which represent in the aggregate approximately 20.7% of all Shares outstanding
on June 14, 1996. The number of Shares subject to the Shareholder Tender
Agreement (plus 460,000 shares acquired by Grantley Corporation, a Delaware
Corporation ("Grantley"), and a wholly owned subsidiary of Varlen, prior to the
date of the Shareholder Tender Agreement) is reflected in rows 7 and 9 of the
table above. The Shareholder Tender Agreement remains in effect until the
earlier of the following: (i) the date the Acquisition Agreement dated as of
June 15, 1996 among Varlen, the Purchaser and the Company is terminated and (ii)
the Effective Date (as defined in the Offer to Purchase). The Shareholder Tender
Agreement is more fully described in Section 11 ("Purpose of the Offer and the
Merger; Plans for the Company; the Acquisition Agreement and Shareholder Tender
Agreement") of the Offer to Purchase. Except with respect to 460,000 Shares
acquired by Grantley prior to the date of the Shareholder Tender Agreement,
which Shares Grantley owns directly, neither the Purchaser, Varlen nor Grantley
will have any voting or dispositive power with respect to the Shares which are
the subject of the Shareholder Tender Agreement until acceptance and payment for
such Shares is made pursuant to the Offer to Purchase, and Grantley, the
Purchaser and Varlen expressly disclaim beneficial ownership of such Shares.
(Page 5 of 10 Pages)
<PAGE>
This Tender Offer Statement on Schedule 14D-1 relates to an offer by BAS,
Inc., a Virginia corporation (the "Purchaser"), and a wholly owned subsidiary of
Varlen Corporation, a Delaware corporation ("Varlen"), to purchase all of the
outstanding shares of Common Stock, par value $1.00 per share (the "Shares"), of
Brenco, Incorporated, a Virginia corporation (the "Company"), at $16.125 per
share, net to seller in cash without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated June 20, 1996 (the "Offer to
Purchase") and in the related Letter of Transmittal, copies of which are
attached hereto as Exhibits (a)(1) and (a)(2), respectively (collectively, the
"Offer"). The Offer is made pursuant to an Acquisition Agreement dated as of
June 15, 1996 among Varlen, the Purchaser and the Company (the "Acquisition
Agreement"), a copy of which is attached hereto as Exhibit (c)(1).
This Tender Offer Statement on Schedule 14D-1 shall also constitute a
Schedule 13D with respect to the Shareholder Tender Agreement dated as of June
15, 1996 (the "Shareholder Tender Agreement") entered into by certain
shareholders of the Company (the "Tendering Shareholders") including Needham B.
Whitfield, Chairman and Chief Executive Officer of the Company, Anne Whitfield
Kenny (whose husband, John C. Kenny, is a director of the Company), and certain
members (and trusts for the benefit of such members) of their families and
Varlen. Pursuant to the Shareholder Tender Agreement, the Tendering Shareholders
have each agreed to tender (and not withdraw, subject to certain exceptions)
pursuant to the Offer and prior to the Expiration Date (as defined in the Offer
to Purchase) all of the Shares owned of record or beneficially by such Tendering
Shareholder (except for 50,000 Shares in the aggregate which may be contributed
to charity) on the date of the Shareholder Tender Agreement, together with any
Shares acquired by any such Tendering Shareholder prior to the termination of
the Shareholder Tender Agreement. A copy of the Shareholder Tender Agreement is
filed as Exhibit (c)(2) hereto.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Brenco, Incorporated, a Virginia
corporation, and the address of its principal executive office is One Park West
Circle, Midlothian, Virginia 23113.
(b) The information set forth in the Introduction of the Offer to Purchase
is incorporated herein by reference.
(c) The information set forth in Section 6 ("Market Prices of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) The information set forth in the Introduction, Section 9
("Certain Information Concerning the Purchaser and Varlen) and Schedule A of the
Offer to Purchase is incorporated herein by reference.
(e)-(f) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Varlen") of the Offer to Purchase is incorporated
herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser and Varlen"), Section 10 ("Background of
the Offer"), Section 11 ("Purpose of the Offer and the Merger; Plans for the
Company; the Acquisition Agreement and Shareholder Tender Agreement") and
Section 13 ("Certain Conditions of the Offer and the Merger") of the Offer to
Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 12 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
(Page 6 of 10 Pages)
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer"), Section 11 ("Purpose of the Offer and the Merger;
Plans for the Company; the Acquisition Agreement and Shareholder Tender
Agreement") and Section 13 ("Certain Conditions of the Offer and the Merger") of
the Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 ("Certain Effects of the
Offer") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Company"), Section 9 ("Certain Information Concerning
the Purchaser and Varlen"), Section 10 ("Background of the Offer") and Section
11 ("Purpose of the Offer and the Merger; Plans for the Company; the Acquisition
Agreement and Shareholder Tender Agreement) of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser and Varlen"), Section 10 ("Background of
the Offer"), Section 11 ("Purpose of the Offer and the Merger; Plans for the
Company; the Acquisition Agreement and Shareholder Tender Agreement") and
Section 13 ("Certain Conditions of the Offer and the Merger") of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Certain Fees
and Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and Varlen") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b)-(c) The information set forth in Section 2 ("Acceptance of and Payment
for Shares") and Section 15 ("Certain Legal Matters") of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Certain Effects of the Offer")
of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, the Acquisition Agreement dated as of June 15, 1996 among
Varlen, the Purchaser and the Company and the Shareholder Tender Agreement dated
as of June 15, 1996 among Varlen and the Tendering Shareholders, copies of which
are attached hereto as Exhibits (a)(1), (a)(2), (c)(1) and (c)(2), respectively,
is incorporated herein in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) -- Offer to Purchase dated June 20, 1996
(a)(2) -- Letter of Transmittal dated June 20, 1996
(a)(3) -- Notice of Guaranteed Delivery
(a)(4) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees
(Page 7 of 10 Pages)
<PAGE>
(a)(5) -- Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees
(a)(6) -- Text of Joint Press Release issued by Varlen and the Company on
June 17, 1996
(a)(7) -- Form of Summary Advertisement dated June 20, 1996
(a)(8) -- Text of Joint Press Release issued by Varlen and the Company on
June 20, 1996
(a)(9) -- Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9
(b)(1) -- Form of Credit Agreement among Varlen, the Borrowing
Subsidiaries party thereto, the Lenders to be identified therein
and The First National Bank of Chicago, as agent
(c)(1) -- Acquisition Agreement dated as of June 15, 1996 among Varlen,
the Purchaser and the Company
(c)(2) -- Shareholder Tender Agreement, dated as of June 15, 1996 among
Varlen and the Tendering Shareholders
(c)(3) -- Opinion of Mays & Valentine dated June 15, 1996
(d)-(f) -- Not applicable
(Page 8 of 10 Pages)
<PAGE>
SIGNATURES
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this statement is true, complete and correct.
VARLEN CORPORATION
<TABLE>
<S> <C>
By: /s/ RICHARD L. WELLEK
-----------------------------------------
Name: Richard L. Wellek
Title: President and Chief Executive Officer
</TABLE>
GRANTLEY CORPORATION
<TABLE>
<S> <C>
By: /s/ LARRY KORAL
-----------------------------------------
Name: Larry Koral
Title: Vice President
</TABLE>
BAS, INC.
<TABLE>
<S> <C>
By: /s/ RICHARD L. WELLEK
-----------------------------------------
Name: Richard L. Wellek
Title: President and Chief Executive Officer
</TABLE>
Dated: June 20, 1996
(Page 9 of 10 Pages)
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ---------- -----------
<S> <C> <C>
(a)(1) Offer to Purchase dated June 20, 1996
(a)(2) Letter of Transmittal dated June 20, 1996
(a)(3) Notice of Guaranteed Delivery
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees
(a)(5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees
(a)(6) Text of Joint Press Release issued by Varlen and the Company on June 17, 1996
(a)(7) Form of Summary Advertisement dated June 20, 1996
(a)(8) Text of Joint Press Release issued by Varlen and the Company on June 20, 1996
(a)(9) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
(b)(1) Form of Credit Agreement among Varlen, the Borrowing Subsidiaries party thereto, the
Lenders to be identied therein and The First National Bank of Chicago, as agent
(c)(1) Acquisition Agreement dated as of June 15, 1996 among Varlen, the Purchaser and the
Company
(c)(2) Shareholder Tender Agreement, dated as of June 15, 1996 among Varlen and the Tendering
Shareholders
(c)(3) Opinion of Mays & Valentine dated June 15, 1996
</TABLE>
(Page 10 of 10 Pages)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
BRENCO, INCORPORATED
AT
$16.125 NET PER SHARE
BY
BAS, INC.
A WHOLLY OWNED SUBSIDIARY OF
VARLEN CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 18, 1996 UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF BRENCO, INCORPORATED HAS UNANIMOUSLY APPROVED THE
OFFER, THE MERGER (AS HEREINAFTER DEFINED) AND THE ACQUISITION AGREEMENT (AS
HEREINAFTER DEFINED), HAS DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER AND
THE ACQUISITION AGREEMENT ARE FAIR TO AND IN THE BEST INTERESTS OF THE
SHAREHOLDERS OF BRENCO, INCORPORATED AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES (AS HEREINAFTER DEFINED) PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS HEREINAFTER DEFINED)
A NUMBER OF SHARES OF BRENCO, INCORPORATED WHICH, TOGETHER WITH THE SHARES
BENEFICIALLY OWNED BY VARLEN CORPORATION, BAS, INC. AND/OR OTHER SUBSIDIARIES OF
VARLEN CORPORATION, REPRESENTS AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES
THEN OUTSTANDING ON A FULLY DILUTED BASIS. THE PURCHASER ESTIMATES THAT
APPROXIMATELY 6,639,627 SHARES WILL NEED TO BE VALIDLY TENDERED (AND NOT VALIDLY
WITHDRAWN) TO SATISFY THIS MINIMUM CONDITION (AS HEREINAFTER DEFINED). THE OFFER
IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTIONS 1, 13 AND 16.
VARLEN CORPORATION HAS ENTERED INTO A SHAREHOLDER TENDER AGREEMENT WITH
CERTAIN SHAREHOLDERS OF BRENCO, INCORPORATED INCLUDING THE CHAIRMAN AND CHIEF
EXECUTIVE OFFICER OF BRENCO, INCORPORATED AND CERTAIN MEMBERS OF HIS FAMILY,
PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH SHAREHOLDERS HAVE AGREED (SUBJECT TO
CERTAIN EXCEPTIONS) TO TENDER IN THE OFFER APPROXIMATELY 20.7% OF ALL
OUTSTANDING SHARES.
---------------------
IMPORTANT
ANY SHAREHOLDER DESIRING TO TENDER ALL OR A PORTION OF SUCH SHAREHOLDER'S
SHARES SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF
TRANSMITTAL AND MAIL OR DELIVER THE LETTER OF TRANSMITTAL TOGETHER WITH THE
CERTIFICATE(S) EVIDENCING SUCH SHARES, AND ANY OTHER REQUIRED DOCUMENTS, TO THE
DEPOSITARY OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY
TRANSFER SET FORTH IN SECTION 4 OR (2) REQUEST HIS BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR HIM. A
SHAREHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF SUCH SHAREHOLDER
DESIRES TO TENDER SUCH SHARES.
A SHAREHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES
REPRESENTING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY
WITH THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, MAY TENDER SUCH
SHARES BY FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY SET FORTH IN SECTION
4.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT OR TO THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE
NUMBERS SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES
OF THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED
DELIVERY AND OTHER RELATED MATERIALS MAY BE DIRECTED TO THE INFORMATION AGENT,
THE DEALER MANAGER, OR TO BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST COMPANIES.
---------------------
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
June 20, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<C> <S> <C>
INTRODUCTION............................................... 1
1. Terms of the Offer; Expiration Date............... 4
2. Acceptance of and Payment for Shares.............. 4
3. Withdrawal Rights................................. 5
4. Procedures for Accepting the Offer and Tendering
Shares........................................... 6
5. Certain Income Tax Consequences................... 8
6. Market Prices of Shares; Dividends................ 9
7. Certain Effects of the Offer...................... 9
8. Certain Information Concerning the Company........ 10
9. Certain Information Concerning the Purchaser and
Varlen........................................... 12
10. Background of the Offer........................... 14
11. Purpose of the Offer and the Merger; Plans for the 16
Company; the Acquisition Agreement and
Shareholder Tender Agreement.....................
12. Source and Amount of Funds........................ 24
13. Certain Conditions of the Offer and the Merger.... 25
14. Dividends and Distributions....................... 27
15. Certain Legal Matters............................. 28
16. Extension of Tender Period, Termination and
Amendments....................................... 31
17. Certain Fees and Expenses......................... 32
18. Miscellaneous..................................... 33
Schedule A -- Directors and Executive Officers of Varlen
and the Purchaser.......................................... A-1
</TABLE>
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF BRENCO, INCORPORATED:
INTRODUCTION
BAS, Inc., a Virginia corporation (the "Purchaser") and a wholly owned
subsidiary of Varlen Corporation, a Delaware corporation ("Varlen"), hereby
offers to purchase all outstanding shares of the Common Stock, par value $1.00
per share (the "Shares"), of Brenco, Incorporated, a Virginia corporation (the
"Company"), at $16.125 per Share, net to the seller in cash, without any
interest, upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which together constitute
the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares
pursuant to the Offer. The Purchaser will pay charges and reimbursable expenses
of Lehman Brothers Inc., which is acting as the Dealer Manager for the Offer (in
such capacity, the "Dealer Manager"), Harris Trust Company of New York, which is
acting as the Depositary (the "Depositary") and D.F. King & Co., Inc., which is
acting as the Information Agent (the "Information Agent"), incurred in
connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AND THE ACQUISITION AGREEMENT, HAS DETERMINED THAT THE TERMS OF THE
OFFER, THE MERGER AND THE ACQUISITION AGREEMENT ARE FAIR TO AND IN THE BEST
INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
THE COMPANY WHICH, TOGETHER WITH THE SHARES BENEFICIALLY OWNED BY VARLEN, THE
PURCHASER AND/OR OTHER SUBSIDIARIES OF VARLEN, REPRESENTS AT LEAST TWO-THIRDS OF
THE TOTAL NUMBER OF SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE
"MINIMUM CONDITION"). THE OFFER IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTIONS 1, 13 AND 16.
Wheat, First Securities, Inc., has delivered to the Company's Board of
Directors its opinion that the consideration to be received by the shareholders
of the Company pursuant to the Offer and the Merger is fair to such shareholders
from a financial point of view. The Purchaser has been advised by the Company
that a copy of such opinion will be set forth in full as an exhibit to the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") which is being distributed to the Company's shareholders. Shareholders
are urged to read the opinion in its entirety for a description of the
assumptions made, matters considered and limitations of the review undertaken by
Wheat, First Securities, Inc.
The purpose of the Offer is to facilitate the acquisition of all of the
outstanding Shares and thereby to enable Purchaser to acquire control of, and
the entire equity interest in, the Company. The Offer will be followed by the
Merger which will enable the Purchaser to acquire all outstanding Shares not
tendered and purchased pursuant to the Offer or acquired pursuant to the
Shareholder Tender Agreement (as hereinafter defined).
The Offer is being made pursuant to an Acquisition Agreement, dated as of
June 15, 1996 (the "Acquisition Agreement"), by and among Varlen, the Purchaser
and the Company. Pursuant to the Acquisition Agreement, and subject to the
satisfaction or waiver of the conditions set forth therein, the Purchaser has
agreed to make the Offer and purchase any and all Shares validly tendered and
not withdrawn following the later of (i) the expiration or termination of all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), applicable to the Offer and (ii) the Expiration
Date. After the completion of the Offer, the Purchaser will be merged with and
into the Company (the "Merger") and each Share then outstanding (other than
Shares held by Varlen, the Purchaser or any direct or indirect subsidiary of
Varlen, the Purchaser or the Company, and Shares with respect to which
dissenter's rights under the Virginia Stock Corporation Act, as amended (the
"Virginia Act") are properly exercised) will be converted upon effectiveness of
the
<PAGE>
Merger (the "Effective Time") into the right to receive $16.125 in cash, without
any interest. Following the consummation of the Merger, the Company will
continue as the surviving corporation and will be a wholly owned subsidiary of
Varlen.
The Acquisition Agreement provides that, promptly upon the acceptance for
payment of, and payment by the Purchaser in accordance with the Offer for,
Shares constituting 50% or more of all Shares then outstanding pursuant to the
Offer, and from time to time thereafter, the Purchaser will be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors of the Company as will give the Purchaser representation on
the Board of Directors equal to at least that number of directors which equals
the product of the total number of directors on the Board of Directors
multiplied by the percentage that such number of Shares so accepted for payment
and paid for or owned by Varlen or the Purchaser bears to the total number of
Shares outstanding; PROVIDED, HOWEVER, that the Purchaser shall have the right
(in its discretion) to designate a number of directors less than such product;
AND PROVIDED FURTHER, HOWEVER, that at all times prior to the Merger there shall
be at least two members of the Board of Directors of the Company selected by the
current members of such Board. In the Acquisition Agreement, the Company has
agreed to use its best efforts to cause the Purchaser's designees to be elected
to the Company's Board of Directors (including mailing to the Company's
shareholders the information required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
promulgated thereunder) and to use its reasonable best efforts to cause the
resignation of current directors, and/or an increase in the number of the
Company's directors, as may be directed by Varlen and required to implement the
foregoing.
The Merger is subject to the satisfaction of various conditions, including,
among other things, approval by the shareholders of the Company if required
under the Virginia Act. If the Purchaser acquires the number of Shares required
to satisfy the Minimum Condition, it will control two-thirds of the outstanding
Shares on a fully diluted basis. Accordingly, the Purchaser would have
sufficient voting power to approve the Merger at a meeting of shareholders to
vote thereon. In the event that as a result of the Offer, Varlen owns 90% or
more of the outstanding Shares, the Purchaser and Varlen would be able to effect
the Merger pursuant to the short form merger provisions of the Virginia Act
without any action by any other shareholder of the Company, but subject to the
requirements of the Virginia Act that a copy of the Acquisition Agreement be
mailed to shareholders and to the applicable dissenter's rights provisions of
the Virginia Act.
In connection with the Merger, the Company has agreed that it shall take all
action necessary, in accordance with the Virginia Act and its charter and
bylaws, to convene a meeting of its shareholders as promptly as practicable to
consider and vote upon the Merger (if and to the extent required by the Virginia
Act), and to not take any action which would result in the affirmative vote of
shareholders required for approval of the Merger to be greater than two-thirds
of the votes entitled to be cast. Unless in the written opinion of legal counsel
to the Company (the delivery of which shall be confirmed in writing to Varlen by
such counsel) any of the following actions would create a substantial risk of
violating the fiduciary duties of the Board of Directors to the shareholders of
the Company, the Company has also agreed: (i) that the proxy or information
statement with respect to any meeting of the Company's shareholders or other
corporate action to approve the Acquisition Agreement and the Merger, shall
contain the recommendation of the Board of Directors that the shareholders of
the Company vote to adopt and approve the Merger and the Acquisition Agreement,
and (ii) if proxies are solicited, to use its reasonable best efforts to solicit
from its shareholders proxies in favor of such adoption and approval and to take
all other action necessary or, in the reasonable judgment of Varlen, helpful to
secure the vote or consent of shareholders required by the Virginia Act to
effect the Merger. At such meeting of the shareholders of the Company, Varlen,
the Purchaser and their direct and indirect subsidiaries will vote all of the
Shares then owned by any of them in favor of the Merger.
Holders of Shares may, in certain circumstances, have a statutory right to
dissent from the Merger and demand the "fair value" of their Shares under the
Virginia Act, provided they follow the
2
<PAGE>
procedures established by the Virginia Act to exercise and perfect such right.
Any dissenting shareholders will have only such rights and privileges as a
shareholder of the Company as are provided for under Article 15 (DISSENTER'S
RIGHTS) of the Virginia Act. See Section 11.
Simultaneously with entering into the Acquisition Agreement, Varlen entered
into a Shareholder Tender Agreement (the "Shareholder Tender Agreement") with
certain shareholders of the Company (the "Tendering Shareholders"), including
Needham B. Whitfield, Chairman and Chief Executive Officer of the Company, Anne
Whitfield Kenny (whose husband, John C. Kenny, is a director of the Company),
and certain members (and trusts for the benefit of members) of their family.
Pursuant to the Shareholder Tender Agreement, each Tendering Shareholder has
agreed to tender (subject to certain possible exceptions) pursuant to the Offer
and before the Expiration Date all of the Shares owned of record or beneficially
by such Tendering Shareholder (except for 50,000 Shares in the aggregate which
may be contributed to charity) on the date of the Shareholder Tender Agreement,
together with any Shares acquired by any such Tendering Shareholder prior to the
termination of the Shareholder Tender Agreement. As of the date hereof, the
Tendering Shareholders beneficially own 2,108,343 Shares, or approximately 20.7%
of all outstanding Shares.
The Acquisition Agreement and the Shareholder Tender Agreement are more
fully described in Section 11 of this Offer to Purchase. Shareholders are
encouraged to read that Section carefully, together with all other terms and
conditions of the Offer, before deciding whether to tender their Shares.
According to the Company, on June 14, 1996 there were (i) 10,207,440 Shares
(including 62,576 restricted Shares issued pursuant to the Company's restricted
stock plan) outstanding, and (ii) 442,000 shares reserved for issuance upon the
exercise of outstanding stock options issued pursuant to Company stock option
plans. As of the date of this Offer to Purchase, a subsidiary of Varlen
beneficially owns 460,000 Shares. Based on the foregoing, the Minimum Condition
will be satisfied if 6,639,627 Shares are validly tendered and not withdrawn
prior to the Expiration Date.
THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY,
JULY 18, 1996, UNLESS THE OFFER IS EXTENDED.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING. ANY
SUCH SOLICITATION WOULD BE MADE ONLY PURSUANT TO SEPARATE PROXY OR SOLICITATION
MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT,
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
3
<PAGE>
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions set forth in the Offer (including, if the Offer is extended or
amended, the terms and conditions of any extension or amendment), the Purchaser
will accept for payment and will pay for any and all Shares validly tendered on
or prior to the Expiration Date and not withdrawn in accordance with Section 3
of this Offer to Purchase. The term "Expiration Date" means 12:00 midnight, New
York City time, on Thursday, July 18, 1996, unless the Purchaser, in its sole
discretion, shall have extended the period of time for which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Purchaser, shall expire. See Section 16.
The Offer is subject to certain conditions set forth in Section 13,
including satisfaction of the Minimum Condition and the expiration or
termination of the waiting period applicable to the Purchaser's acquisition of
Shares pursuant to the Offer under the HSR Act. If any condition to the
Purchaser's obligation to purchase shares is not satisfied prior to the payment
for any such Shares, the Purchaser may (i) terminate the Offer and return all
tendered Shares to tendering shareholders, (ii) extend the Offer and, subject to
withdrawal rights as set forth in Section 3, retain all such Shares until the
expiration of the Offer as so extended, (iii) waive such condition and, subject
to any requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered by the Expiration Date and not withdrawn,
or (iv) delay acceptance for payment of or payment for Shares, subject to
applicable law, until satisfaction or waiver of the conditions of the Offer.
The Acquisition Agreement provides that, unless previously approved by the
Company, the Purchaser will not reduce the price to be paid per Share pursuant
to the Offer, change the form of consideration to be paid in the Offer or the
Merger, increase the Minimum Condition or amend the terms of the Offer
(including any of the conditions set forth in Section 13) in a manner that is
materially adverse to the holders of Shares. For a description of the
Purchaser's right to extend the period of time during which the Offer is open,
and to amend, delay or terminate the Offer, see Section 16.
The Company has provided the Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares and will be furnished to brokers,
dealers, banks and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE OF AND PAYMENT FOR SHARES. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the Purchaser will
purchase, by accepting for payment, and will pay for, any and all Shares validly
tendered and not withdrawn following the later of (i) the expiration or
termination of all waiting periods under the HSR Act that are applicable to the
purchase of Shares pursuant to the Offer, and (ii) the Expiration Date. In
addition, the Purchaser expressly reserves the right, in its sole discretion, to
delay the acceptance of, or payment for, Shares in order to comply, in whole or
in part, with any applicable law. See Section 15. In all cases, payment for
Shares purchased pursuant to the Offer will be made only after timely receipt by
the Depositary of certificates for such Shares or timely confirmation of
book-entry transfer (a "Book-Entry Confirmation") of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each, a "Book-Entry Transfer Facility" and
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 4, a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) and any other documents
required by the Letter of Transmittal.
4
<PAGE>
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment (and thereby purchased) tendered Shares as, if and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving payment from the Purchaser and transmitting payments to
tendering shareholders. The Purchaser will not, under any circumstances, pay any
interest on the purchase price, regardless of any delay in making such payment.
If any tendered Shares are not purchased pursuant to the Offer, or if
certificates are submitted for more Shares than are tendered, certificates for
such unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of book-entry transfer within a Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within such
Book-Entry Transfer Facility), as promptly as practicable after the expiration
or termination of the Offer.
The Purchaser will pay all stock transfer taxes, if any, payable with
respect to the transfer to it of Shares purchased pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or (in the
circumstances permitted by the Offer) if unpurchased Shares are to be registered
in the name of, any person other than the registered holder, or if tendered
certificates are registered in the name of any person other than the person
signing any Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder or such other person) payable on
account of such payment or transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes, or
exemption therefrom, is submitted.
The Purchaser expressly reserves the right to transfer or assign to Varlen
or to one or more of Varlen's direct or indirect wholly owned subsidiaries the
right to purchase all or any portion of the Shares tendered pursuant to the
Offer, but no such transfer or assignment will relieve the Purchaser of its
obligations under the Offer or prejudice the rights of tendering shareholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
If, prior to the Expiration Date, the Purchaser shall decide, in its sole
discretion, to increase the consideration offered to shareholders pursuant to
the Offer, such increased consideration shall be paid to all holders of Shares
accepted for payment and paid for pursuant to the Offer.
3. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer will be
irrevocable, except that Shares tendered may be withdrawn at any time prior to
the Expiration Date and, unless previously accepted for payment, may also be
withdrawn after August 18, 1996. If the Purchaser is delayed in its acceptance
or purchase of or payment for Shares or is unable to purchase or pay for Shares
for any reason, then, without prejudice to the Purchaser's rights under Sections
1, 13 and 16, tendered Shares may be retained by the Depositary on behalf of the
Purchaser and may not be withdrawn except as permitted by this Section 3 and
subject to Rule 14e-1(c) under the Exchange Act. See Section 16.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
specified on the back cover of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and, if certificates
representing such Shares have been delivered or otherwise identified to the
Depositary, the name(s) in which such certificate(s) is (are) registered, if
different from the name of the person tendering such Shares. If certificates
have been delivered or otherwise identified to the Depositary, then prior to the
physical release of such certificates, the tendering shareholder must also
submit the serial numbers shown on the particular certificates evidencing such
Shares and the signature on the notice of withdrawal must be guaranteed by a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office, branch or agency in the United States or any other
institution that is a member of the Medallion Signature Guaranty Program (each
being referred to herein as an "Eligible Institution"). If Shares
5
<PAGE>
have been tendered pursuant to the procedure for book-entry tender as set forth
in Section 4, the notice of withdrawal must specify the name and account
number(s) of the account(s) at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares, in which case a notice of withdrawal will be
effective if delivered to the Depositary by any method of delivery described in
the first sentence of this paragraph. None of Varlen, the Purchaser, the Dealer
Manager, the Depositary or the Information Agent will be obligated to give
notice of any defects or irregularities in any notice of withdrawal, nor shall
any of them incur any liability for failure to give any such notice. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination shall be final and binding.
Withdrawals of Shares tendered may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. Withdrawn Shares, however, may be retendered by following one of the
procedures described in Section 4 at any time prior to the Expiration Date.
4. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
VALID TENDER. In order for a holder of Shares to validly tender Shares
pursuant to the Offer, a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), together with any required
signature guarantees and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase, on or prior to the Expiration
Date. Either (i) the certificates for such Shares must be delivered to the
Depositary or (ii) such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below and a Book-Entry Confirmation must be
received by the Depositary (including an Agent's Message (as defined below), if
the tendering shareholder has not delivered a Letter of Transmittal), in each
case on or prior to the Expiration Date. Delivery of documents to a Book-Entry
Transfer Facility does not constitute delivery to the Depositary. Alternatively,
the tendering shareholder may comply with the guaranteed delivery procedure set
forth below. The term "Agent's Message" means a message transmitted by a
Book-Entry Transfer Facility to and received by the Depositary and forming a
part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgement from a participant in the
system established by such Book-Entry Transfer Facility tendering the Shares
which are the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such Letter of Transmittal against such
participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry transfer of the Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account in
accordance with such Book-Entry Transfer Facility's procedure for such transfer.
Even if delivery of Shares is to be effected through book-entry transfer at a
Book-Entry Transfer Facility, the Letter of Transmittal (or a manually signed
facsimile thereof) along with any required signature guarantees and any other
required documents, or an Agent's Message, must be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover page of
this Offer to Purchase on or prior to the Expiration Date, or the shareholder
must comply with the guaranteed delivery procedure set forth below.
SIGNATURE GUARANTEES. If the Letter of Transmittal is signed by the
registered holder of the Shares tendered therewith and payment is to be made
directly to such registered holder, or if Shares are tendered for the account of
an Eligible Institution, no signature guarantee is required. In all other cases,
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. If certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made or
certificates for Shares not accepted for payment or not tendered are to be
returned to a person other than the registered holder, then certificates must be
endorsed or
6
<PAGE>
accompanied by appropriate stock powers, in either case signed exactly as the
name or the names of the registered owner or owners appear on certificates, with
the signature(s) on the certificates or stock powers guaranteed as aforesaid.
See Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such holder's certificates are not immediately available, or time
will not permit all required documents to reach the Depositary on or prior to
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all of
the following conditions are met:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser is received by
the Depositary as provided below by the Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof) with any required signature guarantee and any other documents
required by the Letter of Transmittal, or an Agent's Message, are received
by the Depositary within three National Association of Securities Dealers,
Inc. Automated Quotation System trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by facsimile transmission, or by mail, to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
In all cases, payment for Shares tendered and purchased pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares (or a timely Book-Entry Confirmation), a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile thereof) and
any other documents required by the Letter of Transmittal.
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Purchaser
as his proxies, in the manner set forth in the Letter of Transmittal, to the
full extent of such shareholder's rights with respect to the Shares tendered by
such shareholder and purchased by the Purchaser (and any and all other Shares
and other securities issued or issuable in respect thereof on or after June 15,
1996) prior to the time of any shareholder vote or other action. All such
proxies shall be irrevocable and coupled with an interest in the tendered
Shares. Such appointment will be effective when, and only to the extent that,
the Purchaser accepts such Shares for payment. Upon such appointment, all prior
proxies given by such shareholder with respect to such purchased Shares or other
securities will be revoked and no subsequent proxies may be given. The designees
of the Purchaser will, with respect to such Shares and other securities, be
empowered to exercise all voting and other rights of such shareholder as they,
in their sole discretion, may deem proper at any annual, special or adjourned
meeting of the Company's shareholders, by written consent or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be validly
tendered, immediately upon the acceptance for payment of such Shares, the
Purchaser be able to exercise full voting and other rights of a record and
beneficial holder, including rights in respect of acting by written consent,
with respect to such Shares (and any and all other securities as set forth
above).
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING DELIVERY THROUGH A
BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING
SHAREHOLDER. IF DELIVERY IS TO BE BY MAIL, INSURED REGISTERED MAIL, RETURN
RECEIPT REQUESTED IS RECOMMENDED. AMPLE TIME SHOULD BE ALLOWED FOR SUCH
DOCUMENTS TO REACH THE DEPOSITARY. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION
4, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
7
<PAGE>
BACK-UP FEDERAL INCOME TAX WITHHOLDING. Under the federal income tax laws,
the Depositary will be required to withhold 31% of the amount of any payments
made to certain shareholders pursuant to the Offer. To prevent such backup
federal income tax withholding, each such shareholder must provide the
Depositary with his correct taxpayer identification number and certify that such
shareholder is not subject to such backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser and Varlen, in their sole
discretion, whose determination will be final and binding. The Purchaser and
Varlen reserve the absolute right to reject any or all tenders determined by
them not to be in proper form or the acceptance of or payment for which may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser and Varlen
also reserve the absolute right to waive any of the conditions of the Offer or
any defect in any tender with respect to any particular Shares or any particular
shareholder. No tender of Shares will be deemed to have been validly made until
all defects and irregularities relating thereto have been cured or waived. None
of Varlen, the Purchaser, the Dealer Manager, the Depositary or the Information
Agent will be obligated to give notice of any defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give any such
notice. The Purchaser's and Varlen's interpretation of the terms and conditions
of the Offer (including the Letter of Transmittal and instructions thereto) will
be final and binding.
5. CERTAIN INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or for Shares pursuant to the Merger will be taxable for
federal income tax purposes and may be taxable under applicable state, local,
foreign and other tax laws. The tax consequences of such receipt may vary
depending upon, among other things, the particular circumstances of the
shareholder. In general, a shareholder will recognize gain or loss equal to the
difference between the amount of cash received and his tax basis for his Shares.
Such gain or loss will generally be capital gain or loss provided that such
shareholder held his Shares as a capital asset, and will be long-term capital
gain or loss if, on the date of sale, such Shares were held for more than one
year. Otherwise, such gain or loss will be short-term capital gain or loss.
The foregoing may not be applicable to shareholders who acquired their
Shares pursuant to the exercise of employee stock options or otherwise as
compensation or who are not citizens or residents of the United States or who
are otherwise subject to special tax treatment under the Internal Revenue Code
of 1986, as amended (such as life insurance companies, tax exempt entities and
regulated investment companies).
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISORS TO
DETERMINE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO SUCH
SHAREHOLDER, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS.
8
<PAGE>
6. MARKET PRICES OF SHARES; DIVIDENDS. The Shares are traded in the
over-the-counter market, under the symbol "BREN." The Shares are quoted in the
National Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System ("NASDAQ") National Market System. The following table sets forth, for
the calendar periods shown, the range of high and low sales prices for the
Shares as quoted in the NASDAQ National Market System for such periods, in each
case as reported by published financial sources, and the cash dividend paid by
the Company for each such quarter. NASDAQ National Market System quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and do not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
QUARTERLY
HIGH LOW DIVIDEND
-------- -------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
1st Quarter................................. $12 1/2 $ 8 1/4 $ .05
2nd Quarter................................. 13 1/4 9 1/8 .05
3rd Quarter................................. 14 11 1/2 .06
4th Quarter................................. 13 1/4 11 1/4 .06
YEAR ENDED DECEMBER 31, 1995
1st Quarter................................. $13 $10 5/8 $ .06
2nd Quarter................................. 14 1/4 12 .07
3rd Quarter................................. 12 5/8 9 3/16 .07
4th Quarter................................. 12 10 1/8 .07
YEAR ENDING DECEMBER 31, 1996
1st Quarter................................. $12 13/16 $ 9 $ .07
2nd Quarter (through June 19, 1996)......... 16 1/4 12 1/8 --
</TABLE>
On June 14, 1996, the last full day of trading prior to the announcement of
the Purchaser's intention to make the Offer, the last reported sale price for
the Shares, as reported in the NASDAQ National Market System, was $12.25 per
Share, according to published sources. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
7. CERTAIN EFFECTS OF THE OFFER. The purchase of Shares pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
may also be expected to reduce the number of holders of Shares. Such reductions
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
NASDAQ QUOTATION. Depending on the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the NASD for
continued inclusion in the NASDAQ National Market System (the top tier market of
The NASDAQ Stock Market), which require that an issuer have at least 200,000
publicly held shares, held by at least 400 shareholders or 300 shareholders of
round lots, with a market value of $1,000,000, and have net tangible assets of
at least either $1,000,000, $2,000,000 or $4,000,000, depending on profitability
levels during the issuer's four most recent fiscal years. If these standards are
not met, the Shares might nevertheless continue to be included in the NASD's
NASDAQ Stock Market, with quotations published in the NASDAQ "additional list"
or in one of the "local lists", but if the number of holders of the Shares were
to fall below 300, or if the number of publicly held Shares were to fall below
100,000 or there were not at least two registered and active market makers for
the Shares, the NASD's rules provide that the Shares would no longer be
"qualified" for NASDAQ reporting and NASDAQ would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. If, as a result of the purchase of Shares
pursuant to the Offer, the Shares no longer meet the requirements of the NASD
for continued inclusion in The NASDAQ Stock Market or the NASDAQ National Market
System, as the case may be, the market for Shares could be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
quotation through NASDAQ and the Shares are no longer included in The NASDAQ
Stock Market, it is possible that the Shares would continue to trade in the
over-the-counter market and that price quotations would be
9
<PAGE>
reported by other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon the number of
holders of Shares remaining at such time, the interests in maintaining a market
in Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors. The Purchaser has been advised by the Company that, as of June 15,
1996, there were approximately 1,951 record holders of Shares.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application of the
Company to the Securities and Exchange Commission (the "Commission") if the
Shares are not listed on a national securities exchange and there are fewer than
300 record holders of Shares. Termination of registration of the Shares under
the Exchange Act would substantially reduce the information required to be
furnished by the Company to its shareholders and the Commission and would make
certain provisions of the Exchange Act (such as the short-swing profit recovery
provisions of Section 16(b) and the requirement of furnishing a proxy or
information statement in connection with shareholders' meetings pursuant to
Section 14(a) or (c) and the related requirement of an annual report) no longer
applicable to the Company. Furthermore, the ability of "affiliates" of the
Company and persons holding "restricted securities" of the Company to dispose of
such securities pursuant to Rule 144 or Rule 144A promulgated under the
Securities Act of 1933, as amended, may be impaired or, with respect to certain
persons, eliminated. If, as a result of purchases pursuant to the Offer or
otherwise, the Company is no longer required to maintain registration of the
Shares under the Exchange Act, the Purchaser intends to cause the Company to
apply for termination of such registration. See Section 11.
MARGIN REGULATIONS. The Shares are presently "margin securities" under the
rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities for the purpose of buying,
carrying or trading in securities ("Purpose Loans"). In the event that the
Shares were no longer quoted in the NASDAQ National Market System (which depends
on factors such as the number of holders of the Shares and the number and market
value of publicly-held Shares (see NASDAQ QUOTATION above)), the Shares would no
longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as collateral
for Purpose Loans made by brokers. In addition, if registration of the Shares
under the Exchange Act were terminated, the Shares would no longer constitute
"margin securities."
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act,
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or other transactions
following the purchase of Shares pursuant to the Offer in which the Purchaser
seeks to acquire the remaining shares not held by it. However, Rule 13e-3 would
be inapplicable if (i) the Shares are deregistered under the Exchange Act prior
to the Merger or other transactions or (ii) the Merger or another business
combination is consummated within one year after the purchase of the Shares
pursuant to the Offer and the amount paid per Share for each class of Share in
the Merger or other business combination is at least equal to the amount paid
per Share for such class of Share in the Offer. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning the
fairness of the proposed transaction and the consideration offered to minority
shareholders in such transaction be filed with the Commission and disclosed to
shareholders prior to the consummation of the transaction.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a Virginia
corporation with its principal executive offices located at One Park West
Circle, Midlothian, Virginia 23113, telephone (804) 794-1436. According to
information filed by the Company with the Commission, the Company is primarily
engaged in the manufacture, sale and servicing of roller bearings; the
manufacture and sale of automotive forgings; the provision of third party
railcar switching services; and the operation of short-line railroads.
10
<PAGE>
Set forth below is a summary of certain selected financial information with
respect to the Company and its subsidiaries for the fiscal years ended December
31, 1995, December 31, 1994 and December 31, 1993 and for the three-month
periods ended March 31, 1996 and March 31, 1995, which has been excerpted or
derived from the audited consolidated financial statements contained in the
Company's Annual Reports on Form 10-K for the fiscal years ended December 31,
1995 and December 31, 1994, and from unaudited consolidated financial statements
contained in the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to such documents
and all of the financial statements and related notes contained therein.
BRENCO, INCORPORATED
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------
1996 1995 1995 1994 1993
--------- --------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales......................................... $ 32,875 $ 35,232 $ 127,139 $ 117,897 $ 98,724
Costs and expenses................................ 28,825 29,224 110,177 102,727 89,413
Interest expense.................................. 178 214 723 799 741
Income before income taxes........................ 4,123 5,979 16,909 14,555 6,893
Net income........................................ 2,571 3,640 10,660 8,802 4,241
Earnings per share:
Net income per share............................ .25 .36 1.05 .88 .43
Average shares outstanding...................... 10,189 10,102 10,135 10,050 9,942
BALANCE SHEET DATA:
Current assets.................................... $ 56,780 $ 49,171 $ 49,520 $ 41,968 $ 36,900
Total assets...................................... 93,041 84,743 86,278 76,569 69,629
Current liabilities............................... 11,962 12,297 8,438 7,530 8,312
Long-term debt.................................... 8,184 9,540 8,212 9,567 10,000
Shareholders' equity.............................. 66,134 58,777 63,999 55,498 48,289
</TABLE>
CERTAIN COMPANY PROJECTIONS. Prior to entering into the Acquisition
Agreement, Varlen conducted a due diligence review of the Company and in
connection with such review received certain non-public business and financial
information from the Company including summary business plans comprised of
income, balance sheet and cash flow statements, financial plans and certain
historical data detailing sales, costs and expenses and balance sheet data.
Certain projected information included in the non-public business and financial
records of the Company included that (i) net sales for the Company for the
fiscal years ending December 31, 1996 through 1998 would be approximately $125
million, $124 million and $130 million, respectively and (ii) net income for the
Company for the fiscal years ending December 31, 1996 through 1998 would be
approximately $9.6 million, $9.7 million and $10.3 million, respectively. None
of the assumptions which form the basis for the projected information give
effect to the Offer, the Merger or the financing thereof or the potential
combined operations of Varlen and the Company after consummation of such
transactions.
THE COMPANY HAS ADVISED THAT THE ABOVE PROJECTIONS AND FORECASTS WERE
PREPARED FOR INTERNAL PURPOSES ONLY, WERE NOT PREPARED WITH A VIEW TO COMPLIANCE
WITH THE COMMISSION'S PUBLISHED GUIDELINES FOR DISCLOSURE OF FORWARD-LOOKING
INFORMATION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS REGARDING PROJECTIONS, AND WERE NOT INTENDED FOR PUBLIC
DISSEMINATION. THE FOREGOING PROJECTIONS AND FORECASTS ARE NECESSARILY BASED ON
ASSUMPTIONS AS TO FACTS WHICH ARE NOT WITHIN THE COMPANY'S CONTROL. NO ASSURANCE
CAN BE GIVEN THAT SUCH PROJECTIONS OR FORECASTS WILL PROVE TO BE
11
<PAGE>
ACCURATE TO ANY EXTENT AND NONE OF VARLEN, THE PURCHASER, THE COMPANY OR ANY OF
THEIR RESPECTIVE ADVISORS OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION
ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH PROJECTIONS OR FORECASTS.
VARLEN AND THE PURCHASER HAVE INCLUDED SUCH PROJECTIONS AND FORECASTS HEREIN
ONLY BECAUSE VARLEN WAS PROVIDED THEM PRIOR TO THE EXECUTION OF THE ACQUISITION
AGREEMENT. ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS AND
FORECASTS ARE BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF
THE COMPANY WHICH MAY NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE
COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS AND FORECASTS SET FORTH
ABOVE WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN.
THE PROJECTIONS AND FORECASTS HAVE NOT BEEN EXAMINED OR COMPILED BY THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. THE INCLUSION OF SUCH PROJECTIONS AND
FORECASTS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT VARLEN, THE
PURCHASER, THE COMPANY, ANY OF THEIR RESPECTIVE ADVISORS OR ANY OTHER PARTY WHO
RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS.
Except where otherwise stated, the information concerning the Company
contained in this Offer to Purchase or incorporated herein by reference has been
taken from or based upon publicly-available documents and records on file with
the Commission and other public sources or was provided by the Company. Although
the Purchaser has no knowledge that would indicate that any statements contained
herein based on such documents and records are untrue, neither Varlen nor the
Purchaser can take responsibility for the accuracy or completeness of the
information contained in such documents and records, or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information which are unknown to Varlen or
the Purchaser.
The Company is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning the Company's
business, principal physical properties, capital structure, material pending
legal proceedings, operating results, financial condition, the Company's
directors and officers, their remuneration, stock options and restricted stock
granted to them, the principal holders of the Company's securities, any material
interests of such persons in transactions with the Company and other matters, is
required to be disclosed in proxy statements and annual reports distributed to
the Company's shareholders and filed with the Commission. Such reports, proxy
statements and other information may be inspected at the Commission's public
reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection at the following regional offices of the
Commission: 7 World Trade Center, Suite 1300, New York, New York 10048; and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and copies may be
obtained, by mail, for prescribed rates from the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such information
should also be available for inspection at the offices of NASDAQ Operations,
1735 K Street, N.W., Washington, D.C. 20006.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND VARLEN. The Purchaser
is a newly incorporated Virginia corporation and a wholly owned subsidiary of
Varlen. To date, the Purchaser has engaged in no activities other than those in
connection with the Offer. The principal executive offices of the Purchaser and
Varlen are located at 55 Shuman Boulevard, P.O. Box 3089, Naperville, Illinois,
60566-7089, telephone (708) 420-0400.
The name, business address, citizenship, present principal employment or
occupation and employment history for the past five years of each of the
directors and executive officers of the Purchaser and Varlen are set forth in
Schedule A to this Offer to Purchase.
Varlen, a Delaware corporation, was formed in 1969. Varlen is a manufacturer
of (i) aluminum permanent mold and die castings and structural molded plastic
components for trucks and trailers; (ii) components for railcars and
locomotives; (iii) remanufactured crankshafts and camshafts and railroad track
fastener systems; (iv) automatic transmission reaction plates, steering column
and
12
<PAGE>
transmission components, seat frame brackets and precision stamped metal
components and weldments for cars and light trucks; and (v) instruments to
improve yield, certify products and monitor regulatory standards for petroleum
products.
Except as set forth in this paragraph or elsewhere in this Offer to
Purchase, and except for 460,000 shares beneficially owned by a subsidiary of
Varlen, neither the Purchaser nor Varlen nor, to the best of their knowledge,
any of the persons listed in Schedule A hereto nor any associate or majority
owned subsidiary of any of the foregoing, beneficially owns or has a right to
acquire any equity securities of the Company and neither the Purchaser nor
Varlen nor, to the best of their knowledge, any of the persons or entities
referred to above, nor any director, executive officer or subsidiary of any of
the foregoing, has effected any transaction in such equity securities during the
past 60 days.
Except as set forth in this Offer to Purchase, neither the Purchaser nor
Varlen nor, to the best of the knowledge of Varlen and the Purchaser, any of the
persons listed in Schedule A hereto, has any contract, arrangement,
understanding or relationship (whether or not legally enforceable) with any
other person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any of such securities, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against
loss, or the giving or withholding of proxies. Except as set forth in this Offer
to Purchase, there have been no contacts, negotiations or transactions which
have occurred since January 1, 1993, between Varlen, the Purchaser, or any of
Varlen's other subsidiaries or, to the best of the knowledge of Varlen and the
Purchaser, any of the persons listed in Schedule A hereto, on the one hand, and
the Company or its affiliates, on the other hand, concerning: a merger,
consolidation or acquisition; a tender offer or other acquisition of securities;
an election of directors; or a sale or other transfer of a material amount of
assets. Except as described in this Offer to Purchase, neither the Purchaser nor
Varlen nor, to the best of the knowledge of Varlen and the Purchaser, any of the
persons listed in Schedule A hereto, has since January 1, 1993 had any
transaction with the Company or any of its executive officers, directors or
affiliates which would require disclosure under the rules and regulations of the
Commission applicable to the Offer.
Except as set forth in this Offer to Purchase, during the last five years,
neither the Purchaser nor Varlen nor, to the best of the knowledge of Varlen and
the Purchaser, any of the persons listed on Schedule A (i) has been convicted in
a criminal proceeding (excluding traffic violations and similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, Federal or state securities laws or finding any violation
of such laws.
Until immediately prior to the time the Purchaser purchases the Shares
pursuant to the Offer, it is not anticipated that the Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer. Because the Purchaser is a newly formed corporation and has
minimal assets and capitalization, no meaningful financial information regarding
the Purchaser is available.
Varlen is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is obligated to file reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning Varlen's business, principal physical properties, capital structure,
material pending legal proceedings, operating results, financial condition,
directors and executive officers, their remuneration, stock options granted to
them, the principal holders of Varlen's securities and any material interest of
such persons in transactions with Varlen and other matters is required to be
disclosed in proxy statements and annual reports distributed to Varlen's
stockholders and filed with the Commission. Such reports, proxy statements and
other information may be examined, and copies
13
<PAGE>
may be obtained from the Commission in the same manner set forth in Section 8
with respect to information concerning the Company. Such information should also
be available for inspection at the offices of the NASDAQ Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
Set forth below is a summary of certain selected financial information of
Varlen and its subsidiaries for the fiscal years ended January 31, 1996, January
31, 1995 and January 31, 1994 and for the three-month periods ended May 4, 1996
and April 29, 1995, which has been excerpted or derived from the audited
consolidated financial statements contained in Varlen's Annual Report on Form
10-K for the fiscal years ended January 31, 1996 and January 31, 1995 and from
unaudited financial information contained in the Company's Quarterly Report on
Form 10-Q for the quarter ended May 4, 1996. More comprehensive financial
information is included in such reports and other documents filed by Varlen with
the Commission, and the following summary is qualified in its entirety by
reference to such document and all of the financial statements and related notes
contained therein.
VARLEN CORPORATION
SELECTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------ FISCAL YEAR ENDED JANUARY 31,
APRIL 29, -------------------------------------
MAY, 4 1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................................... $ 91,975 $ 106,969 $ 386,987 $ 341,521 $ 291,908
Cost of sales................................. 68,178 79,611 290,052 260,469 221,988
Selling, general and administrative
expenses..................................... 14,254 15,289 57,762 50,436 45,087
Interest expense, net......................... 1,053 1,173 4,467 4,762 6,110
Income before income taxes.................... 8,490 10,896 34,706 25,854 18,723
Net earnings.................................. 4,822 6,156 19,609 14,762 10,766
Earnings per share*:
Primary earnings per share.................. .79 1.01 3.19 2.44 1.80
Fully diluted earnings per share............ .60 .75 2.43 1.92 1.57
Average shares outstanding*:
Primary..................................... 6,095 6,101 6,141 6,064 5,986
Fully diluted............................... 9,159 9,166 9,199 9,136 8,062
BALANCE SHEET DATA:
Current assets................................ $ 112,008 $ 119,118 $ 111,514 $ 111,535 $ 84,575
Total assets.................................. 234,123 232,214 230,874 220,186 186,264
Current liabilities........................... 44,201 57,734 44,470 53,822 35,529
Long-term debt................................ 73,403 72,790 73,398 72,788 72,698
Shareholders' equity.......................... 101,399 86,766 97,953 79,031 63,644
</TABLE>
- ------------------------
*Amounts prior to May 4, 1996 have been restated for a 10% stock dividend
declared on May 29, 1996 and payable on July 15, 1996.
10. BACKGROUND OF THE OFFER. On December 11, 1995, at Varlen's request,
two senior officers of Varlen, Richard L. Wellek, President and Chief Executive
Officer, and Raymond A. Jean, Executive Vice President and Chief Operating
Officer, visited the Company's facilities in Petersburg, Virginia and met with
Needham B. Whitfield, Chairman of the Board of the Company and Chief Executive
Officer, J. Craig Rice, President and Chief Operating Officer, and Howard J.
Bush, Vice President -- Marketing. After a presentation by Mr. Bush of the
Company's markets and businesses, the Varlen executives were given a tour of the
manufacturing facilities, and afterwards a general discussion ensued. The Varlen
executives pointed to a variety of changes in the railroad markets domestically
and internationally, and proposed that a large supplier, with a wide variety of
products important to the
14
<PAGE>
rail industry, would be better positioned to deal with these changing
conditions. The Varlen executives asked the Company if they would be interested
in combining with Varlen to form such a supplier. The Company's executives
agreed to think about the proposition, and to have further discussions with
Varlen.
On January 25, 1996, Mr. Wellek, together with George W. Hoffman, Railroad
Group Vice President for Varlen, returned to Petersburg and resumed discussions
with Messrs. Whitfield, Rice, and Bush. A number of marketing synergies were
identified between the two companies, and both parties agreed to explore each
other's operations in greater depth.
On February 20, 1996, Messrs Whitfield, Rice and Bush visited Keystone
Industries, Inc. in Camp Hill, Pennsylvania. Keystone is a manufacturer of
railroad equipment components and a wholly owned subsidiary of Varlen. After a
tour of the facilities, further discussions about operations and railroad
markets were conducted with Messrs. Wellek and Hoffman.
On February 21, 1996, Messrs. Whitfield and Rice accompanied Mr. Wellek to
Vassar, Michigan to tour two automotive parts plants of a Varlen subsidiary and
meet local managers of these operations. Business philosophies, marketing
strategies, organizational culture and operating methods were discussed.
On March 11, 1996, Mr. Wellek visited Messrs. Whitfield and Rice at the
Company's administrative headquarters in Midlothian, Virginia to discuss whether
there was enough fit between the two companies to explore in earnest the
possibility of a business combination. The two companies agreed to continue
discussions.
On March 20, 1996, Messrs. Wellek and Jean met Mr. Rice and Keith Poe,
Executive Vice President of Quality Bearing Service ("QBS"), the Company's
wholly owned reconditioning subsidiary, in Little Rock, Arkansas to tour QBS's
newest reconditioning plant and discuss the reconditioning operations.
On March 21, 1996, Messrs. Wellek and Jean, who were in Louisville, Kentucky
for an annual truck show, made a brief tour of QBS's reconditioning plant in
Louisville.
On March 27, 1996, Varlen signed a confidentiality agreement with the
Company providing for the transfer of confidential information to Varlen about
the Company's operations and financial results, and holding Varlen subject to a
standstill provision in the event Varlen wished to use this information for
purposes of, among other things, making a public tender for the Company shares.
On April 3, 1996, Richard A. Nunemaker, Vice President, Finance and Chief
Financial Officer of Varlen, met with Jacob M. Feichtner, Executive Vice
President and Chief Financial Officer of the Company, Mr. Whitfield and others
to determine what financial and operating data was available to begin his
inquiries.
On April 10, 1996, Messrs. Wellek, Jean, Hoffman, Thomas A. Robinson, and
others visited the Company's facilities in Petersburg to conduct an engineering
review of the Company's new bearing developments and its development of a
one-way clutch for the automotive market. Mr. Rice and several of the Company's
engineers were involved in the discussions.
On April 11, 1996, Messrs. Wellek, Jean, Hoffman and Robinson met with
Messrs. Rice, Whitfield, and James W. Benz, President of Rail Link, a contract
switching subsidiary wholly owned by the Company. A variety of railroad industry
and international sales issues were discussed.
On April 15, 1996, Mr. Nunemaker and Stephen E. Obendorf, met with Mr.
Feichtner and others to further discuss and review financial and operating data
of the Company. On the same date, Vicki L. Casmere, Vice President, General
Counsel and Secretary of Varlen, met with the Company's counsel in Richmond and
later with Messrs. Feichtner and Whitfield in Midlothian to conduct a general
review of legal matters related to the Company's operations.
15
<PAGE>
On May 7, 1996, Mr. Wellek met with Messrs. Whitfield and Rice at the
Company's Midlothian headquarters to review the status of Varlen's inquiries and
to advise the Company's executives that Varlen wished to acquire the Company,
assuming the contract terms, timing and price were satisfactory to both parties.
There was a general discussion as to how this process might proceed and Mr.
Wellek indicated the possible price range of a Varlen offer.
On May 29, 1996, Messrs. Whitfield and Rice met with Messrs. Wellek, Jean,
Nunemaker, Robinson and Ms. Casmere at Varlen's headquarters in Naperville,
Illinois. Mr. Whitfield reported the Company Board's response to Varlen's
proposal and asked for definitive terms.
On May 31, 1996, Mr. Wellek called Mr. Whitfield and informed him that
Varlen wished to make a cash tender offer for the Shares and assuming the
Company would cooperate by entering into an acquisition agreement, Varlen would
submit a proposed draft of the agreement, which was done the following week. Mr.
Wellek indicated that the final price offered would depend on the terms of the
agreement.
On June 11, 1996, Mr. Wellek and Ms. Casmere of Varlen, together with
Varlen's outside counsel, met with Messrs. Whitfield and Rice of the Company and
its counsel and negotiated the basic terms subject to approval of both boards.
Negotiations continued over the period from June 11 to June 14 concerning
certain additional terms.
At the June 13, 1996 Varlen Board of Directors' meeting, the Board of
Directors was updated on the status of negotiations relating to the Offer and
the proposed terms of the relevant agreements. Mr. Bush of the Company was in
attendance at the beginning of the meeting, made a presentation on the Company's
railroad bearing markets and answered questions by the Varlen directors. The
Board of Directors then approved the Acquisition Agreement and the Shareholder
Tender Agreement.
The negotiations culminated in the execution of the Acquisition Agreement
and the Shareholder Tender Agreement on Saturday, June 15, 1996. On June 17,
1996, Varlen and the Company, in a joint press release, announced Varlen's
intention to commence the Offer.
11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE
ACQUISITION AGREEMENT AND SHAREHOLDER TENDER AGREEMENT.
PURPOSE OF THE OFFER AND THE MERGER
The purpose of the Offer is to facilitate the acquisition of all of the
outstanding Shares and thereby to enable the Purchaser to acquire control of,
and the entire equity interest in, the Company. The purpose of the Merger is to
acquire all outstanding Shares not tendered and purchased pursuant to the Offer
or acquired pursuant to the Shareholder Tender Agreement. The Offer is being
made pursuant to the Acquisition Agreement.
No dissenter's rights are available in connection with the Offer. Holders of
Shares may be entitled to dissenter's rights in connection with the Merger if,
at the record date with respect to the meeting at which the Acquisition
Agreement and the Merger will be acted upon, certain requirements are satisfied.
Section 13.1-730 of the Virginia Act (as effective from July 1, 1996)
provides that no dissenter's rights are available for the shares of any class or
series of shares which, at the record date fixed to determine the shareholders
entitled to receive notice of and to vote at the meeting of shareholders to act
upon the agreement or plan of merger, were either (i) listed on a national
securities exchange or on the National Association of Securities Dealers
Automated Quotation System or (ii) held of record by at least 2,000
shareholders, unless, among other things, in either case (i) the holders of such
class or series of shares are required by the terms of such agreement or plan to
accept for such shares anything except cash or (ii) the transaction to be voted
on is an "affiliated transaction" that has not been approved by a majority of
"disinterested directors." See Section 15.
If the conditions of Section 13.1-730 of the Virginia Act are not met and if
the Merger or a similar business combination is consummated, the holders of
Shares not purchased pursuant to the Offer
16
<PAGE>
would have certain rights to dissent and demand to be paid the "fair value" of
their Shares under the Virginia Act. Under the Virginia Act, dissenting
shareholders who comply with applicable statutory procedures would be entitled
to payment of the "fair value" of the Shares as to which dissenter's rights are
properly claimed as of the time immediately before the effectuation of the
Merger (excluding any appreciation or depreciation in anticipation of the
Merger, unless such exclusion would be inequitable). In the first instance, the
"fair value" estimation is made by the corporation. Dissatisfied dissenters may
then notify the corporation of their own "fair value" estimation. If the
corporation and the dissatisfied shareholder cannot settle on the amount owed,
the shareholder will ultimately be entitled to a judicial determination of "fair
value." Any such judicial determination of the "fair value" of the Shares could
be based upon considerations other than or in addition to the price paid in the
Offer and the market value of the Shares, including asset values, the investment
value of the Shares and any other valuation considerations generally accepted in
the investment community. The "fair value" of the Shares so determined could be
more or less than the price per Share to be paid pursuant to the Offer and the
Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE COMPLETE. THE EXERCISE AND PRESERVATION OF DISSENTER'S RIGHTS
REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE VIRGINIA ACT.
There can be no assurance that the Merger will be consummated, inasmuch as
the Merger is subject to various conditions, some of which are beyond the
control of Varlen, the Purchaser and the Company. See Section 13. In the event
that, for any reason, the Merger does not occur, depending on the results of the
Offer, Varlen and the Purchaser intend to consider the desirability of acquiring
either additional Shares or the entire remaining equity interest in the Company.
If Varlen and/or the Purchaser determine to do either, any such future
transaction or transactions might be by means of a merger, share exchange,
reverse stock split, open market or privately-negotiated purchases, one or more
additional tender offers, exchange offers or otherwise. Such transactions might
involve the exchange of Shares for cash, securities of the Company, Varlen, the
Purchaser or a subsidiary of any of the foregoing, or some combination of cash
and securities, and may be on terms and at prices more or less favorable than
those of the Offer. Moreover, the decision to enter into such future
transactions and the forms they might take will depend on the circumstances then
existing, including the financial resources of Varlen and the Purchaser and
Varlen's business, tax and accounting objectives, performance of the Shares in
the market, availability and alternative uses of funds, money market and stock
market conditions, general economic conditions, and other factors. Varlen and/or
the Purchaser may enter into one or more such transactions whether or not the
Purchaser purchases Shares pursuant to the Offer. Varlen and/or the Purchaser
may also engage in certain of such transactions during the period following
expiration of the Offer and prior to the Merger.
PLANS FOR THE COMPANY
As described in this Offer to Purchase, Varlen and the Purchaser have made
proposals which would, if completed, result in a merger of the Company, changes
in its board of directors, the termination of quotations for the Company's stock
on NASDAQ and the termination of the registration of the Company's stock under
the Exchange Act. At present Varlen and the Purchaser do not have any plans for
any material sale of the Company's assets, changes in capitalization or dividend
policy, or other changes in the Company's corporate structure or business. After
consummation of the Merger, Varlen will continue to review the business and
operations of the Company and, based on such review, may effect the acquisition
or disposition of assets or other changes in the Company's business, corporate
structure, capitalization, management or dividend policy which it considers
appropriate or desirable. Varlen has not yet determined what specific actions,
if any, it may take with respect to the Company.
THE ACQUISITION AGREEMENT
THE OFFER AND MERGER. The Acquisition Agreement provides for the public
announcement of the Offer within one business day after the execution thereof
and for the commencement of the Offer as
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promptly as practicable, but in no event later than five business days, after
such public announcement. The obligation and right of Purchaser to accept for
payment and pay for any Shares tendered pursuant to the Offer is subject to
satisfaction of the Minimum Condition, the expiration or termination of all
waiting periods under the HSR Act and the other conditions described in Section
13. The Purchaser expressly reserves the right to waive any such condition, to
increase the price per Share payable in the Offer and to make any other changes
in the terms and conditions of the Offer; provided that the Purchaser has agreed
that it will not (i) decrease the price payable in the Offer, (ii) change the
form of consideration payable in the Offer or the Merger, (iii) increase the
Minimum Condition, or (iv) amend any other term of the Offer (including the
conditions described in Section 13) in a manner materially adverse to the
holders of Shares.
The Acquisition Agreement provides that, as soon as practicable following
consummation of the Offer and the satisfaction or waiver of certain conditions,
the Purchaser will be merged into the Company, with the Company surviving the
Merger. Pursuant to the Merger, each outstanding Share (other than Shares held
by Varlen, the Purchaser, the Company or any direct or indirect subsidiary of
Varlen, the Purchaser or the Company, and Shares with respect to which
dissenter's rights under the Virginia Act are properly exercised) will be
converted into the right to receive $16.125 in cash, without any interest.
Following the Merger, the Company will be a wholly owned subsidiary of Varlen.
The Merger is subject to the satisfaction of various conditions, including
approval by the Company's shareholders if required under the Virginia Act.
In the Acquisition Agreement the Company has represented and warranted that
its Board of Directors has approved the Offer and the Merger and recommended
acceptance of the Offer by holders of Shares and approval of the Merger (if such
approval is required by the Virginia Act) by holders of Shares. The Company has
further represented and warranted that its Board of Directors (all of whom, the
Company's counsel has opined to Varlen, are "disinterested directors" within the
meaning of the Virginia Act with respect to Varlen and the Purchaser) has taken
certain actions in order to exempt Varlen, the Purchaser, their respective
direct and indirect subsidiaries and the Offer, the Merger and the other
transactions contemplated by the Acquisition Agreement from the restrictions and
other provisions of: (A) Article 14 (AFFILIATED TRANSACTIONS) of the Virginia
Act, in the manner provided by Section 13.1-727.B.1(iv) which (absent such an
exemption or similar board action) generally prohibits mergers,
recapitalizations, share exchanges, asset sales and other transactions between
certain Virginia corporations and holders of 10% or more of their voting
securities ("interested shareholders") unless approved by a majority of
"disinterested directors" and/or holders of two-thirds of the corporation's
shares excluding those of the interested shareholder; (B) Article 14.1 (CONTROL
SHARE ACQUISITIONS) of the Virginia Act, which (absent such an exemption or
similar board action) generally denies voting rights to certain acquirers of 20%
of more of the outstanding voting power of a public Virginia corporation
("acquiring persons") unless granted by a majority of the shares entitled to
vote in the election of directors of the corporation other than those held by
acquiring persons and certain corporate insiders; and (C) Article I of the
Articles of Incorporation, as amended of the Company (the "Charter"), which
(absent such an exemption or similar board action) generally requires the
affirmative vote of holders of 75% of the Shares in order to approve a merger,
consolidation and certain other business combinations between the Company and a
beneficial owner of 10% or more of its Shares. The Company and its Board of
Directors have agreed to take such other actions necessary or appropriate at the
request of Varlen or the Purchaser to: (1) exempt Varlen, the Purchaser, their
respective direct and indirect subsidiaries, the Offer, the Merger and the other
transactions contemplated by the Acquisition Agreement from the provisions of
any takeover, affiliated transactions, business combination, control share
acquisition or other provision of (i) law or regulation of the Commonwealth of
Virginia or any department or agency thereof or (ii) the Charter or Bylaws of
the Company, and (2) maintain the shareholder vote required to approve the
Merger at the two-thirds level.
COVENANTS OF THE COMPANY. Under the Acquisition Agreement, the Company has
agreed that unless Varlen or the Purchaser otherwise agree in writing, prior to
the Effective Time or such earlier time as designees of the Purchaser constitute
a majority of the Board of Directors of the Company:
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(i) the business of the Company and its subsidiaries shall be conducted
in the ordinary course of business and consistent with past practice, and
the Company shall use its reasonable best efforts to maintain and preserve
its and its subsidiaries' business organization, assets, employees and
advantageous business relationships;
(ii) neither the Company nor any of its subsidiaries shall: (1) amend or
propose to amend its articles of incorporation or bylaws; (2) split, combine
or reclassify any shares of its capital stock or declare, set aside or pay
any dividend payable in cash, stock or property with respect to its capital
stock except for regular quarterly cash dividends not in excess of $.07 per
Share on the Shares and except for any dividend by a wholly owned subsidiary
payable to the Company or another wholly owned subsidiary; (3) issue, sell,
pledge, dispose of or encumber any additional shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any capital stock of
any class of the Company or any of its subsidiaries other than Shares which
the Company is required to issue pursuant to the options outstanding on June
14, 1996; (4) transfer, lease, license, sell, mortgage, pledge, dispose of
or encumber any material assets of the Company or any of its subsidiaries
other than in the ordinary course of business and consistent with past
practice; (5) redeem, purchase or otherwise acquire directly or indirectly
any of the capital stock or other equity securities of the Company; (6)
adopt a plan of liquidation or resolutions providing for the liquidation,
dissolution, merger, consolidation or other reorganization of the Company or
any of its subsidiaries, except for mergers among wholly owned subsidiaries;
(7) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof
or make any investment with respect thereto; (8) directly or indirectly: (i)
incur or modify any long-term indebtedness or short-term indebtedness for
money borrowed or other material liability other than in the ordinary course
of business and consistent with past practice, (ii) incur any additional
indebtedness for money borrowed other than in the ordinary course of
business and consistent with past practice, or (iii) make any loans or
advances other than in the ordinary course of business and consistent with
past practice and intercompany loans and advances among the Company and its
wholly owned subsidiaries; (9) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent or otherwise),
other than the payment, discharge or satisfaction of liabilities in the
ordinary course of business and consistent with past practice; (10) waive,
release, grant or transfer any rights of value or modify or change in any
material respect any existing license, lease, contract or other document,
other than in the ordinary course of business and consistent with past
practice; or (11) enter into any material commitment or transaction, other
than in the ordinary course of business and consistent with past practice;
(iii) neither the Company nor any of its subsidiaries shall: (1) grant
any increase in the compensation payable or to become payable by the Company
or any of its subsidiaries to any of its directors, executive officers or
key employees or adopt any new, or amend or otherwise increase the amounts
payable or to become payable under, any existing, bonus, incentive
compensation, severance, deferred compensation, profit sharing, stock
option, stock purchase, insurance, pension, retirement or other employee
benefit plan (including (but not limited to) the granting of stock options,
stock appreciation rights or restricted stock), or (2) enter into or amend
any employment or change-in-control agreement with, or, except in accordance
with the existing written policies and agreements of the Company, grant any
severance or termination pay to, any director, officer or employee of the
Company or any of its subsidiaries; and
(iv) neither the Company nor any of its subsidiaries shall agree, in
writing or otherwise, to take any of the foregoing actions or any action
which would make any representation or warranty of the Company in the
Acquisition Agreement untrue or incorrect in any material respect.
NON-SOLICITATION. The Acquisition Agreement further provides that neither
the Company nor any of its subsidiaries, nor any of their respective directors,
officers, employees, investment bankers, representatives or agents shall,
directly or indirectly, make, solicit, initiate or encourage the initiation of,
any inquiries or proposals from, or provide any confidential information or
participate in any discussions or negotiations with, or otherwise cooperate in
any way with or assist, any person (other than Varlen and its subsidiaries,
those third parties previously disclosed in writing by the Company to
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Varlen prior to the execution of the Acquisition Agreement ("Previously
Disclosed") and their respective directors, officers, employees, investment
bankers, commercial banks, representatives and agents) concerning any merger,
consolidation, other business combination, recapitalization, liquidation or
dissolution or any purchase or other acquisition or sale or other disposition of
assets (other than in the ordinary course of business) or shares of capital
stock of the Company or any of its subsidiaries or any similar transaction
involving the Company or (except as Previously Disclosed) any subsidiary or
division of the Company or any subsidiary; PROVIDED, HOWEVER, that (i) the
Company or its Board of Directors shall not be prohibited from taking and
disclosing to the Company's shareholders a position contemplated by Rule 14d-9
or Rule 14e-2 promulgated under the Exchange Act, and (ii) in the event that the
Company shall receive an unsolicited proposal from a third party which the
Company's Board of Directors determines, based on the advice of its legal
counsel and independent financial advisor, is capable of consummating such
transaction, for the acquisition for cash of all the outstanding Shares on terms
that the Company's Board of Directors determines, based on the advice of its
financial advisor (the receipt of which advice shall be confirmed in writing to
Varlen by the Company), are economically superior to those of the Offer and the
Merger and which in the written opinion of legal counsel to the Company (the
delivery of which shall be confirmed in writing to Varlen by such counsel) a
failure to consider by the Board of Directors of the Company would create a
substantial risk of violating their fiduciary duties to shareholders, the
Company may provide information to such third party to the same extent that such
information has been provided to the Purchaser and Varlen. The Company must
promptly advise Varlen of, and communicate to Varlen the terms of, any such
inquiry or proposal the Company may receive.
CONFIDENTIALITY AND STANDSTILL AGREEMENTS. Under the Acquisition Agreement,
the Company has agreed to use its reasonable best efforts to obtain confidential
information, non-disclosure, non-use and standstill agreements from any third
party with or for whom the Company or any subsidiary has taken any action or
received any proposal not prohibited under the non-solicitation provisions of
the Acquisition Agreement. The Company also agreed not to consent to the
termination or amendment of the confidential information, non-disclosure or
non-use provisions of any agreement with a third party without the prior written
consent of Varlen or the Purchaser, and to use its reasonable best efforts to
take all actions necessary or proper to enforce strict compliance with such
provisions.
STOCK INCENTIVE PLANS. Under the Acquisition Agreement, the Company is
required to adjust the terms of all outstanding employee stock options to
purchase Shares granted under any stock option plan of the Company and all
restricted Shares granted under any restricted stock plan to cancel such options
and restricted Shares. Not later than immediately prior to the Merger, each such
option and restricted Share shall become fully exercisable or unrestricted, as
the case may be, and vested. The Company has agreed to use its reasonable best
efforts to cancel each option outstanding not later than immediately prior to
the Merger in exchange for a cash payment equal to the product of (i) the total
number of Shares subject to the option and (ii) the excess, if any, of $16.125
(or any such higher price per Share as may be paid in the Offer) over the
exercise price per Share subject to such option. The Company has also agreed to
use its reasonable best efforts to cancel each restricted Share outstanding not
later than immediately prior to the Merger in exchange for $16.125. In addition,
the Board of Directors has agreed to take appropriate action with respect to the
Company's Employee Stock Savings Plan (the "Savings Plan") to provide that: (i)
until the earlier to occur of the Effective Time or any termination of the
Acquisition Agreement, participants in the Savings Plan will not be eligible to
receive matching Shares on any Shares purchased by such participants after the
date the Acquisition Agreement, and (ii) any rights of participants in the
Savings Plan to receive matching Shares from the Company as of the date of the
Acquisition Agreement accrued as a result of Shares purchased prior to the date
of the Acquisition Agreement shall be cancelled in exchange for a payment, not
later than immediately prior to the Effective Time, from the Company (subject to
any applicable withholding taxes) in cash equal to the product of (x) the total
number of such accrued matching Shares and (y) $16.125. Under the Acquisition
Agreement, any other plan providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any subsidiary shall
terminate as of the consummation of the Merger.
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DESIGNATION OF DIRECTORS. The Acquisition Agreement provides that, promptly
upon the acceptance for payment of and payment by the Purchaser in accordance
with the Offer for Shares constituting 50% or more of all Shares then
outstanding in accordance with the Offer, and from time to time thereafter, the
Purchaser will be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as will give the
Purchaser representation on the Board of Directors equal to at least that number
of directors which equals the product of the total number of directors on the
Board of Directors multiplied by the percentage that such number of Shares so
accepted for payment and paid for or owned by Varlen or the Purchaser bears to
the total number of Shares outstanding; PROVIDED, HOWEVER, that the Purchaser
shall have the right (in its discretion) to designate a number of directors less
than such product; AND PROVIDED FURTHER, HOWEVER, that at all times prior to the
Merger there shall be at least two members of the Board of Directors of the
Company selected by current members of such Board. Subject to the preceding
sentence, upon the Purchaser's purchase of the Shares pursuant to the Offer, the
Purchaser will have sufficient voting power to remove the entire Board of
Directors of the Company and replace it with the Purchaser's nominees. In the
Acquisition Agreement, the Company has agreed to take all action necessary to
cause the Purchaser's designees to be elected to the Company's Board of
Directors (including mailing to the shareholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder) and to
use its reasonable best efforts to cause the resignation of such directors, and/
or an increase in the number of its directors, as may be directed by Varlen and
required to implement the foregoing.
CONFIDENTIALITY. Under the Acquisition Agreement, Varlen and the Purchaser
have agreed to, and to cause their officers, employees, agents and
representatives to, keep confidential, unless compelled to disclose by judicial
or administrative process or by other requirements of law, all non-public,
confidential or proprietary information provided by the Company (except to the
extent that such information can be shown to have been (i) previously known by
Varlen or the Purchaser, (ii) in the public domain through no fault of Varlen or
the Purchaser, or (iii) later lawfully acquired by Varlen from other sources)
and will not release or disclose such information to any other person.
INDEMNIFICATION AND INSURANCE. The Acquisition Agreement provides that the
Charter or Bylaws of the Company, after the Merger (the "Surviving Corporation")
shall contain provisions no less favorable with respect to indemnification than
those that are set forth in the Company's Charter and Bylaws, as amended to the
date the Acquisition Agreement, which provisions may not be amended, repealed or
otherwise modified for a period of five years after the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Effective Time were directors, officers, employees or agents of
the Company (the "Indemnified Parties"). Varlen shall cause the Surviving
Corporation to fulfill such indemnification obligations. Varlen also agreed to
use its reasonable best efforts to cause to be maintained in effect for three
years from the Effective Time the current policy (or successor policies) of the
directors' and officers' liability insurance maintained by the Company with
respect to matters occurring prior to the Effective Time, to the extent
available; PROVIDED, HOWEVER, that Varlen is not required to expend more than an
amount per year equal to 150% of current annual premiums paid by the Company to
maintain or procure insurance coverage pursuant hereto.
REPRESENTATIONS AND WARRANTIES. The Acquisition Agreement contains various
customary representations and warranties of the parties thereto, including
representations by Varlen and the Purchaser as to their organization and
qualification, authority relative to the Acquisition Agreement, compliance,
financing, and brokers and finders, and by the Company as to its organization
and qualification, capitalization, capitalization of its subsidiaries, authority
relative to the Acquisition Agreement, lack of conflicts, filing of reports and
financial statements, litigation, employee benefit plans, taxes, absence of
certain changes, brokers and finders, liabilities, contracts, board actions, and
cash and cash equivalents.
TERMINATION. The Acquisition Agreement may be terminated at any time prior
to the Effective Time, whether prior to or after approval by the shareholders of
the Company:
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(A) by mutual written consent of the Boards of Directors of Varlen and
the Company;
(B) by either the Company or Varlen if any court of competent
jurisdiction or other governmental body shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable best efforts to lift),
in each case, permanently restraining, enjoining or otherwise prohibiting
the Offer or the Merger and such order, decree, ruling or other action shall
have become final and non-appealable;
(C) by the Company, if the Offer shall have been terminated, or the
Offer shall have expired, without the purchase of any Shares thereunder
within two business days thereof and such non-purchase shall not have been
due to a failure to satisfy any of the conditions of the Offer described in
Section 13 of this Offer to Purchase; PROVIDED that the Company may not
terminate the Acquisition Agreement if the Company is in breach of such
agreement;
(D) by the Company, if the Effective Time shall not have occurred on or
before December 31, 1996 due to a failure of any of the conditions to the
obligations of the Company to effect the Merger as described in the
Acquisition Agreement; PROVIDED that the Company may not terminate the
Agreement if the Company's failure to fulfill any obligation under the
Acquisition Agreement has been the cause of, or resulted in, in whole or in
part, the failure of the Effective Time to occur on or before such date;
(E) by the Company, if: (1) any corporation, partnership, person, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act) other
than Varlen or the Purchaser or any of their respective subsidiaries or
affiliates (a "Qualified Person") shall have commenced (within the meaning
of Rule 14d-2 under the Exchange Act) a cash tender offer for any and all
Shares at a price at or in excess of $16.125 per Share, or (2) any Qualified
Person shall have made a bona fide written proposal involving a merger or
consolidation of the Company or the acquisition of all the Shares or all or
a substantial portion of its assets which would result in a cash
distribution to shareholders of the Company in excess of $16.125 per Share
(any such proposal described in subclause (1) or (2) being referred to as a
"Qualified Proposal"), and the Board of Directors of the Company shall have
been advised in a writing by its legal counsel (the delivery of which advice
shall have been confirmed in writing to Varlen by such counsel) that there
would be a substantial risk of liability for breach of their fiduciary
obligations to shareholders if they failed to recommend such offer or accept
such Qualified Proposal; PROVIDED, HOWEVER, that the Company may not
terminate the Acquisition Agreement: (i) until the expiration of five
business days after notice of such Qualified Proposal has been delivered to
Varlen, or (ii) unless otherwise consented to in writing by Varlen, if any
such offer or Qualified Proposal is made in breach of, or as a result of a
breach of its non-solicitation obligation described herein;
(F) by either of Varlen or the Purchaser, if due to a failure to satisfy
any of the conditions of the Offer described in Section 13 of this Offer to
Purchase: (i) Varlen or any of its subsidiaries or affiliates shall not have
commenced the Offer, or shall have terminated the Offer, or (ii) the Offer
shall have expired without the purchase of any Shares thereunder within two
business days thereof, or (iii) Varlen shall have determined not to proceed
with the Merger; PROVIDED that neither Varlen nor the Purchaser may
terminate the Acquisition Agreement if either Varlen or the Purchaser is in
material breach of such agreement;
(G) by either of Varlen or the Purchaser, if the Effective Time shall
not have occurred on or before December 31, 1996 due to a failure of any of
the conditions to the obligations of Varlen and the Purchaser to effect the
Merger described in the Acquisition Agreement; PROVIDED that neither Varlen
nor the Purchaser may terminate the Acquisition Agreement if Varlen's or the
Purchaser's failure to fulfill any material obligation under the Acquisition
Agreement has been the cause of, or resulted in, in whole or in part, the
failure of the Effective Time to occur on or before such date; or
(H) by either of Varlen or the Purchaser, if prior to the purchase of
Shares in the Offer, the Board of Directors of the Company shall have: (1)
withdrawn, or modified in a manner adverse to
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Varlen or the Purchaser, its approval or recommendation of the Offer or the
Merger or any of its other actions taken in accordance with the provisions
of the Acquisition Agreement summarized in the third paragraph of "The
Acquisition Agreement -- The Offer and Merger" hereinabove, (2) taken any of
the actions referred to in the third paragraph of "The Acquisition Agreement
-- The Offer and Merger" hereinabove for the benefit of any person (other
than Varlen, the Purchaser or any of their respective subsidiaries) or any
transaction (other than the Offer and Merger), or (3) resolved to do any of
the foregoing.
TERMINATION FEE. If the Acquisition Agreement is terminated by the Company
pursuant to the provision described in clause (E) of "The Acquisition Agreement
- -- Termination" above or if the Acquisition Agreement and/or the Offer is
terminated by Varlen or the Purchaser by reason of a failure of any condition to
the Offer described in (i) paragraphs (a), (b) or (g) of Section 13 of this
Offer to Purchase, (ii) paragraph (c) of Section 13 of this Offer to Purchase
(but only if due, in whole or in part, to any (x) act of the Company or any
affiliate thereof, or (y) other occurrence, event, fact or circumstance not
beyond the control of the Company or any affiliate thereof), or (iii) clause
(vi) of paragraph (c) of Section 13 of this Offer to Purchase, the Company has
agreed to pay to Varlen a termination fee of $6,500,000 plus an amount
sufficient to reimburse Varlen and its subsidiaries for all fees, costs and
expenses relating to the transactions contemplated by the Acquisition Agreement,
the financing contemplated by the Acquisition Agreement and the transactions
contemplated thereby (PROVIDED that the Company shall not be obligated to
reimburse Varlen or its subsidiaries for more than $2,000,000 of such fees,
costs and expenses).
In the event of the termination of the Acquisition Agreement, it will become
null and void and have no effect without any liability on the part of any party,
except that provisions relating to the termination fee, expenses of the parties
and confidentiality of information will survive any such termination and
provided that a party will not be relieved from liability for any breach of the
Acquisition Agreement.
COSTS AND EXPENSES. The Acquisition Agreement provides that except as
provided above under "Termination Fee," all costs and expenses incurred in
connection with the transactions contemplated by the Acquisition Agreement shall
be paid by the party incurring such costs and expenses.
SHAREHOLDER TENDER AGREEMENT
TENDER OF TENDERING SHAREHOLDER SHARES. Varlen and the Tendering
Shareholders have entered into the Shareholder Tender Agreement, which provides
that each Tendering Shareholder will tender its Shares pursuant to the Offer
before the Expiration Date and will not withdraw any Shares so tendered without
Varlen's prior written consent; PROVIDED, HOWEVER, that each Tendering
Shareholder may: (i) refrain from so tendering its Shares, and may withdraw any
Shares previously so tendered, if and for so long as there shall have been
commenced and not terminated a cash tender offer by any person or "group" (other
than Varlen or the Purchaser or any of their respective subsidiaries or
affiliates) for any and all Shares at a price in excess of $16.125 per share (a
"Superior Offer"); and (ii) tender its Shares pursuant to such Superior Offer;
AND PROVIDED FURTHER, HOWEVER, that in the event that (x) any such Superior
Offer shall have expired or been terminated without purchase of such Tendering
Shareholder's Shares, and (y) the Offer shall then be in effect, then such
Tendering Shareholder shall again be subject to the foregoing provisions.
Notwithstanding the foregoing, the Shareholder Tender Agreement permits up
to 50,000 of the Tendering Shareholders' Shares (in the aggregate) to be
contributed to one or more charitable organizations and, if and to the extent so
contributed, such Shares will not be required to be tendered pursuant to the
Offer.
OTHER AGREEMENTS. During the term of the Shareholder Tender Agreement, and
except as otherwise provided therein or with the prior written consent of
Varlen, each Tendering Shareholder may not (i) sell, pledge or otherwise dispose
of any of its Shares, (ii) deposit its Shares into a voting trust or enter into
a voting agreement or arrangement with respect to such Shares, (iii) grant any
proxy,
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power-of-attorney or other authorization in or with respect to such Shares, or
(iv) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect sale, assignment, transfer or other
disposition of such Shares.
The Shareholder Tender Agreement requires each Tendering Shareholder to
abide by the terms of the non-solicitation provisions of the Acquisition
Agreement summarized in "The Acquisition Agreement -- Non-Solicitation" section
set forth above in this Section 11.
TERMINATION. The Shareholder Tender Agreement will terminate upon the
earlier to occur of: (i) the termination of the Acquisition Agreement (if any),
and (ii) the Effective Date.
GENERAL. The preceding descriptions of the terms and provisions of the
Acquisition Agreement and the Shareholder Tender Agreement are qualified in
their entirety by reference to the texts of such agreements, which are exhibits
to the Tender Offer Statement on Schedule 14D-1 filed by the Purchaser and
Varlen with the Commission and is available for inspection and copying at the
principal office of the Commission in the manner set forth in Section 9.
12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all presently outstanding Shares pursuant to the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$165 million. Such funds will be obtained by the Purchaser or provided by Varlen
or one or more of its subsidiaries to the Purchaser from available cash on hand
and pursuant to a $190 million credit facility (the "Credit Facility") to be
provided by The First National Bank of Chicago (the "Agent Bank") and other
banks and financial institutions who may become party thereto (collectively with
the Agent Bank, the "Banks"), the identity of which has not yet been determined.
The Credit Facility will be comprised of a term loan commitment (the "Facility A
Commitment") in the aggregate principal amount of approximately $135 million to
be provided to the Purchaser, and a revolving credit/letter of credit facility
(the "Facility B Commitment") in the aggregate principal amount of approximately
$55 million to be provided to Varlen, the Purchaser and/or any other wholly
owned subsidiary of Varlen who may satisfy the conditions to becoming a
"Borrowing Subsidiary" under the applicable credit agreement (Varlen, the
Purchaser and each such other subsidiary, in such capacity, the "Borrowers").
The Facility A Commitment and the revolving credit portion of the Facility B
Commitment will bear interest, at the Borrower's option from time to time, at a
rate equal to either the "Alternate Base Rate," the "Eurocurrency Rate" or the
"Fixed CD Rate," in each case plus a spread based on Varlen's Leverage Ratio."
The "Alternate Base Rate" for any day will mean the greater of (i) the rate of
interest announced by the Agent Bank as its "Corporate Base Rate" for such day
or (ii) the "Federal Funds Effective Rate" in effect on such day plus .50% per
annum, changing as and when such Corporate Base Rate or Federal Funds Effective
Rate changes. "Eurocurrency Rate" generally will mean the rate for dollar
deposits appearing on Telerate Page 3750, as adjusted for maximum statutory
reserves. The "Fixed CD Rate" generally will mean the rate determined by the
Agent Bank based on the average of the prevailing bid rates on the borrowing
date for the purchase of certificates of deposit of the Agent Bank, adjusted for
maximum Federal Reserve Board reserve requirements and the Federal Deposit
Insurance Corporation assessment rate. The Credit Facility will provide for
customary provisions relating to yield protection, availability and capital
adequacy.
The Credit Facility will provide for the payment by Varlen of certain fees
including a (i) commitment fee at a rate ranging from .175% to .375% per annum
based on the average daily unused portion of the Facility A Commitment and the
Facility B Commitment and (ii) certain letter of credit fees ranging from .50%
to 1.25% per annum based on the undrawn stated amount of each letter of credit,
a letter of credit fronting fee of 0.15% of the face amount of each standby
letter of credit and customary fees in connection with commercial letters of
credit and performance letters of credit.
The Credit Facility will have customary conditions to borrowing,
representations and warranties, covenants and events of default. Without
limiting the generality of the foregoing, the Lenders obligation to fund shall
be conditioned upon the satisfaction of the Minimum Condition.
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Each of Varlen and its domestic subsidiaries (including the Purchaser and,
upon consummation of the Offer or the Merger, the Company) will unconditionally
guarantee the indebtedness, obligations and liabilities of the Borrowers under
the Credit Facility.
The commitment of the Banks under the Credit Facility will expire on the
sixth anniversary of the date of the closing of the Credit Facility, subject to
certain extension provisions. It is anticipated that borrowings under the Credit
Facility will be repaid from funds generated internally by Varlen and its
subsidiaries (including the Company) and from other sources, which may include
other bank financings.
THE OFFER IS NOT SUBJECT TO A FINANCING CONDITION.
13. CERTAIN CONDITIONS OF THE OFFER AND THE MERGER. Notwithstanding any
other provision of the Acquisition Agreement or the Offer, and except as
expressly limited below, the Purchaser: shall not be required to commence or
continue the Offer; or accept for payment, purchase or pay for any Shares
tendered; may postpone the acceptance for payment, the purchase of, and/or
payment for, Shares; and/ or may amend (subject to the restrictions contained in
the Acquisition Agreement, which for purposes of this section of the Offer to
Purchase includes the same as it may be modified, amended, supplemented and/or
restated from time to time) or terminate the Offer; if: (1) there shall not have
been validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which, together with the Shares beneficially owned by the
Purchaser and Varlen, represents two-thirds of the total voting power of all
shares of capital stock of the Company outstanding on a fully-diluted basis, or
(2) any waiting period under the HSR Act applicable to the purchase of the
Shares pursuant to the Offer shall not have expired or been terminated, or (3)
at any time on or after June 1, 1996 and prior to the time of payment for any
such Shares (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer), any of the following events (each an
"Event") shall have occurred (each of paragraphs (a) through (h) providing a
separate and independent condition to the Purchaser's obligations pursuant to
the Offer):
(a) the Company shall have authorized, recommended or proposed, or shall
have announced an intention to authorize, recommend or propose, or
shall have entered into an agreement or agreement in principle with respect
to, any merger, consolidation, other business combination, recapitalization,
liquidation or dissolution, or any purchase or other acquisition or sale or
other disposition of assets (other than in the ordinary course of business)
or shares of capital stock of the Company or any of its subsidiaries, or any
similar transaction involving the Company or any subsidiary or division of
the Company or any subsidiary (other than the Merger and as Previously
Disclosed with respect to certain subsidiaries) (the foregoing being
collectively referred to as a "Business Combination"), or any material
change in its capitalization, or any release or relinquishment of any
material contract or other rights not in the ordinary course of business; or
(b) (i) the Board of Directors of the Company shall have (x) modified or
amended in any respect its recommendation of the Offer, the Merger or
any of its other actions taken in accordance with the provisions of the
Acquisition Agreement summarized in the third paragraph of "The Acquisition
Agreement -- The Offer and Merger" in Section 11 of this Offer to Purchase,
or (y) adopted any resolution to do so, or (ii) the opinion of Virginia
counsel to the Company received by the Company pursuant to the Acquisition
Agreement (which opinion relates to the actions of the Board of Directors of
the Company described in the foregoing clause (i)) shall have been
disclaimed, disavowed, retracted or revoked in any respect, or shall
otherwise have been rendered inaccurate or erroneous, or (iii) the Board of
Directors of the Company shall have (x) taken any of the actions taken in
accordance with the provisions of the Acquisition Agreement summarized in
the third paragraph of "The Acquisition Agreement -- The Offer and Merger"
in Section 11 of this Offer to Purchase for the benefit of any person,
entity or group (as defined in Section 13(d)(3) of the Exchange Act) (other
than Varlen, the Purchaser or any of their respective subsidiaries) or any
Business Combination (other than the Offer and the Merger), or (y) adopted
any resolution to do so; or
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(c) it shall have been publicly disclosed, or Varlen, the Purchaser or
the Company shall have learned that: (i) any person, entity
(including the Company or any of its subsidiaries or affiliates) or group
(as defined in Section 13(d)(3) of the Exchange Act) (a "Person") shall have
(x) acquired or become the beneficial owner of more than 10% of the
outstanding Shares (other than the Tendering Shareholders), or (y) been
granted by the Company any warrant, option or right, conditional or
otherwise, to acquire beneficial ownership of more than 10% of the
outstanding Shares, other than acquisitions by a Person who has publicly
disclosed such ownership in a Schedule 13D or 13G (or amendment thereto) on
file with the Commission prior to June 1, 1996, and other than for bona fide
arbitrage purposes, or (ii) any such Person (other than, in the case of the
following clause (x), a Tendering Shareholder) who has publicly disclosed in
such a Schedule 13D or 13G any such ownership of more than 10% of the
outstanding Shares prior to such date shall have (x) acquired or become the
beneficial owner of, or proposed to acquire or become the beneficial owner
of, additional Shares, or (y) been granted by the Company any warrant,
option or right, conditional or otherwise, to acquire any Shares, or (iii)
any new group shall have been formed which beneficially owns more than 10%
of the Shares, or (iv) any Person shall have commenced, or publicly proposed
to commence, a tender offer for outstanding Shares, or publicly proposed any
Business Combination, or (v) any Person shall have commenced any
solicitation of proxies with respect to the Shares in opposition to the
Merger, or (vi) any Person shall have acquired or become the beneficial
owner of more than 50% of the outstanding Shares; or
(d) there shall be pending any action or proceeding before any court,
government, governmental authority or agency: (i) challenging or
seeking to make illegal, or to delay or otherwise directly or indirectly to
restrain or prohibit the making of the Offer, the acceptance for payment of,
payment for, or the purchase of, some or all of the Shares by Varlen, the
Purchaser or any other subsidiary or affiliate of Varlen or the consummation
of the Merger, or seeking to obtain material damages in connection with the
Offer or the Merger, or (ii) seeking to prohibit ownership or operation by
Varlen, the Purchaser or any other subsidiary or affiliate of Varlen of all
or a material portion of the business or assets of Varlen, the Company or
any of their respective subsidiaries or affiliates or to compel Varlen, the
Purchaser or any other subsidiary or affiilate of Varlen to dispose of or to
hold separately all or a material portion of the business or assets of
Varlen, the Company or any of their respective subsidiaries or affiliates,
as a result of the Offer or the Merger, or (iii) seeking to impose or
confirm limitations on the ability of Varlen, the Purchaser, or any other
subsidiary or affiliate of Varlen effectively to exercise full rights of
ownership and control of any Shares (or any shares of capital stock of any
subsidiary of the Company) (including, without limitation, the right to vote
any such Shares (or shares of a subsidiary)) acquired pursuant to the Offer
or otherwise (directly or indirectly), on all matters properly presented to
the Company's shareholders (or any such subsidiary's shareholders), or (iv)
seeking to require divestiture by Varlen, the Purchaser or any other
subsidiary or affiliate of Varlen of any Shares, or (v) invalidating or
rendering unenforceable any material provision of the Acquisition Agreement,
or (vi) which otherwise might materially adversely affect Varlen, the
Company or any of their respective subsidiaries or affiliates;
(e) there shall be any action taken, or any statute, rule, regulation,
judgment, order or injunction proposed, enacted, entered, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government, governmental authority or agency (other than the
application of the waiting period provisions of the HSR Act to the Offer or
to the Merger) which may, directly or indirectly, result in any of the
consequences referred to in paragraph (d) above;
(f) there shall have occurred: (i) any general suspension of, or
limitation on prices for, trading in securities on any national
securities exchange or in the over-the-counter market, or (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks in
the United States, or (iii) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which, in the sole judgment of
Varlen, might affect the extension of credit by banks or other lending
institutions in the United States, or (iv) any material change in the
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United States or any other currency exchange rates or any suspension of or
limitation on, the markets therefor, or (v) any extraordinary adverse change
in the financial markets or the market price of the Shares, or (vi) any
change in the general political, market, economic or financial conditions in
the United States or abroad that could, in the sole judgment of Varlen, have
a material adverse effect upon the business or operations of the Company or
any of its subsidiaries or affiliates or the trading of the Shares, or (vii)
a commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, or (viii) in
the case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof; or
(g) the representations and warranties of the Company in the Acquisition
Agreement shall not be true and correct in all material respects, or
the Company shall not have performed in all material respects each covenant
and complied with each agreement to be performed and complied with by the
Company under the Acquisition Agreement; or
(h) the Company and Varlen shall have agreed to terminate the Offer or
the Acquisition Agreement, or the Acquisition Agreement shall
otherwise have been terminated in accordance with its terms;
which, in the sole judgment of the Purchaser, in any such case, and regardless
of the circumstances (including any action or inaction by the Purchaser and
Varlen) giving rise to any such condition, make it inadvisable to proceed with
acceptance for payment or purchase of or payment for any Shares tendered or to
proceed with the Merger.
The foregoing conditions are for the sole benefit of Varlen and the
Purchaser and may be asserted by Varlen and the Purchaser regardless of the
circumstances giving rise to such condition, including (without limitation) any
action or inaction by Varlen or the Purchaser, or may be waived by Varlen or the
Purchaser in whole at any time or in part from time to time in their sole
discretion. The failure by Varlen or the Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right and may be asserted at any time and
from time to time. Any determination by Varlen or the Purchaser concerning any
Event shall be final and binding upon all parties.
In addition, under the Acquisition Agreement the obligations of Varlen and
the Purchaser to consummate and effect the Merger are subject to the condition
that the Company shall not have received demands for payment of the fair value
of Shares (pursuant to Article 15 (DISSENTER'S RIGHTS) of the Virginia Act) with
respect to more than 5% of the outstanding Shares.
In addition, notwithstanding anything to the contrary in this Section 13,
the obligations of the Purchaser to accept for payment, purchase or pay for any
Shares tendered shall also be subject to the expiration or termination of all
waiting periods under the HSR Act that are applicable to the purchase of Shares
pursuant to the Offer and the Acquisition Agreement.
14. DIVIDENDS AND DISTRIBUTIONS. If, on or after June 15, 1996, the
Company should (i) split, combine or otherwise change the Shares or the
Company's capitalization, (ii) issue or sell any additional securities of the
Company or otherwise cause an increase in the number of outstanding securities
of the Company (except for Shares issuable upon the exercise of employee stock
options outstanding on the date of the Acquisition Agreement), (iii) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares, or (iv) disclose that it has taken any such action, then,
without prejudice to Purchaser's rights under Sections 1 and 13, the Purchaser
may, in its sole discretion, make such adjustments as it deems appropriate to
reflect such split, combination or other change in the purchase price and the
other terms of the Offer or the Merger (including, without limitation, the
number and type of securities offered to be purchased, the amounts payable
therefor and the fees payable hereunder).
Except for regular quarterly cash dividends paid by the Company on its
Shares in an amount not in excess of $.07 per Share on the Shares, if, on or
after June 15, 1996, the Company should declare or
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pay any cash or stock dividend or other distribution or issue any rights with
respect to the Shares, payable or distributable to shareholders of record on a
date prior to the transfer to the name of the Purchaser or its nominee or
transferee on the Company's stock transfer records of the Shares accepted for
payment pursuant to the Offer, then, without prejudice to the Purchaser's rights
under Sections 1 and 13 and without limiting the rights of the Purchaser
described in the preceding paragraph of this Section 14, any such dividend,
distribution or right to be received by the tendering shareholders will be
received and held by the tendering shareholder for the account of the Purchaser
and will be required to be promptly remitted and transferred by each tendering
shareholder to the Depositary for the account of Purchaser, accompanied by
appropriate documentation and transfer. Pending such remittance, the Purchaser
will be entitled to all rights and privileges as owner of any such dividend,
distribution or right and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion.
15. CERTAIN LEGAL MATTERS. Except as set forth in this Section 15, based
on a review of publicly available filings by the Company with the Commission and
other information concerning the Company provided to Varlen, the Purchaser is
not aware of any license or other regulatory permit which appears to be material
to the business of the Company and that might be adversely affected by the
Purchaser's acquisition of Shares pursuant to the Offer (and the indirect
acquisition of the stock of the Company's subsidiaries), or of any approval or
other action by any domestic or foreign governmental or administrative agency
that would be required prior to the acquisition of Shares by the Purchaser
pursuant to the Offer. Should any such approval or other action be required, it
is the Purchaser's present intention that such additional approval or action
would be sought. While the Purchaser does not presently intend to delay the
purchase of Shares tendered pursuant to the Offer pending receipt of any such
additional approval or the taking of any such action, there can be no assurance
that any such additional approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Company's or Varlen's business, or that certain parts of the Company's or
Varlen's business might not be required to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
action or in the event that such approvals were not obtained or such actions
were not taken. The Purchaser's obligation to purchase and pay for Shares is
subject to certain conditions relating to the legal matters discussed in this
Section 15. See Section 13.
ANTITRUST. Under the HSR Act, certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission ("FTC") and certain waiting period requirements have been
satisfied. The acquisition of Shares pursuant to the Offer and the Acquisition
Agreement is subject to such requirements. On June 20, 1996, Varlen filed with
the Antitrust Division and the FTC a Notification and Report Form with respect
to the Offer and the Merger.
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares pursuant to the Offer may not be consummated prior to the expiration of a
15-calendar day waiting period following the filing by Varlen, unless earlier
terminated. Accordingly, as such filing was made on June 20, 1996, the waiting
period which is applicable to the Offer will expire at 11:59 p.m., New York City
time, on July 5, 1996, unless Varlen receives a request from either the FTC or
the Antitrust Division for additional information or documentary material, or
the Antitrust Division and the FTC terminate the waiting period prior thereto.
If, within such 15-day waiting period either the Antitrust Division or the FTC
requests additional information or material from Varlen concerning the Offer,
the waiting period will be extended and would expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance by
Varlen with such request. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the rules promulgated under
the HSR Act. Thereafter, the waiting period could be extended only by court
order or with the consent of the Purchaser. The additional 10-calendar-day
waiting period may be terminated sooner by the FTC or the Antitrust Division. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or
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the FTC raises substantive issues in connection with a proposed transaction, the
parties frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. Although the
Company is required to file certain information and documentary material with
the Antitrust Division and the FTC in connection with the Offer and the Merger,
neither the Company's failure to make such filings nor a request made to the
Company from the Antitrust Division or the FTC for additional information or
documentary material will extend the Offer period with respect to the purchase
of Shares pursuant to the Offer and the Acquisition Agreement. The Purchaser
will not accept for payment Shares tendered pursuant to the Offer unless and
until the waiting period requirements imposed by the HSR Act with respect to the
Offer have been satisfied. See Section 13.
If the acquisition of Shares is delayed pursuant to a request by the FTC or
the Antitrust Division for additional information or documentary material
pursuant to the HSR Act, the Offer may, at the discretion of the Purchaser, be
extended and, in any event, the purchase of and payment for Shares will be
deferred until ten days after the request is substantially complied with by
Varlen, unless the ten-day extended period expires on or before the date when
the initial waiting period would otherwise have expired or unless the waiting
period is sooner terminated by the FTC and the Antitrust Division. See Section
2. Unless the Offer is extended, any extension of the waiting period will not
give rise to any additional withdrawal rights. See Section 3.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer and the Merger. At any time before or after the
Purchaser's purchase of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer and the Merger or seeking divestiture of Shares purchased
thereunder or the divestiture of assets of the Company, the Purchaser, Varlen or
any of their respective subsidiaries or affiliates. Private parties as well as
state attorneys general may also bring legal actions under the antitrust laws
under certain circumstances. If any such action by the FTC, the Antitrust
Division or any other person should be instituted, the Purchaser could decline
to accept for payment any Shares tendered. See Section 13 for certain conditions
to the Offer. Based upon an examination of information relating to the
businesses in which Varlen and the Company are engaged, Varlen believes that the
consummation of the Offer would not violate any antitrust laws. However, there
can be no assurance that a challenge to the Offer on antitrust grounds will not
be made or, if a challenge is made, what the result will be.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
STATE TAKEOVER LAWS
The Company is incorporated under the laws of the State of Virginia. The
following is a summary of certain provisions of the Virginia Act which are
applicable to the Offer.
SHAREHOLDER VOTE REQUIRED TO APPROVE FUNDAMENTAL ACTIONS. Section 13.1-718
of the Virginia Act provides that, except for certain parent-subsidiary mergers
(see "Introduction" above), certain significant corporate actions must be
approved by a vote of more than two-thirds of the votes entitled to be cast on
the matter unless the corporation's articles of incorporation specify a higher
or lower vote. These matters include mergers (with certain exceptions), share
exchanges, sales of all or substantially all of a corporation's assets,
dissolutions and amendments to a corporation's articles of incorporation
("Fundamental Actions"). The Company's Charter currently provides that the vote
required to approve certain Fundamental Actions constituting a "business
combination" (as defined therein) with a beneficial owner of 10% or more of the
Shares is 75% of the Shares. See "The Acquisition Agreement -- The Offer and
Merger" in Section 11 above.
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AFFILIATED TRANSACTIONS STATUTE. Article 14 of the Virginia Act (the
"Affiliated Transactions Statute") generally prohibits a publicly held Virginia
corporation from engaging in an "affiliated transaction" with an "interested
shareholder" for a period of three years after the date of the transaction in
which the person became an interested shareholder, unless (i) a majority of
disinterested directors approved in advance the transaction in which the
interested shareholder became an interested shareholder or (ii) the affiliated
transaction is approved by the affirmative vote of a majority of the
disinterested directors and the holders of two-thirds of the voting shares other
than the shares beneficially owned by the interested shareholder. A corporation
may engage in an affiliated transaction with an interested shareholder beginning
three years after the date of the transaction in which the person became an
interested shareholder, if the transaction is approved by a majority of the
disinterested directors or by two-thirds of the disinterested shareholders or if
it complies with certain statutory fair price provisions.
Subject to certain exceptions, under the Virginia Act an "interested
shareholder" is a person who, together with affiliates and associates,
beneficially owns 10% or more of the corporation's outstanding voting
securities. "Affiliated transactions" include (i) any merger or share exchange
with an interested shareholder; (ii) the transfer to any interested shareholder
of corporate assets with a fair market value greater than 5% of the
corporation's consolidated net worth; (iii) the issuance to any interested
shareholder of voting shares with a fair market value greater than 5% of the
fair market value of all outstanding voting shares of the corporation; (iv) any
reclassification of securities or corporate reorganization that will have the
effect of increasing by 5% or more the percentage of the corporation's
outstanding voting shares held by any interested shareholder; and (v) any plan
or proposal for dissolution of the corporation proposed by or on behalf of any
interested shareholder.
Under certain circumstances, the Affiliated Transactions Statute may make it
more difficult for an interested shareholder to effect various transactions with
the Company, after the consummation of the Merger. These provisions may have the
effect of preventing changes in management and possibly making it more difficult
to accomplish transactions which shareholders may otherwise deem to be in their
best interests.
CONTROL SHARE ACQUISITIONS STATUTE. Article 14.1 of the Virginia Act (the
"Control Share Acquisitions Statute") provides that shares of a publicly held
Virginia corporation that are acquired in a "control share acquisition"
generally will have no voting rights unless such rights are conferred on those
shares by the vote of a majority of all the outstanding shares other than
interested shares. A control share acquisition is defined, with certain
exceptions, as the acquisition of the beneficial ownership of voting shares
which would cause the acquirer to have voting power within the following ranges
or to move upward from one range into another: (i) 20% to 33 1/3%; (ii) 33 1/3%
to 50%; or (iii) more than 50%, of such votes.
The foregoing summary of the provisions of the Virginia Act does not purport
to be complete and is qualified in its entirety by reference to the provisions
of the Virginia Act.
The Board of Directors of the Company has approved the Offer and the Merger
and recommended acceptance of the Offer by holders of Shares and approval (if
required by the Virginia Act) by holders of Shares. The Board of Directors of
the Company has also taken actions to exempt Varlen, the Purchaser, their
respective direct and indirect subsidiaries and the Offer and the Merger from
the restrictions and provisions of the Affiliated Transactions Statute and
Control Share Acquisitions Statute as well as from the super-majority
shareholder vote provisions of Article I of the Company's Charter. In addition,
in connection with Section 13.1-730 (DISSENTER'S RIGHTS) of the Virginia Act,
the Board of Directors of the Company has approved the Merger by a majority of
"disinterested directors" (as defined in Section 13.1-725 of the Virginia Act).
See Section 11.
In 1995, in WLR FOODS, INC. V. TYSON FOODS INC., the United States Court of
Appeals for the Fourth Circuit ruled that four Virginia anti-takeover statutes,
including the Affiliated Transactions Statute, the Control Share Acquisitions
Statute, the "poison pill statute" and the "business judgment statute" contained
in the Virginia Act are not preempted by applicable federal securities law, are
constitutional and, even though the statutes favor incumbent management over
bidders, do not impermissibly restrict the ability of a bidder to take over a
Virginia corporation.
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A number of states have adopted takeover laws which purport, to varying
degrees, to be applicable to attempts to acquire securities of corporations
which are incorporated in such states or which have substantial assets, security
holders, principal executive offices or principal places of business therein. To
the extent that certain provisions of certain of these state takeover statutes
purport to apply to the Offer or the Merger, the Purchaser believes that such
laws conflict with federal law and constitute an unconstitutional burden on
interstate commerce. In 1982, the Supreme Court of the United States, in EDGAR
V. MITE CORP., held that the Illinois Business Takeovers Statute, which as a
matter of state securities law, made takeovers of corporations meeting certain
requirements more difficult, imposed a substantial burden on interstate commerce
and therefore was unconstitutional. In 1987, however, in CTS CORP. V. DYNAMICS
CORP. OF AMERICA, the Supreme Court of the United States held that the State of
Indiana could, as a matter of corporate law and, in particular, those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
the prior approval of the remaining shareholders, provided that such laws were
applicable only under certain conditions. The state law before the Supreme Court
was by its terms applicable only to corporations that had a substantial number
of stockholders in the state and were incorporated therein. Subsequently, a
number of Federal courts ruled that various state takeover statutes were
unconstitutional insofar as they apply to corporations incorporated outside the
state of enactment.
Except as described herein, the Purchaser does not know whether the Offer is
subject to any state takeover statutes and neither Varlen nor the Purchaser has
attempted to comply with any state takeover statutes in connection with the
Offer. Should any person seek to apply any such statute to the Offer, Varlen and
the Purchaser reserve the right to challenge the validity or applicability of
any state law allegedly applicable to the Offer and nothing in this Offer to
Purchase nor any action taken in connection herewith is intended as a waiver of
that right. In the event that any state takeover statute is found applicable to
the Offer and an appropriate court does not determine that such laws are
inapplicable or invalid as applied to the Offer, the Purchaser may be required
to file certain information with, or receive approvals from, the relevant state
authorities, or the Purchaser might be unable to purchase and accept for payment
or pay for Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In the circumstances described above, the Purchaser may
not be obligated to accept for purchase and payment or pay for any Shares
tendered.
16. EXTENSION OF TENDER PERIOD, TERMINATION AND AMENDMENTS. The
Acquisition Agreement provides that the Offer may not be amended to reduce the
price to be paid per Share, change the form of consideration to be paid in the
Offer or the Merger, increase the Minimum Condition or amend the terms of the
Offer in a manner that is materially adverse to the holders of the Shares.
Subject to such restrictions, the Purchaser expressly reserves the right, in its
sole discretion, at any time from time to time, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary. If the Purchaser shall decide, in its sole
discretion, to increase the consideration offered in the Offer to holders of
Shares or make any other material change in the terms of the Offer (including
the Minimum Condition) or the information concerning the Offer, the Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The
minimum period during which the Offer must remain open following material
changes in the terms of the Offer or information concerning the Offer, other
than a change in price or a change in percentage of securities sought, will
depend upon the facts and circumstances, including the relative materiality of
the terms or information. With respect to a change in price or a change in
percentage of securities sought, a minimum ten-business day period from the date
of announcement thereof is required to allow for adequate dissemination to
shareholders and investor response. If, prior to the Expiration Date, the
Purchaser should decide to increase the price per Share being offered in the
Offer, such increase will be applicable to all shareholders whose Shares are
accepted for payment pursuant to the Offer. As used in this Offer to Purchaser,
"business day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
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The Purchaser also expressly reserves the right (i) to delay payment for any
Shares, regardless of whether such Shares were theretofore accepted for payment,
or to terminate the Offer and not accept for payment or pay for any Shares not
theretofore accepted or paid for, upon the occurrence of any of the conditions
specified in Section 13 by giving oral notice thereof to the Depositary, and
(ii) subject to the restrictions set forth in the Acquisition Agreement, at any
time or from time to time, to amend the Offer in any respect. See Section 13.
Any extension, delay, termination, waiver or amendment of the Offer will be
followed, as soon as practicable, by public announcement thereof, and such
announcement in the case of an extension will be made in accordance with Rule
14e-1(d) no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date. Without limiting the manner in
which the Purchaser may choose to make any public announcement, the Purchaser
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to either the Dow Jones or
Reuters News Services and making any appropriate filing with the Commission.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may retain tendered shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 3. However, the ability of
the Purchaser to delay the payment for Shares which the Purchaser has accepted
for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires
that a bidder pay the consideration offered or return the securities deposited
by or on behalf of holders of securities promptly after the termination or
withdrawal of the Offer.
17. CERTAIN FEES AND EXPENSES. Lehman Brothers Inc. ("Lehman") is acting
as Dealer Manager for the Offer and as financial advisor to Varlen in connection
with the transactions described in this Offer to Purchase. Pursuant to an
engagement letter dated March 15, 1996 (the "Engagement Letter"), Varlen has
agreed to pay Lehman an advisory fee in connection with the acquisition of the
Company, in one or a series or combination of transactions whereby, directly or
indirectly, control (i.e., 51% of the Shares of the Company), or substantially
all of the assets of the Company or any of its affiliates is transferred to
Varlen or Purchaser or any of their affiliates (an "Acquisition"), of 0.75% of
the gross value of all cash, securities and other property paid directly or
indirectly by Varlen and/or the Purchaser in connection with an Acquisition (the
"Consideration"); provided that the Acquisition occurs on or prior to December
31, 1998 (the "Termination Date"). Varlen has further agreed that in the event
that Varlen or the Purchaser shall acquire less than 50% of the Shares but more
than 20% of the Shares outstanding on a fully diluted basis prior to the
Termination Date, and during such period Varlen or Purchaser shall have a
designee appointed to the Company's Board of Directors, then Varlen has agreed
to pay to Lehman an advisory fee of 0.75% of the price paid by the Company for
such shares. Varlen has agreed to pay Lehman the foregoing fees as follows: (x)
one-third upon commencement of an Acquisition and (y) two-thirds upon
consummation of an Acquisition. Pursuant to the Dealer Manager Agreement, dated
June 20, 1996, Varlen has also agreed to pay Lehman a fee equal to $.065 per
Share for each Share accepted for payment in the Offer as compensation for
serving as Dealer Manager for the Offer, which amount will be credited against
the above-described advisory fee being paid to Lehman by Varlen. In addition,
Varlen has agreed to reimburse Lehman for its reasonable expenses (including
professional fees and expenses of up to $10,000, plus 50% of its reasonable
professional fees and expenses in excess of $10,000, up to a maximum of $50,000)
and has agreed to indemnify Lehman against certain liabilities and expenses in
connection with their engagement. The amount of the total advisory fees and
reimbursable expenses payable to Lehman pursuant to the Engagement Letter, if
the Acquisition is consummated, is currently estimated not to exceed $1.4
million.
The Purchaser has retained D.F. King & Co. to act as Information Agent and
Harris Trust Company of New York to act as Depositary in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telex, telegraph and personal interview and may request
32
<PAGE>
brokers, dealers and other nominee shareholders to forward material relating to
the offer to beneficial owners. The Information Agent and the Depositary will
receive reasonable and customary compensation for services relating to the Offer
in addition to reimbursement of reasonable out-of-pocket expenses. The Purchaser
has agreed to indemnify the Information Agent and the Depositary against certain
liabilities and expenses in connection with the Offer including certain
liabilities under the federal securities laws.
Neither Varlen nor the Purchaser will pay any fees or commissions to any
broker, dealer or other person (other than the above-described fee to Lehman)
for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by the
Purchaser for reasonable and necessary costs and expenses incurred by them in
forwarding materials to their customers.
18. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction in which
the making of the Offer is not in compliance with applicable law. If the
Purchaser becomes aware of any jurisdiction in which the making of the Offer
would not be in compliance with applicable law, the Purchaser will make a good
faith effort to comply with any such law. If, after good faith effort, the
Purchaser cannot comply with any such law, the Offer will not be made to, nor
will tenders be accepted from or on behalf of, holders of Shares residing in any
jurisdiction in which the making of the Offer or acceptance thereof would not be
in compliance with the securities, blue sky or other laws of such jurisdiction.
In any jurisdiction the securities, blue sky or other laws of which require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by the Dealer Manager or by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
Varlen and the Purchaser have filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of
the General Rules and Regulations under the Exchange Act, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto. Such Tender Offer Statement and any amendments thereto, including
exhibits, may be obtained in the manner described in Section 8 with respect to
information concerning the Company, except that such information will not be
available at the regional offices of the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF VARLEN OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
BAS, Inc.
33
<PAGE>
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF VARLEN AND THE PURCHASER
The names and principal business positions for the past five years of each
director and executive officer of Varlen are set forth below. The business
address of each such person is 55 Shuman Boulevard, P.O. Box 3089, Naperville,
Illinois 60566-7089. All persons listed below are citizens of the United States
of America.
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS POSITIONS FOR THE PAST FIVE YEARS
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Richard L. Wellek Director; President and Chief Executive Officer of Varlen since 1983. From
1968 through 1983 he held various executive and operational positions at
Varlen.
Vicki L. Casmere Vice President, General Counsel and Secretary since April 1, 1996. Ms.
Casmere served as Corporate Counsel of Caremark Inc. from 1992 to 1996 and
as Vice President of Caremark Inc. from 1994 to 1996. Previously, Ms.
Casmere served as Corporate Counsel of Baxter Healthcare Corporation from
1988 to 1992.
Rudolph Grua Director; Vice Chairman of General Binding Corporation, a manufacturer of
business machines and related supplies, since January 1995 and a director
since May 1984. Prior to January 1995, Mr. Grua was President and Chief
Executive Officer of General Binding Corporation, positions he had held
since May 1984.
George W. Hoffman Railroad Group Vice President since 1990. Mr. Hoffman was an Executive at
Keystone Railway Equipment Company, a subsidiary of Varlen, from 1979 to
1994.
Raymond A. Jean Executive Vice President and Chief Operating Officer since 1993.
Previously, Mr. Jean served as Group Vice President from 1988 to 1992.
Ernest H. Lorch Director; Of Counsel to Whitman Breed Abbott & Morgan, attorneys, a
position he has held since January 1993. He retired as Chairman and Chief
Executive Officer of The Dyson-Kissner-Moran Corporation ("DKM"), a private
investment company, in December 1992, a position he held since January
1992. DKM owned approximately 30% of the Common Stock of Varlen prior to
Varlen's purchase of all of the Varlen shares owned by DKM in January 1993.
Mr. Lorch was President of DKM from June 1984 to January 1992. Mr. Lorch is
also a director of Tyler Corporation, a retail supplier of automotive parts
that also provides products for fundraising programs.
L. William Miles Director; Vice President for Administration at Fairfield University,
Connecticut, a position he has held since July 1992. From February 1988 to
June 1992 he was Senior Vice President of Call Interactive, a provider of
interactive telephone services. Mr. Miles is also a director of Bouton
Corporation, a manufacturer of safety glasses.
Richard A. Nunemaker Vice President, Finance and Chief Financial Officer since 1991. Previously,
Mr. Nunemaker served as Vice President and Controller from 1987 to 1991.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS POSITIONS FOR THE PAST FIVE YEARS
- ------------------------------------ ---------------------------------------------------------------------------
Greg A. Rosenbaum Director; President of Palisades Associates, Inc., a merchant banking and
consulting company, since August 1989. Mr. Rosenbaum is also director of
Richey Electronics, Inc., a distributor of electronic components, a
position he has held since 1993.
<S> <C>
Joseph J. Ross Director; Chairman, President and Chief Executive Officer of Federal Signal
Corporation, a manufacturer of public safety, signaling and communications
equipment. He has been Chairman of Federal Signal since February 1990 and
has served as its President and Chief Executive Officer since December
1987.
Theodore A. Ruppert Director; For more than the last five years, a general partner in the
Village Development Partnership, a real estate, manufacturing and oil
development holding company; Chairman, Chief Executive Officer and director
of Glaize Development Corporation, a real estate developer; and a director
of Pioneer Bank & Trust Company.
</TABLE>
A-2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
The names and principal business positions for the past five years of the
director and executive officers of the Purchaser are set forth below. The
business address of each such person is 55 Shuman Boulevard, P.O. Box 3089,
Naperville, Illinois 60566-7089. All persons listed below are citizens of the
United States of America. For further information regarding such persons, see
"Directors and Executive Officers of Varlen."
<TABLE>
<CAPTION>
NAME POSITION
- ------------------------------------ -------------------------------------------------------
<S> <C>
Richard L. Wellek Director and President
Richard A. Nunemaker Vice President and Treasurer
Vicki L. Casmere Vice President and Secretary
</TABLE>
A-3
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each shareholder
of the Company or his broker, dealer, commercial bank or other nominee to the
Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
----------------
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Wall Street Station 77 Water Street, 4th Receive Window
P.O. Box 1010 Floor 77 Water Street, 5th
New York, New York New York, New York 10005 Floor
10268-1010 New York, New York
10005
BY FACSIMILE
TRANSMISSION:
(FOR ELIGIBLE
INSTITUTIONS ONLY)
(212) 701-7636
(212) 701-7637
CONFIRM FACSIMILE BY
TELEPHONE:
(212) 701-7624
</TABLE>
---------------------
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be directed to the Information Agent or the Dealer
Manager at their respective telephone numbers and locations listed below. You
may also contact your broker, dealer, commercial bank or trust company or
nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550 (collect)
or
Call Toll Free: 1-800-848-3402
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-2864 (CALL COLLECT)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
BRENCO, INCORPORATED
PURSUANT TO THE OFFER TO
PURCHASE DATED JUNE 20, 1996
BY
BAS, INC.
A WHOLLY OWNED SUBSIDIARY OF
VARLEN CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 18, 1996 UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Wall Street Station 77 Water Street, 4th Floor Receive Window
P.O. Box 1010 New York, New York 10005 77 Water Street, 5th Floor
New York, New York New York, New York 10005
10268-1010
</TABLE>
BY FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(212) 701-7636
(212) 701-7637
CONFIRM FACSIMILE BY TELEPHONE:
(212) 701-7624
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders if
certificates for Shares (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in Section 4 of the Offer to Purchase) is
utilized, if delivery of Shares is to be made by book-entry transfer to the
accounts maintained by Harris Trust Company of New York, as Depositary (the
"Depositary"), at The Depository Trust Company or the Philadelphia Depository
Trust Company (each a "Book-Entry Transfer Facility" and collectively the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 4 of the Offer to Purchase. Holders of Shares whose certificates for
Shares are not immediately available, or who are unable to deliver their Shares
or confirmation of the book-entry tender of their Shares into the Depositary's
account at a Book-Entry Transfer Facility ("Book Entry Confirmation") and all
other documents required by this Letter of Transmittal to the Depositary on or
prior to the Expiration Date (as defined in the Offer to
<PAGE>
Purchase), must tender their Shares according to the guaranteed delivery
procedure set forth in Section 4 of the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ....................................................................................
Check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number ...................................................................................................
Transaction Code Number ..........................................................................................
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO
THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Owner(s) ...................................................................................
Window Ticket Number (if any) ....................................................................................
Date of Execution of Notice of Guaranteed Delivery ...............................................................
Name of Institution which Guaranteed Delivery ....................................................................
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number ...................................................................................................
Transaction Code Number ..........................................................................................
</TABLE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF TENDERED SHARES
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
APPEAR(S) ON SHARE CERTIFICATES)
CERTIFICATE TOTAL NUMBER OF NUMBER OF
NUMBER(S)* SHARES REPRESENTED SHARES TENDERED**
BY CERTIFICATE(S)*
TOTAL SHARES
* NEED NOT BE COMPLETED BY SHAREHOLDERS DELIVERING SHARES BY BOOK-ENTRY TRANSFER.
** UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED BY ANY CERTIFICATES DELIVERED TO THE
DEPOSITARY ARE BEING TENDERED. SEE INSTRUCTION 4.
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to BAS, Inc., a Virginia corporation (the
"Purchaser") and a wholly owned subsidiary of Varlen Corporation, a Delaware
corporation ("Varlen"), the above-described shares of Common Stock, par value
$1.00 per share (the "Shares"), of Brenco, Incorporated, a Virginia corporation
(the "Company"), pursuant to the Purchaser's offer to purchase all outstanding
Shares at a price of $16.125 per Share, net to the seller in cash, without any
interest, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated June 20, 1996 (the "Offer to Purchase") and in this Letter of
Transmittal (which together constitute the "Offer"), receipt of which are hereby
acknowledged. The undersigned understands that the Purchaser reserves the right
to transfer or assign, in whole or from time to time in part, to Varlen or one
or more of its other direct or indirect wholly owned subsidiaries the right to
purchase all or any portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and any and all other Shares and other
securities and property issued or issuable or distributed or distributable
(other than the Company's regular quarterly dividend of not more than $.07 per
Share) in respect thereof on or after June 15, 1996 and prior to the transfer to
the name of the Purchaser or nominee or transferee of the Purchaser on the
Company's stock transfer records of the Shares tendered herewith (collectively,
a "Distribution")), and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares (and any Distribution) with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest)
to: (i) deliver certificates for such Shares (and any Distribution), or transfer
ownership of such Shares (and any Distribution) on the account books maintained
by a Book-Entry Transfer Facility, together in any such case with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Purchaser, upon receipt by the Depositary, as the undersigned's agent, of the
purchase price (adjusted, if appropriate, as provided in the Offer to Purchase);
(ii) present such Shares (and any Distribution) for transfer on the books of the
Company; and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any Distribution), all in accordance
with the terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints the Purchaser, its officers and
its designees, and each of them, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to exercise all voting and
other rights of the undersigned in such manner as each such attorney-in-fact and
proxy or the substitute for any such attorney-in-fact and proxy shall in the
sole discretion of each such attorney-in-fact and proxy or his substitutes deem
proper, and otherwise act (including pursuant to written consent) with respect
to all of the Shares tendered hereby (and any Distribution) which have been
accepted for payment by the Purchaser prior to the time of such vote or other
action and which the undersigned is entitled to vote at any meeting of
shareholders (whether annual or special and whether or not an adjourned
meeting), or consent in lieu of any such meeting, or otherwise. THIS PROXY IS
IRREVOCABLE AND COUPLED WITH AN INTEREST AND IS GRANTED IN CONSIDERATION OF, AND
IS EFFECTIVE UPON, THE ACCEPTANCE FOR PAYMENT OF SUCH SHARES BY THE PURCHASER
<PAGE>
IN ACCORDANCE WITH THE TERMS OF THE OFFER. SUCH ACCEPTANCE FOR PAYMENT SHALL
REVOKE, WITHOUT FURTHER ACTION, ANY OTHER POWER OF ATTORNEY AND/ OR PROXY GIVEN
BY THE UNDERSIGNED AT ANY TIME WITH RESPECT TO SUCH SHARES (AND ANY
DISTRIBUTION) AND NO SUBSEQUENT POWER OF ATTORNEY OR PROXY MAY BE GIVEN (AND IF
GIVEN WILL NOT BE EFFECTIVE) WITH RESPECT THERETO BY THE UNDERSIGNED. The
undersigned understands that the Purchaser expressly reserves the right to
require that, in order for Shares to be validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares (and any Distribution), the
Purchaser is able to exercise full voting rights and other rights of a record
and beneficial holder thereof, including rights in respect of acting by written
consent with respect to such Shares (and any Distribution) or voting at any
meeting of shareholders.
The undersigned hereby represents and warrants that: (i) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distribution) and (ii) when the same are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary, the Purchaser or Varlen to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby (and
any Distribution). In addition, the undersigned shall promptly remit and
transfer to the Depositary for the account of the Purchaser the whole of any
dividend (other than the Company's regular quarterly dividend of not more than
$.07 per Share), distribution, interest payment or right issued to the
undersigned on or after June 15, 1996, in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer. Pending such remittance,
the Purchaser shall be entitled to all rights and privileges as owner of any
such dividend, distribution, interest payment or right and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators and legal
representatives of the undersigned. Except as stated in the Offer to Purchase,
this tender is irrevocable.
The undersigned understands that the tender of Shares pursuant to any of the
procedures described in Section 4 of the Offer to Purchase and in the
instructions hereto will constitute the tendering shareholder's acceptance of
the terms and conditions of the Offer, as well as the tendering shareholder's
representation and warranty that such shareholder has the full power and
authority to tender and assign the Shares tendered (and any Distribution), as
specified in this Letter of Transmittal. The Purchaser's acceptance for payment
of Shares pursuant to the Offer will constitute a binding agreement between the
tendering shareholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or any certificates for Shares
not tendered or accepted for payment in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature. In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or return any certificates for Shares not tendered or
accepted for payment in the name(s) of, and deliver said check and/or return
such certificates to, the person or persons so indicated. The undersigned
recognizes that the Purchaser has no obligation pursuant to the Special Payment
Instructions to transfer any Shares from the name of the registered holder
thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be issued in the name of someone other than the undersigned.
Issue / / check / / certificates to:
Name ........................................................................
(Please Print)
Address .....................................................................
.............................................................................
(Include Zip Code)
.............................................................................
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be sent to someone other than the undersigned, or to the undersigned at an
address other than that shown above.
Mail / / check / / certificates to:
Name ........................................................................
(Please Print)
Address .....................................................................
.............................................................................
(Include Zip Code)
IMPORTANT
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
.............................................................................
.............................................................................
Signature(s) of Owner(s)
Dated: ............................................................... , 1996
(Must be signed by registered owner(s) exactly as name(s) appear(s) on
certificate(s) for Shares or on a security position listing or by person(s)
authorized to become registered owner(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, agents, officers of corporations or others
acting in a fiduciary or representative capacity, please provide the following
information. See Instruction 5.)
Name(s) ......................................................................
.............................................................................
(Please Print)
Capacity (full title) .......................................................
Address ....................................................................
.............................................................................
.............................................................................
(Include Zip Code)
Area Code and Telephone Numbers .............................................
Taxpayer Identification
or Social Security No. ....................................................
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Name ........................................................................
(Please Print)
Authorized Signature ........................................................
Name of Firm ................................................................
Address .....................................................................
.............................................................................
(including Zip Code)
Area Code and Telephone Number ..............................................
Dated: ............................................................... , 1996
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<S> <C> <C> <C>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
SUBSTITUTE PART 1 - PLEASE PROVIDE YOUR TIN IN ------------------------------------
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY Social Security Number
DEPARTMENT OF THE TREASURY, SIGNING AND DATING BELOW. OR
INTERNAL REVENUE SERVICE ------------------------------------
Employer Identification Number
PAYER'S REQUEST FOR TAXPAYER PART 2 - Certification - Under Penalties of Perjury, PART 3 -
IDENTIFICATION NUMBER (TIN) I certify that: Awaiting
(1) The number shown on this form is my correct TIN / /
Taxpayer Identification Number (or I am waiting
for a number to be issued to me and have checked
the box in Part 3) and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do
not cross out such item (2).
SIGNATURE DATE
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification Number has
not been issued to me, and either (1) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number by the
time of payment, 31% of all reportable payments made to me will be withheld,
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
_________________________________ _________________________________, 1996
Signature Date
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of Shares tendered herewith,
unless such holder(s) has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" above, or (b)
if such Shares are tendered for the account of a firm which is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of a recognized Medallion Signature Guarantee Program (each of the
foregoing being referred to as an "Eligible Institution"). In all other cases,
all signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by shareholders either if certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if tenders are to be made pursuant to the
procedure for tender by book-entry transfer set forth in Section 4 of the Offer
to Purchase. Certificates for tendered Shares, or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at a Book-Entry Transfer Facility, as well as this Letter
of Transmittal (or a facsimile hereof), properly completed and duly executed
with any required signature guarantees, or an Agent's Message in connection with
a book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the front page of this Letter of Transmittal prior to the Expiration
Date. Shareholders whose certificates are not immediately available or who
cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedure set forth in Section 4 of the Offer to
Purchase. Pursuant to such procedure: (i) such tender must be made by or through
an Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Purchaser,
must be received by the Depositary prior to the Expiration Date; and (iii) the
certificates (or a Book-Entry Confirmation) representing all tendered Shares, in
proper form for transfer, in each case together with the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed with any required
signature guarantees (or, in the case of a book-entry delivery, an Agent's
Message) and any other documents required by this Letter of Transmittal, must be
received by the Depositary within three National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ System") trading days after
the date of execution of such Notice of Guaranteed Delivery. If certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased (unless you are tendering all of the Shares
you own). All tendering shareholders, by execution of this Letter of Transmittal
(or a facsimile hereof), waive any right to receive any notice of the acceptance
of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate number(s) and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER.) If fewer than all of the Shares evidenced by any
certificate delivered to the Depositary are to be tendered, fill in the number
of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such a case, new Share certificate(s) for the Shares that were
evidenced by your old Share certificate(s), but were not tendered by you, will
be sent to you (unless otherwise provided in the appropriate box on this Letter
of Transmittal) as soon as practicable after the Expiration Date. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or not purchased are to be issued in the
name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s)
for such Shares. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Purchaser will pay or cause to be paid any stock transfer taxes with
respect to the transfer and sale of Shares to it or its order pursuant to the
Offer. If, however, payment of
<PAGE>
the purchase price is to be made to, or if certificate(s) for Shares not
tendered or accepted for payment are to be registered in the name of, any person
other than the registered holder(s), if a transfer tax is imposed for any reason
other than the sale or transfer of Shares to Purchaser pursuant to the Offer, or
if tendered certificate(s) are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or an
exemption therefrom, is submitted.
Except as otherwise provided in this Instruction 6, it will not be necessary
for transfer tax stamps to be affixed to the certificate(s) listed in this
Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any Shares purchased is to be issued, or any Shares not
tendered or not purchased are to be returned, in the name of a person other than
the person(s) signing this Letter of Transmittal, or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Shareholders tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account at any of the Book-Entry Transfer
Facilities as such shareholder may designate under "Special Payment
Instructions." If no such instructions are given, any such Shares not purchased
will be returned by crediting the account at the Book-Entry Transfer Facilities
designated above.
8. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of Shares will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. The Purchaser
reserves the absolute right to reject any or all tenders of Shares determined by
it not to be in proper form or the acceptance for payment of or payment for
tenders of Shares which may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of Shares. No tender of Shares will be deemed to have
been properly made until all defects and irregularities relating thereto have
been cured or waived. The Purchaser's interpretation of the terms and conditions
of the Offer in this regard will be final and binding. None of the Purchaser,
the Dealer Manager, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defect or irregularity in
tenders or incur any liability for failure to give any such notification.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a shareholder whose tendered Shares are accepted for payment is
required to provide the Depositary with a correct Taxpayer Identification Number
("TIN"), generally the shareholder's social security or federal employer
identification number, on Substitute Form W-9 below. Failure to provide the
information on the form may subject the tendering shareholder or other payee to
a $50 penalty. In addition, payments that are made to such shareholder or other
payee with respect to Shares purchased pursuant to the Offer may be subject to
31% federal income tax withholding on the payment of the purchase price.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify an exempt recipient,
the shareholder must submit a Form W-8, signed under penalties of perjury,
attesting that individual's exempt status. A Form W-8 can be obtained from the
Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the Substitute Form W-9 certifying (i) that the TIN provided on the
Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN) and
(ii) that (a) such shareholder has not been notified by the Internal Revenue
Service that such shareholder is subject to backup withholding as a result of a
failure to report all interest or dividends or (b) the Internal Revenue Service
has notified such shareholder that such shareholder is no longer subject to
backup withholding.
The box in part 3 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number in order to avoid backup withholding.
Notwithstanding that the box in part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, if the shareholder or
other payee does not provide a properly certified TIN to the Depositary within
60 days, the Depositary will withhold 31% of all payments made prior to the time
a properly certified TIN is provided to the Depositary.
The shareholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares or of
the last transferee appearing on the transfers attached to, or endorsed on, the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Information Agent at its address and
telephone numbers set forth below. Additional copies of the Offer to Purchase,
this Letter of Transmittal and the Notice of Guaranteed Delivery may also be
obtained from the Information Agent or the Dealer Manager or from brokers,
dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate evidencing
Shares has been lost, destroyed or stolen, the shareholder should promptly
notify Wachovia Bank of North Carolina, N.A., Winston Salem, North Carolina
27102-3001, Attention: Darrell V. Milton at (919) 770-4994. The shareholder will
then be instructed as to the steps that must be taken in order to replace the
certificate. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN
AGENT'S MESSAGE TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR
TO THE EXPIRATION DATE.
FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES
AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH SHAREHOLDER
OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER
NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH BELOW:
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
------------------
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Wall Street Station 77 Water Street, 4th Receive Window
P.O. Box 1010 Floor 77 Water Street,
New York, New York New York, New York 5th Floor
10268-1010 10005 New York, New York
10005
BY FACSIMILE
TRANSMISSION:
(FOR ELIGIBLE
INSTITUTIONS ONLY)
(212) 701-7636
(212) 701-7637
CONFIRM FACSIMILE BY
TELEPHONE:
(212) 701-7624
</TABLE>
--------------------------
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent or the Dealer Manager as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550 (collect)
or
Call Toll Free: 1-800-848-3402
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-2864 (CALL COLLECT)
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
BRENCO, INCORPORATED
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates representing
shares of Common Stock, par value $1.00 per share (the "Shares"), of Brenco,
Incorporated, a Virginia corporation (the "Company"), are not immediately
available or time will not permit all required documents to reach Harris Trust
Company of New York (the "Depositary") on or prior to the Expiration Date (as
defined in the Offer to Purchase), or the procedures for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or facsimile transmission or mail to the
Depositary. See Section 4 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
------------------
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
Wall Street Station 77 Water Street, 4th Receive Window
P.O. Box 1010 Floor 77 Water Street, 5th
New York, New York New York, New York 10005 Floor
10268-1010 New York, New York
10005
BY FACSIMILE
TRANSMISSION:
(FOR ELIGIBLE
INSTITUTIONS ONLY)
(212) 701-7636
(212) 701-7637
CONFIRM FACSIMILE BY
TELEPHONE:
(212) 701-7624
</TABLE>
------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to BAS, Inc., a Virginia corporation (the
"Purchaser") and a wholly owned subsidiary of Varlen Corporation, a Delaware
corporation ("Varlen"), upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated June 20, 1996 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which together constitute the "Offer"),
receipt of each of which is hereby acknowledged, the number of Shares indicated
below pursuant to the guaranteed delivery procedures set forth in Section 4 of
the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares ........................... Name(s) of Record Holder(s) .................
Certificate No(s). (if available): Address(es): ...............................
............................................ .............................................
............................................ .............................................
Area Code and Telephone Number(s):
.............................................
</TABLE>
If Share(s) will be tendered by book-entry transfer, check one box.
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
<TABLE>
<S> <C>
Account Number: ............................ Signature(s): ..............................
Date: ......................................
</TABLE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Association's Medallion Signature Guaranty Program (each, an "Eligible
Institution"), hereby (a) represents that the tender of Shares effected hereby
complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended,
and (b) guarantees to deliver to the Depositary, at one of its addresses set
forth above, either the certificates representing all tendered Shares, in proper
form for transfer, a Book-Entry Confirmation (as defined in the Offer to
Purchase), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or,
in the case of book-entry delivery of Shares, an Agent's Message (as defined in
the Offer to Purchase), and any other documents required by the Letter of
Transmittal within three National Association of Securities Dealers, Inc.
Automated Quotation System trading days after the date of execution of this
Notice of Guaranteed Delivery.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal (unless
an Agent's Message is utilized) and certificates for Shares to the Depositary
within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution.
<TABLE>
<S> <C>
Name of Firm: .............................. .............................................
(AUTHORIZED SIGNATURE)
Address: ................................... Name: ......................................
(PLEASE TYPE OR PRINT)
Title: .....................................
Area Code
and Telephone Number: ...................... Date: ......................................
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
BRENCO, INCORPORATED
AT
$16.125 NET PER SHARE
BY
BAS, INC.
A WHOLLY OWNED SUBSIDIARY OF
VARLEN CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 18, 1996 UNLESS THE OFFER IS EXTENDED.
June 20, 1996
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by BAS, Inc., a Virginia corporation (the
"Purchaser") and a wholly owned subsidiary of Varlen Corporation, a Delaware
corporation, to act as financial advisor and Dealer Manager in connection with
the Purchaser's offer to purchase all outstanding shares of Common Stock, par
value $1.00 per share (the "Shares"), of Brenco Incorporated, a Virginia
corporation (the "Company"), at $16.125 per Share, net to the seller in cash,
without any interest, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated June 20, 1996 (the "Offer to Purchase") and the
related Letter of Transmittal (which together constitute the "Offer").
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated June 20, 1996;
2. Letter of Transmittal, for your use to tender Shares and for the
information of your clients;
3. Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if certificates for Shares and all other documents are not
immediately available or cannot be delivered to Harris Trust Company of New
York (the "Depositary") by the Expiration Date (as defined in the Offer to
Purchase) or if the procedures for book-entry transfer cannot be completed
by the Expiration Date;
4. A form of letter which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer;
5. Guidelines of the Internal Revenue Service for certification of
Taxpayer Identification Number on Substitute Form W-9;
6. Return envelope addressed to the Depositary; and
7. The letter to shareholders of the Company from the Chairman of the
Board of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JULY 18, 1996, UNLESS
THE OFFER IS EXTENDED.
<PAGE>
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the Expiration Date a number of Shares
which, together with the Shares beneficially owned by Varlen Corporation, the
Purchaser and/or other subsidiaries of Varlen Corporation, represents at least
two-thirds of the total number of Shares then outstanding on a fully diluted
basis, and (ii) the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder. The Offer is also subject to other terms and
conditions contained in the Offer to Purchase. See the Introduction and Sections
1, 13 and 16.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal and any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer of
Shares, and any other required documents should be sent to the Depositary, and
either certificates representing tendered Shares should be delivered to the
Depositary, or Shares should be tendered by book-entry transfer into the
Depositary's account maintained at one of the Book-Entry Transfer Facilities (as
defined in the Offer to Purchase), all in accordance with the instructions set
forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to forward their certificates for tendered Shares or other required
documents on or prior to the Expiration Date or to comply with the book-entry
transfer procedures on a timely basis, a tender may be effected by following the
guaranteed delivery procedures specified in Section 4 of the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager, as described in the Offer to
Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser
will, however, upon request, reimburse you for reasonable expenses incurred by
you in forwarding any of the enclosed materials to your clients. The Purchaser
will pay or cause to be paid any stock transfer taxes payable on the transfer of
the Shares to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at their respective addresses and telephone
numbers set forth on the back cover of the Offer to Purchase.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction.
Very truly yours,
LEHMAN BROTHERS INC.
NEW YORK, NEW YORK
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF VARLEN CORPORATION, THE PURCHASER, THE COMPANY, ANY
AFFILIATE OF THE FOREGOING, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
BRENCO, INCORPORATED
AT
$16.125 NET PER SHARE
BY
BAS, INC.
A WHOLLY OWNED SUBSIDIARY OF
VARLEN CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, JULY 18, 1996 UNLESS THE OFFER IS EXTENDED.
June 20, 1996
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated June 20,
1996 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer") and other materials relating to the Offer by
BAS, Inc., a Virginia corporation (the "Purchaser") and a wholly owned
subsidiary of Varlen Corporation, a Delaware corporation, to purchase all
outstanding shares of Common Stock, par value $1.00 per Share (the "Shares"), of
Brenco, Incorporated, a Virginia corporation (the "Company"), at $16.125 per
Share, net to the seller in cash, without any interest, upon the terms and
subject to the conditions set forth in the Offer. Holders of Shares whose
certificates for such Shares are not immediately available, or who cannot
deliver their certificates and all other required documents to Harris Trust
Company of New York (the "Depositary") on or prior to the Expiration Date (as
defined in the Offer to Purchase), or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Shares according to the
guaranteed delivery procedures set forth in Section 4 of the Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all such Shares held by us for your account, pursuant to the terms
and subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $16.125 per Share, net to you in cash, without any
interest, thereon, upon the terms and subject to the conditions set forth in the
Offer.
2. The Offer is being made for all outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on Thursday, July 18, 1996, unless the Offer is extended.
4. Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer.
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the Expiration Date, a number of
Shares which, together with the Shares beneficially owned by Varlen Corporation
or the Purchaser and/or other subsidiaries of Varlen Corporation, represents at
least two-thirds of the total number of Shares then outstanding on a fully
diluted basis and (ii) the
<PAGE>
expiration of all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder.
The Offer is also subject to other terms and conditions contained in the Offer
to Purchase. See the Introduction and Sections 1, 13 and 16.
6. The Board of Directors of the Company has unanimously approved the
Offer, the Merger (as defined in the Offer to Purchase) and the Acquisition
Agreement (as defined in the Offer to Purchase), has determined that the terms
of the Offer and the Merger contemplated thereby are fair to and in the best
interests of the shareholders of the Company and recommends that the
shareholders accept the Offer and tender their Shares pursuant to the Offer.
7. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (a) certificates for
tendered Shares or timely confirmation of the book-entry transfer of such Shares
into the account maintained by the Depositary at The Depository Trust Company or
the Philadelphia Depository Trust Company (collectively, the "Book-Entry
Transfer Facilities"), pursuant to the procedures set forth in Section 4 of the
Offer to Purchase, (b) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in the Offer to Purchase), in connection with a
book-entry delivery, and (c) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering shareholders
at the same time depending upon when certificates for or confirmations of
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility are actually received by the Depositary.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any such jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of the Purchaser by Lehman Brothers Inc., the Dealer Manager for the
Offer, or one or more registered brokers or dealers that are licensed under the
laws of such jurisdiction.
If you wish to have us tender any or all of your Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. An envelope to return your
instructions to us is enclosed. PLEASE FORWARD YOUR INSTRUCTIONS TO US IN AMPLE
TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION
DATE. The enclosed Letter of Transmittal is furnished to you as an example and
should not be used to tender Shares. IF YOU AUTHORIZE THE TENDER OF YOUR SHARES,
ALL SUCH SHARES WILL BE TENDERED UNLESS OTHERWISE SPECIFIED ON THE INSTRUCTION
FORM SET FORTH BELOW.
Tear Here Tear Here
- --------------------------------------------------------------------------------
Instructions with Respect to:
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
BRENCO, INCORPORATED
by
BAS, INC.
a Wholly Owned Subsidiary of
VARLEN CORPORATION
-2 -
<PAGE>
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated June 20, 1996 (the "Offer to Purchase") and the related Letter
of Transmittal (which together constitute the "Offer") in connection with the
offer by BAS, Inc., a Virginia corporation and a wholly owned subsidiary of
Varlen Corporation, a Delaware corporation, to purchase all outstanding shares
of Common Stock, par value $1.00 per share (the "Shares"), of Brenco,
Incorporated, a Virginia corporation, at a purchase price of $16.125 per Share,
net to the Seller in cash, without any interest, upon the terms and subject to
the conditions set forth in the Offer to Purchase.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to Be Tendered: ____________ Shares*
SIGN HERE
Signature(s): __________________________________________________________________
Signature(s): __________________________________________________________________
(Print Name(s)): _______________________________________________________________
(Print Address(es)): ___________________________________________________________
(Area Code and Telephone Number(s)): ___________________________________________
(Taxpayer Identification or Social Security Number(s)): ________________________
Dated: ______________, 1996
- ------------------------
* Unless otherwise indicated, it will be assumed that you instruct us to tender
all Shares held by us for your account.
-3 -
<PAGE>
EXHIBIT K
Varlen Corporation, 55 Shuman Blvd., P.O. Box 3089, Naperville, Illinois
60566-7089
(708)420-0400 FAX (708)420-7123
CONTACT:
Richard L. Wellek, President & CEO or
Richard A. Nunemaker, Vice President & CFO
Varlen Corporation (708) 420-4000
Jacob M. Feichtner, Executive Vice President
& CFO
(804) 378-2902
Needham B. Whitfield, Chairman & CEO
Brenco, Incorporated (804) 378-2900
VARLEN ENTERS INTO DEFINITIVE AGREEMENT TO BUY
BRENCO THROUGH $165 MILLION CASH TENDER OFFER
MERGER WOULD CREATE PREEMINENT RAILROAD EQUIPMENT MANUFACTURER WITHIN VARLEN
NAPERVILLE, Ill., June 17, 1996 -- Varlen Corporation (NASDAQ:VRLN) and
Brenco, Incorporated (NASDAQ:BREN) of the Richmond, Va. area, today announced a
definitive agreement for Varlen to buy Brenco in a $165 million cash tender
offer, creating within Varlen a preeminent global manufacturer of precision
engineered railroad products that is well-positioned to capitalize on growing
international interest in American freight railroad technologies.
The merger would transform Varlen into a company with approximately $500
million in 1997 annual sales and 3,200 employees with manufacturing facilities
in 13 states, as well as Germany and France, and would substantially increase
railroad products revenue. The acquisition is anticipated to add up to 7 cents
per share to fiscal 1996 earnings based on a late July closing.
"Varlen and Brenco are a great strategic fit," said Richard L. Wellek,
Varlen's president and chief executive officer. "Varlen has enjoyed excellent
long-term growth on the strength of our current businesses. This combination
will help us grow faster in our railroad and automotive markets. This continues
our corporate focus on manufacturing highly-engineered transportation products
and analytical instruments, maintaining niche market leadership, and expanding
our international presence."
Terms of the agreement approved by both boards of directors include prompt
commencement, through a wholly-owned Varlen subsidiary, of a tender offer at a
price of $16 1/8 for each outstanding share of Brenco common stock. The tender
offer requires that Varlen will be able to obtain at least two-thirds of the
shares at the expiration of the offer, which is scheduled to remain open for 20
business days. An offer to purchase containing all of the terms and conditions
will be mailed to Brenco shareholders in the next few days. The agreement
contemplates that shares not tendered would be acquired at the same price
through a merger. Brenco has approximately 10.2 million shares outstanding.
Persons related to Brenco's founding family -- including Needham B. Whitfield,
Brenco's chairman, and his sister Anne Whitfield Kenny -- control approximately
20 percent of the stock and have signed a separate shareholder tender agreement
with Varlen.
"At a premium of 32% over the closing price for Brenco shares Friday, I
believe Varlen's offer will be well received by Brenco shareholders," said
Brenco's chairman and chief executive officer, Needham B. Whitfield. "We feel
very comfortable entrusting Brenco's dedicated employees and position of
leadership in the railroad bearing market to a company of Varlen's caliber and
reputation. The cultures of the two companies are extremely compatible. Varlen
understands our markets -- both in the automotive and in the railroad industries
- -- and supports our market strategies of continual product innovation and
outstanding customer service. Most important for our future, Varlen is prepared
to invest in our plans for growth."
After the merger, Brenco would continue to be based in the Richmond area and
would become a wholly-owned subsidiary of Varlen. J. Craig Rice would remain as
Brenco president.
<PAGE>
Varlen has been a manufacturer of railroad products since its founding.
Wellek said potential synergies between the two companies should create future
growth opportunities in railroad equipment. "We will have a stronger and more
diverse family of products for the railroad industry, as well as the ability to
leverage greater sales overseas," he said.
Brenco is a leading manufacturer and re-conditioner of tapered roller
bearings for freight cars, for both the domestic and overseas markets. Other
Varlen subsidiaries make railcar shock control devices, outlet gates, locomotive
products and track fastening devices.
Varlen, headquartered in Naperville, Illinois, is a leading manufacturer of
precision engineered transportation products and analytical instruments for the
railroad, heavy-duty truck and trailer, automotive and petroleum industries.
Varlen's customers include Freightliner, PACCAR, General Motors, Chrysler and
TTX. The company had 1995 annual sales of $387 million.
###
MORE INFORMATION ON VARLEN AND BRENCO CAN BE FOUND ON THE CHLOPAK, LEONARD,
SCHECHTER SITE ON THE WORLD WIDE WEB AT HTTP://CLSDC.COM/NEWS/VARLEN.
<PAGE>
================================================================================
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated June 20, 1996 and the related Letter of
Transmittal, and is being made to all holders of Shares. The Purchaser (as
defined below) is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with such state statute. If
after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Lehman Brothers Inc. or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Brenco, Incorporated
at
$16.125 Net Per Share
by
BAS, Inc.
a wholly owned subsidiary of
Varlen Corporation
BAS, Inc., a Virginia corporation (the "Purchaser") and a wholly owned
subsidiary of Varlen Corporation, a Delaware corporation ("Varlen"), is offering
to purchase all outstanding shares of the Common Stock, par value $1.00 per
share (the "Shares"), of Brenco, Incorporated, a Virginia corporation (the
"Company"), at $16.125 per Share, net to the seller in cash, without any
interest, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated June 20, 1996 (the "Offer to Purchase") and in the related
Letter of Transmittal (which together constitute the "Offer"). Following the
Offer, the Purchaser intends to effect the Merger described below.
---------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON THURSDAY, JULY 18, 1996, UNLESS THE OFFER IS EXTENDED.
---------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER
TO PURCHASE) A NUMBER OF SHARES OF THE COMPANY WHICH, TOGETHER WITH THE SHARES
BENEFICIALLY OWNED BY VARLEN, THE PURCHASER, AND/OR OTHER SUBSIDIARIES OF
VARLEN, REPRESENTS AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING
ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). THE PURCHASER ESTIMATES THAT
APPROXIMATELY 6,639,627 SHARES WILL NEED TO BE VALIDLY TENDERED (AND NOT VALIDLY
WITHDRAWN) TO SATISFY THE MINIMUM CONDITION.
The Offer is being made pursuant to an Acquisition Agreement dated as of
June 15, 1996 (the "Acquisition Agreement"), by and among Varlen, the Purchaser
and the Company. Pursuant to the Acquisition Agreement, and subject to the
satisfaction or waiver of the conditions set forth therein, the Purchaser has
agreed to make the Offer and purchase all Shares validly tendered and not
withdrawn following the later of (i) the expiration or termination of all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), applicable to the Offer and (ii) the Expiration
Date. After the completion of the Offer, the Purchaser will be merged with and
into the Company (the "Merger") and each Share then outstanding (other than
Shares held by Varlen, the Purchaser, the Company or any direct or indirect
subsidiary of Varlen, the Purchaser or the Company, and Shares with respect to
which dissenter's rights under the Virginia Stock Corporation Act, as amended
(the "Virginia Act") are properly exercised) will be converted upon
effectiveness of the Merger (the "Effective Time") into the right to receive
$16.125 in cash, without any interest. Following the consummation of the Merger,
the Company will continue as the surviving corporation and will be a wholly
owned subsidiary of Varlen.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AND THE ACQUISITION AGREEMENT, HAS DETERMINED THAT THE TERMS OF THE
OFFER, THE MERGER AND THE ACQUISITION AGREEMENT ARE FAIR TO AND IN THE BEST
INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
Simultaneously with entering into the Acquisition Agreement, Varlen entered
into a Shareholder Tender Agreement (the "Shareholder Tender Agreement") with
certain shareholders of the Company (the "Tendering Shareholders"), including
the Chairman and Chief Executive Officer of the Company and certain members (and
trusts for the benefit of) members of his family. Pursuant to the Shareholder
Tender Agreement, each Tendering Shareholder has agreed to tender (and not
withdraw) pursuant to the Offer and before the Expiration Date all of the Shares
owned of record or beneficially by such Tendering Shareholder (subject to
certain exceptions) on the date of the Shareholder Tender Agreement, together
with any Shares acquired by any such Tendering Shareholder prior to the
termination of the Shareholder Tender Agreement. As of the date hereof, the
Tendering Shareholders beneficially own 2,108,343 Shares, or approximately 20.7%
of all outstanding Shares.
The Offer is subject to certain conditions set forth in the Offer to
Purchase. If any such condition is not satisfied prior to the time of payment
for any Shares, the Purchaser may (i) terminate the Offer and return all
tendered shares to tendering shareholders, (ii) extend the Offer and, subject to
withdrawal rights as set forth below, retain all such Shares until the
expiration of the Offer as so extended, (iii) waive such condition and, subject
to any requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered by the Expiration Date and not withdrawn,
or (iv) delay acceptance for payment of or payment for Shares, subject to
applicable law, until satisfaction or waiver of the conditions of the Offer.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment (and thereby purchased) tendered Shares as, if and when the
Purchaser gives oral or written notice to the Depositary (Harris Trust Company
of New York) of the Purchaser's acceptance of such Shares for payment pursuant
to the Offer. Payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting payments to tendering shareholders. The Purchaser will not,
under any circumstances, pay interest on the purchase price, regardless of any
delay in making such payment. In all cases, payment for Shares purchased
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the certificates evidencing the Shares or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility (as defined in the Offer to Purchase) pursuant to the
procedures set forth in the Offer to Purchase, (ii) the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase), and (iii) any other documents required by the Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period of time during which the Offer
is open (but subject to the terms and conditions of the Acquisition Agreement)
by giving oral or written notice of such extension to the Depositary. Any such
extension will be followed, as soon as practicable, by public announcement
thereof, no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
Tenders of Shares made pursuant to the Offer will be irrevocable, except
that Shares tendered may be withdrawn at any time prior to the Expiration Date
and, unless previously accepted for payment, may also be withdrawn after August
18, 1996. If the Purchaser is delayed in its acceptance or purchase of or
payment for Shares or is unable to purchase or pay for Shares for any reason,
then, without prejudice to the Purchaser's rights, tendered Shares may be
retained by the Depositary on behalf of the Purchaser and may not be withdrawn
except as described in the Offer to Purchase.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses specified on the back cover of the Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and, if certificates
representing such Shares have been delivered or otherwise identified to the
Depositary, the name(s) in which such certificate(s) is (are) registered, if
different from the name of the person tendering such Shares. If certificates
have been delivered or otherwise identified to the Depositary, then prior to the
physical release of such certificates, the tendering shareholder must also
submit the serial numbers shown on the particular certificates evidencing such
Shares and the signature on the notice of withdrawal must be guaranteed by a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office, branch or agency in the United States or any other
institution that is a member of the Medallion Signature Guaranty Program (each
being referred to herein as an "Eligible Institution"). If Shares have been
tendered pursuant to the procedure for book-entry tender set forth in the Offer
to Purchase, the notice of withdrawal must specify the name and account
number(s) of the account(s) at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Purchaser, in its sole discretion, whose determination shall be final and
binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares and will be furnished to brokers,
dealers, banks and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and locations as set forth below, and copies
will be furnished promptly at the Purchaser's expense. The Purchaser will not
pay any fees or commissions to any broker or dealer or any other person (other
than the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (call collect)
or
Call Toll Free: 1-800-848-3402
The Dealer Manager for the Offer is:
Lehman Brothers
3 World Financial Center
New York, New York 10285
(212) 526-2864
(call collect)
June 20, 1996
================================================================================
<PAGE>
Contact:
Richard L. Wellek, President & CEO, or
Richard A. Nunemaker, Vice President & CFO,
Varlen Corporation (708) 420-0400
Jacob M. Feichtner, Executive Vice President & CFO,
(804) 378-2902
Needham B. Whitfield, Chairman & CEO,
Brenco, Incorporated (804) 378-2900
VARLEN COMMENCES $165 MILLION CASH TENDER OFFER
FOR BRENCO SHARES
MERGER WOULD CREATE PREEMINENT RAILROAD EQUIPMENT MANUFACTURER WITHIN VARLEN
NAPERVILLE, ILL., June 20, 1996 -- Varlen Corporation (NASDAQ:VRLN) and
Brenco, Incorporated (NASDAQ:BREN) of the Richmond, Va. area today announced
that a wholly owned Varlen subsidiary has formally commenced a tender offer
for any and all outstanding shares of Brenco common stock at a price of
$16-1/8 per share, net to the seller in cash. The offer, which is scheduled to
expire on July 18, 1996, is being made pursuant to an agreement with Brenco
announced earlier this week. The offer is to be followed by a merger that will
result in Brenco becoming a wholly owned subsidiary of Varlen.
The board of directors of Brenco has unanimously approved the offer and the
merger, has determined that the terms of the offer and merger are fair to and
in the best interests of the shareholders of Brenco and recommends that
shareholders accept the offer and tender
(More)
<PAGE>
their shares pursuant thereto. The tender offer requires that Varlen will be
able to obtain at least two-thirds of the shares at the expiration of the
offer. An offer to purchase containing all of the terms and conditions of the
offer is being distributed to Brenco's shareholders. The agreement
contemplates that shares not tendered would be acquired at the same $16.125
price through the merger. Brenco has approximately 10.2 million shares
outstanding. Persons related to Brenco's founding family -- including Needham
B. Whitfield, Brenco's chairman and chief executive officer, and his sister
Anne Whitfield Kenny -- control approximately 20 percent of the stock and have
signed a separate shareholder tender agreement with Varlen.
"We are delighted to be taking this important step to make Brenco an
integral member of our Varlen family of companies," commented Richard L.
Wellek, Varlen's president and chief executive officer. Wellek said potential
synergies between the two companies should create future growth opportunities
in railroad equipment.
Lehman Brothers, Inc. is acting as financial advisor to Varlen in
connection with the transactions and as dealer manager for the tender offer.
The information agent is D.F. King & Co., Inc.
Brenco, headquartered in the Richmond, Va. area, is a leading manufacturer
and reconditioner of tapered roller bearings for freight cars, for both the
domestic and overseas markets. Other Varlen subsidiaries make railcar shock
control devices, outlet gates, locomotive products and track fastening
devices.
Varlen, headquartered in Naperville, Illinois, is a leading manufacturer of
precision engineered transportation products and analytical instruments for
the railroad, heavy-duty truck
(More)
<PAGE>
and trailer, automotive and petroleum industries. Varlen's customers include
Freightliner, PACCAR, General Motors, Chrysler and TIX. The company had 1995
annual sales of $387 million.
###
MORE INFORMATION ON VARLEN AND BRENCO CAN BE FOUND ON THE CHLOPAK, LEONARD,
SCHECHTER SITE ON THE WORLD WIDE WED AT HTTP://CLSDC.COM/NEWS/VARLEN.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
- ----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
</TABLE>
- ----------------------------------------------------------
<TABLE>
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
</TABLE>
- ----------------------------------------------------------
- ----------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
</TABLE>
- ----------------------------------------------------------
<TABLE>
<C> <S> <C>
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local
government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
- ----------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE
PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE
FORM.
Certain payments, other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Draft 6/18/96
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 __, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 1
ARTICLE II
THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 21
2.1. COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . Page 21
2.1.1. FACILITY A LOANS. . . . . . . . . . . . . . . . . . Page 21
2.1.2. FACILITY B LOANS. . . . . . . . . . . . . . . . . . Page 23
2.2. RATABLE LOANS; TYPES OF ADVANCES . . . . . . . . . . . . . . Page 23
2.3. MINIMUM AMOUNT OF EACH ADVANCE . . . . . . . . . . . . . . . Page 24
2.4. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 24
2.4.1. COMMITMENT FEE. . . . . . . . . . . . . . . . . . . Page 24
2.4.2. UPFRONT FEE . . . . . . . . . . . . . . . . . . . . Page 24
2.4.3. AGENT FEES. . . . . . . . . . . . . . . . . . . . . Page 24
2.5 APPLICABLE MARGIN. . . . . . . . . . . . . . . . . . . . . . Page 24
2.6 REDUCTIONS IN AGGREGATE FACILITY B COMMITMENT. . . . . . . . Page 26
2.7. PRINCIPAL PAYMENTS . . . . . . . . . . . . . . . . . . . . . Page 26
2.7.1. OPTIONAL PAYMENTS . . . . . . . . . . . . . . . . . Page 26
2.7.2. CURRENCY FLUCTUATIONS; PERMITTED EXCESS OVER
AGGREGATE COMMITMENT . . . . . . . . . . . . . . . Page 26
2.7.3. TERMINATION . . . . . . . . . . . . . . . . . . . . Page 27
2.7.4. MANDATORY PREPAYMENTS . . . . . . . . . . . . . . . Page 27
2.8. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR NEW
ADVANCES. . . . . . . . . . . . . . . . . . . . . . . . . . Page 28
2.9. CONVERSION AND CONTINUATION OF OUTSTANDING ADVANCES. . . . . Page 29
2.9.1. DOLLAR ADVANCES . . . . . . . . . . . . . . . . . . Page 29
2.9.2. FOREIGN CURRENCY ADVANCES . . . . . . . . . . . . . Page 29
2.9.3. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . Page 29
2.10. CHANGES IN INTEREST RATE, ETC. . . . . . . . . . . . . . . . Page 30
2.11. RATES APPLICABLE AFTER DEFAULT . . . . . . . . . . . . . . . Page 30
2.12. METHOD OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . Page 31
2.12.1. GENERAL . . . . . . . . . . . . . . . . . . . . . . Page 31
2.12.2. CURRENCY OF PAYMENT . . . . . . . . . . . . . . . . Page 31
2.13. NOTES; TELEPHONIC NOTICES. . . . . . . . . . . . . . . . . . Page 31
2.14. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS . . . . . . . Page 32
2.15. NOTIFICATION BY AGENT. . . . . . . . . . . . . . . . . . . . Page 32
2.16. LENDING INSTALLATIONS. . . . . . . . . . . . . . . . . . . . Page 32
2.17. NON-RECEIPT OF FUNDS BY THE AGENT. . . . . . . . . . . . . . Page 32
2.18. WITHHOLDING TAX EXEMPTION. . . . . . . . . . . . . . . . . . Page 33
2.19. EXTENSION OF FACILITY B TERMINATION DATE . . . . . . . . . . Page 33
2.20. CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . Page 34
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2.20.1. TAXES . . . . . . . . . . . . . . . . . . . . . . . Page 34
2.20.2. YIELD PROTECTION. . . . . . . . . . . . . . . . . . Page 35
2.20.3. CHANGES IN CAPITAL ADEQUACY REGULATIONS . . . . . . Page 36
2.20.4. AVAILABILITY OF TYPES OF ADVANCES . . . . . . . . . Page 37
2.20.5. FUNDING INDEMNIFICATION . . . . . . . . . . . . . . Page 37
2.20.6. LENDER STATEMENTS; SURVIVAL OF INDEMNITY. . . . . . Page 37
ARTICLE III
THE LETTER OF CREDIT SUBFACILITY. . . . . . . . . . . . . . . . . . Page 38
3.1. OBLIGATION TO ISSUE. . . . . . . . . . . . . . . . . . . . . Page 38
3.2. TYPES AND AMOUNTS. . . . . . . . . . . . . . . . . . . . . . Page 38
3.3. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . Page 39
3.4. PROCEDURE FOR ISSUANCE OF FACILITY B LETTERS OF CREDIT . . . Page 39
3.5. REIMBURSEMENT OBLIGATIONS; AUTOMATIC ALTERNATE BASE RATE
ADVANCE; DUTIES OF ISSUING BANKS. . . . . . . . . . . . . . Page 41
3.6. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . Page 41
3.7. PAYMENT OF REIMBURSEMENT OBLIGATIONS . . . . . . . . . . . . Page 43
3.8. COMPENSATION FOR FACILITY B LETTERS OF CREDIT. . . . . . . . Page 44
3.9. LETTER OF CREDIT COLLATERAL ACCOUNT. . . . . . . . . . . . . Page 44
ARTICLE IV
CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . Page 45
4.1. INITIAL ADVANCE AND FACILITY B LETTER OF CREDIT. . . . . . . Page 45
4.2. EACH ADVANCE AND FACILITY B LETTER OF CREDIT . . . . . . . . Page 46
4.3. FIRST ADVANCE OR FACILITY B LETTER OF CREDIT TO NEW
BORROWING SUBSIDIARIES. . . . . . . . . . . . . . . . . . . Page 46
4.4. FACILITY A ADVANCE IN CONNECTION WITH OFFER TO PURCHASE. . . Page 47
4.5. FACILITY A ADVANCE IN CONNECTION WITH MERGER . . . . . . . . Page 48
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER. . . . . . . . . . . . . Page 49
5.1. CORPORATE EXISTENCE AND STANDING . . . . . . . . . . . . . . Page 49
5.2. AUTHORIZATION AND VALIDITY . . . . . . . . . . . . . . . . . Page 49
5.3. NO CONFLICT; GOVERNMENT CONSENT. . . . . . . . . . . . . . . Page 50
5.4. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . Page 50
5.5. MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . Page 50
5.6. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 50
5.7. LITIGATION AND CONTINGENT OBLIGATIONS. . . . . . . . . . . . Page 51
5.8. SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . Page 51
5.9. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 51
5.10. ACCURACY OF INFORMATION. . . . . . . . . . . . . . . . . . . Page 51
5.11. REGULATIONS G, T, U, AND X . . . . . . . . . . . . . . . . . Page 51
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5.12. MATERIAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . Page 52
5.13. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . Page 52
5.14. OWNERSHIP OF PROPERTIES. . . . . . . . . . . . . . . . . . . Page 52
5.15. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . Page 52
5.16. PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . . . . Page 52
5.17. SUBORDINATED INDEBTEDNESS. . . . . . . . . . . . . . . . . . Page 52
5.18. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . Page 52
5.19. SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . Page 53
5.20. BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 53
ARTICLE V-A
REPRESENTATIONS AND WARRANTIES OF BORROWING SUBSIDIARIES. . . . . . Page 53
5A.1. CORPORATE EXISTENCE AND STANDING . . . . . . . . . . . . . . Page 53
5A.2. AUTHORIZATION AND VALIDITY . . . . . . . . . . . . . . . . . Page 54
5A.3. NO CONFLICT; GOVERNMENT CONSENT. . . . . . . . . . . . . . . Page 54
5A.4. FILING . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 54
5A.5. NO IMMUNITY. . . . . . . . . . . . . . . . . . . . . . . . . Page 55
5A.6. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . . . . Page 55
5A.7. PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . . . . Page 55
5A.8. REGULATION U . . . . . . . . . . . . . . . . . . . . . . . . Page 55
ARTICLE VI
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 55
6.1. FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . Page 55
6.2. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . Page 57
6.3. NOTICE OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . Page 57
6.4. CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . Page 57
6.5. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 57
6.6. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . Page 57
6.7. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . Page 58
6.8. MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . . . Page 58
6.9. INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . Page 58
6.10. DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . Page 58
6.11. INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . Page 58
6.12. MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 59
6.13. SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . Page 59
6.14. SALE OF ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . Page 60
6.15. SALE AND LEASEBACK . . . . . . . . . . . . . . . . . . . . . Page 60
6.16. INVESTMENTS AND ACQUISITIONS . . . . . . . . . . . . . . . . Page 60
6.17. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 61
6.18. FIXED ASSET EXPENDITURES . . . . . . . . . . . . . . . . . . Page 63
6.19. RENTALS. . . . . . . . . . . . . . . . . . . . . . . . . . . Page 63
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<PAGE>
6.20. AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . Page 63
6.21. SUBORDINATED INDEBTEDNESS. . . . . . . . . . . . . . . . . . Page 63
6.22. FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . Page 64
6.22.1. INTEREST COVERAGE RATIO . . . . . . . . . . . . . . Page 64
6.22.2. LEVERAGE RATIO. . . . . . . . . . . . . . . . . . . Page 64
6.22.3. OPERATING CASH FLOW TO SENIOR DEBT. . . . . . . . . Page 64
6.22.4. NET WORTH . . . . . . . . . . . . . . . . . . . . . Page 64
6.23. FOREIGN ASSETS . . . . . . . . . . . . . . . . . . . . . . . Page 64
6.24. RATE HEDGING OBLIGATIONS . . . . . . . . . . . . . . . . . . Page 64
6.25. INTEREST RATE AGREEMENTS . . . . . . . . . . . . . . . . . . Page 64
6.26. CONSUMMATION OF MERGER . . . . . . . . . . . . . . . . . . . Page 65
ARTICLE VII
DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 65
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES. . . . . . . . . . . Page 67
8.1. ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . Page 67
8.2. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . Page 67
8.3. PRESERVATION OF RIGHTS . . . . . . . . . . . . . . . . . . . Page 68
ARTICLE IX
GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . Page 69
9.1. SURVIVAL OF REPRESENTATIONS. . . . . . . . . . . . . . . . . Page 69
9.2. GOVERNMENTAL REGULATION. . . . . . . . . . . . . . . . . . . Page 69
9.3. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 69
9.4. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 69
9.5. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . Page 69
9.6. SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. . . . . . . Page 69
9.7. EXPENSES; INDEMNIFICATION. . . . . . . . . . . . . . . . . . Page 69
9.8. NUMBERS OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . Page 70
9.9. ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . Page 70
9.10. SEVERABILITY OF PROVISIONS . . . . . . . . . . . . . . . . . Page 70
9.11. NONLIABILITY OF LENDERS. . . . . . . . . . . . . . . . . . . Page 70
9.12. LANGUAGE . . . . . . . . . . . . . . . . . . . . . . . . . . Page 70
9.13. CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . . . Page 70
9.14. CONSENT TO JURISDICTION. . . . . . . . . . . . . . . . . . . Page 71
9.15. SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . Page 71
9.16. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . Page 71
9.17. ERISA REPRESENTATION . . . . . . . . . . . . . . . . . . . . Page 72
9.18. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . Page 72
9.19. JOINT AND SEVERAL LIABILITY. . . . . . . . . . . . . . . . . Page 72
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<PAGE>
ARTICLE X
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 72
10.1. APPOINTMENT. . . . . . . . . . . . . . . . . . . . . . . . . Page 72
10.2. POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 72
10.3. GENERAL IMMUNITY . . . . . . . . . . . . . . . . . . . . . . Page 73
10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC.. . . . . . . . . Page 73
10.5. ACTION ON INSTRUCTIONS OF LENDERS. . . . . . . . . . . . . . Page 73
10.6. EMPLOYMENT OF AGENTS AND COUNSEL . . . . . . . . . . . . . . Page 73
10.7. RELIANCE ON DOCUMENTS; COUNSEL . . . . . . . . . . . . . . . Page 73
10.8. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. . . . . . . . . . Page 74
10.9. RIGHTS AS A LENDER . . . . . . . . . . . . . . . . . . . . . Page 74
10.l0. LENDER CREDIT DECISION . . . . . . . . . . . . . . . . . . . Page 74
10.11. SUCCESSOR AGENT. . . . . . . . . . . . . . . . . . . . . . . Page 74
ARTICLE XI
SETOFF; RATABLE PAYMENTS. . . . . . . . . . . . . . . . . . . . . . Page 75
11.1. SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 75
11.2. RATABLE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . Page 75
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS . . . . . . . . . Page 75
12.1. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . Page 75
12.2. PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . Page 76
12.2.1 PERMITTED PARTICIPANTS; EFFECT. . . . . . . . . . . Page 76
12.2.2. BENEFIT OF SETOFF . . . . . . . . . . . . . . . . . Page 76
12.3. ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . Page 76
12.3.1. PERMITTED ASSIGNMENTS . . . . . . . . . . . . . . . Page 77
12.3.2. EFFECT; EFFECTIVE DATE. . . . . . . . . . . . . . . Page 77
12.4. DISSEMINATION OF INFORMATION . . . . . . . . . . . . . . . . Page 77
12.5. TAX TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . Page 78
ARTICLE XIII
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 78
13.1. GIVING NOTICE. . . . . . . . . . . . . . . . . . . . . . . . Page 78
13.2. CHANGE OF ADDRESS. . . . . . . . . . . . . . . . . . . . . . Page 78
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ARTICLE XIV
BORROWER RESPONSIBILITY FOR BORROWING SUBSIDIARY OBLIGATIONS. . . . Page 78
14.1 DIRECT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . Page 78
14.2 OBLIGATIONS UNCONDITIONAL. . . . . . . . . . . . . . . . . . Page 78
14.3. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . Page 79
14.4. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 79
14.5. STAY OF ACCELERATION . . . . . . . . . . . . . . . . . . . . Page 80
14.6 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . Page 80
14.7 SUBROGATION. . . . . . . . . . . . . . . . . . . . . . . . . Page 80
ARTICLE XV
COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 81
EXHIBITS
EXHIBIT A-1 BORROWER NOTE
EXHIBIT A-2A BORROWING SUBSIDIARY NOTE
EXHIBIT A-2B 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 D-3 FORM OF OPINION OF COUNSEL IN CONNECTION WITH OFFER TO
PURCHASE
EXHIBIT E LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
EXHIBIT F COMPLIANCE CERTIFICATE
EXHIBIT G FORM OF SUBSIDIARY GUARANTY
EXHIBIT H ASSIGNMENT AGREEMENT
SCHEDULES
SCHEDULE 1 PERCENTAGES
SCHEDULE 2 LENDING INSTALLATIONS
SCHEDULE 3 LITIGATION
SCHEDULE 4 SUBSIDIARIES AND OTHER INVESTMENTS
SCHEDULE 5 INDEBTEDNESS AND LIENS
SCHEDULE 6 EXISTING LETTERS OF CREDIT
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CREDIT AGREEMENT
This Agreement, dated as of July __, 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 4.4.
"ACQUISITION SUBSIDIARY" means BAS, Inc., a Virginia corporation, and its
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.
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"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
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 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)
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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 of any inventory in the ordinary course of business.
"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, each
such enumerated Person acting singly.
"BORROWER" means Varlen Corporation, a Delaware corporation, and its
permitted successors and assigns.
"BORROWER NOTE" means a promissory note, in substantially the form of
EXHIBIT A-1 hereto, duly executed by the Borrower and payable to the order of a
Lender in a principal amount up to and including its 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
Acquisition Subsidiary 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 (i) in connection with the Facility A
Loans, a promissory note in substantially the form of EXHIBIT A-2A hereto, duly
executed by the Acquisition Subsidiary 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-2B 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.
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"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 Eurodollars, 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 EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
Eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies (fully protected against
currency fluctuations for any such deposits with a term of more than ten (10)
days); (iii) shares of money market, mutual or similar funds having assets in
excess of $100,000,000 and the investments of which are limited to investment
grade securities (i.e., securities rated at least Baa by Moody's Investors
Service, Inc. or at least BBB by Standard & Poor's Corporation) and (iv)
commercial paper of United States and foreign banks and bank holding companies
and their subsidiaries and United States and foreign finance, commercial
industrial or utility companies which, at the time of acquisition, are rated A-1
(or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's
Investors Services, Inc.; PROVIDED that the maturities of such Cash Equivalents
shall not exceed 365 days.
"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
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(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
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(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, 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 or (iv) there shall be consummated any
transaction the result of which shall be that the Borrower or the Acquisition
Subsidiary shall fail to own 100% of the outstanding shares of Brenco.
"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.
"CONVERSION/CONTINUATION NOTICE" is defined in SECTION 2.9.3.
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"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.
"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.
"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, and (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.
"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.
"EBITA" means, for any period, the sum of Earnings before Net Interest,
income taxes 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
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determined in accordance with Agreement Accounting Principles on a consolidated
basis for the Borrower and its Subsidiaries.
"EBITDA" means (i) when used with respect to the Borrower, the sum of (a)
EBITA PLUS (b) depreciation, 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, 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.
"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 l974, 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
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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 SALE" means [_________________________]. In no event shall
the aggregate value of all Excluded Asset Sales exceed $46,000,000.
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"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 ______, 1998 and (ii)
thereafter, July __, 1999.
"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 of the purchase 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 _______ 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 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.
"FACILITY B LOAN" is defined in SECTION 2.1.2.
"FACILITY B TERMINATION DATE" means July __, 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.
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"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 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.
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"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 Guaranty dated as of July __, 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
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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.
"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) EBITA 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.
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"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" means a ratio of (i) Indebtedness of the Borrower and its
consolidated Subsidiaries to (ii) EBITDA of the Borrower and its consolidated
Subsidiaries.
"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)
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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.
["MONY LETTERS OF CREDIT" means those certain Facility B Letters of Credit
to be issued by First Chicago, as an Issuing Bank, which Facility B Letters of
Credit shall be (a) Standby Letters of Credit, each with a termination date on
or before [___________________], (b) issued as of the date of this Agreement
notwithstanding the procedure contained in SECTION 3.4(a), and (c) issued for
the benefit of MONY Life Insurance Company of America, The Mutual Life Insurance
Company of New York and Mutual Benefit Life Insurance Company in Rehabilitation
(or their respective successors and assigns) as credit support for the
Borrower's Indebtedness to such entities referred to on SCHEDULE 5 hereto.]
"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 of any Person,
(a) cash (freely convertible into U.S. Dollars) received by such Person or
any Subsidiary of such Person from such Asset Sale (including cash received
as consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of 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 Personas a
reserve, 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
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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. All calculations of
Net Cash Proceeds shall be in Dollar Equivalents.
"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.
"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.
"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 [_____________].
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"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 March, June, September and
December.
"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 (other than in connection with
the Offer to Purchase): (i) made at a time when no Default or Unmatured Default
exists or would exist after giving effect to such Acquisition, (ii) consummated
on a non-hostile basis and 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 [_________________].
"PERSON" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any Governmental Agency.
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"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
stocks 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
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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 2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 66 2/3% 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 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.
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"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
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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.
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, available in a single draw in dollars, to
the Acquisition Subsidiary (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 Acquisition Subsidiary shall deliver to
the Agent a Borrowing Notice, signed by it, on the Facility A Borrowing
Date. Such Borrowing Notice shall specify instructions for the
disbursement of the proceeds of the Facility A Loans. The Facility A Loans
shall initially be Alternate Base Rate Loans and thereafter may be
continued as Alternate Base Rate Loans or converted into Fixed Rate Loans
in the manner provided in SECTION 2.9 and subject to the other conditions
and limitations therein set forth and set forth in this Article II. Any
Borrowing Notice given pursuant to this SECTION 2.1.1(b) shall be
irrevocable.
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(c) MAKING OF FACILITY A LOANS. Promptly after receipt of the
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
Acquisition Subsidiary at the Agent's office in Chicago, Illinois on the
applicable Facility A Borrowing Date and shall disburse such proceeds in
accordance with the Acquisition Subsidiary'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-five (25) consecutive installments, the first
twenty-four (24) of which shall be payable quarterly on the last day of
each calendar quarter commencing September 30, 1996 and continuing
thereafter to and including June 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
---------------- ------------------
September 30, 1996
December 31, 1996
March 31, 1997
June 30, 1997
September 30, 1997
December 31, 1997
March 31, 1998
June 30, 1998
September 30, 1998
December 31, 1998
March 31, 1999
June 30, 1999
September 30, 1999
December 31, 1999
March 31, 2000
June 30, 2000
September 30, 2000
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December 31, 2000
March 31, 2001
June 30, 2001
September 30, 2001
December 31, 2001
March 31, 2002
June 30, 2002
Facility A Termination Date
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 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.
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 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 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 2.5 and 8.1 relating to the reduction,
suspension or termination of the Facility 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. 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
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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, Borrower may not select a Fixed Rate with
an Interest Period greater than one month for any Advance made prior to three
months after the date hereof.
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 B 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 on the daily
unborrowed portion of such Lender's Percentage of the Facility B
Commitment, the accrued but unpaid portion of which shall be payable
on each Payment Date hereafter and on the Facility B 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
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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.
<TABLE>
<CAPTION>
APPLICABLE MARGIN LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
STATUS STATUS STATUS STATUS STATUS STATUS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALTERNATE BASE RATE .25% 0% 0% 0% 0% 0%
EUROCURRENCY RATE 1.25% 1.00% 0.875% 0.75% 0.625% 0.50%
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
(FINANCIAL) 1.25% 1.00% 0.875% 0.75% 0.625% 0.50%
STANDBY LETTER OF CREDIT FEE
(PERFORMANCE) 0.50% 0.50% 0.50% 0.375% 0.375% 0.375%
</TABLE>
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 2.1.
"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.
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"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 the receipt of the financial statements for the fiscal quarter
ended [January 31, 1997] shall be the Applicable Martin determined based upon
the Leverage Ratio applicable on the date hereof (after taking into account all
borrowings on the closing date) but in no event shall be less than Level III.
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 Acquisition
Subsidiary 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 to the unpaid installments
of the Facility A Loans on a pro-rata basis. 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
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<PAGE>
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 by the Borrower or
any Borrowing Subsidiary of the Borrower, other than an
Excluded Asset Sale, 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' (i) receipt
of any Net Cash Proceeds from any such Asset Sale, or (ii)
conversion to cash or Cash Equivalents 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 (y) one hundred percent (100%) of such Net Cash
Proceeds or such proceeds converted from non-cash to Cash
Equivalents.
(ii) Within five (5) Business Days after the receipt by the
Borrower or any Subsidiary of any proceeds of Indebtedness
(other than Permitted Indebtedness), the Borrower shall make
or cause to be made a mandatory prepayment in an amount
equal to one hundred percent (100%) of the net proceeds of
such proceeds of 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 expressly
permitted by the terms of this Agreement.
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(iv) Each mandatory prepayment required by clause (i) and (ii) of
this SECTION 2.4 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 to the unpaid
installments of the Facility A Loans in the inverse
order of maturity; 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).
(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. 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).
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,
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(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
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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.
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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;
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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 extend, 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
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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
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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
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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
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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
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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 prior to three
months after the date hereof, 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
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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 such 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 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 any Letter of Credit which has an expiration date after the
Facility B Termination Date;
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(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 $24,985,857 on or prior to
March 30, 1994 and $15,000,000 thereafter; PROVIDED, HOWEVER, that
$9,985,857 of such $24,985,857 may only be represented by the MONY
Letters of Credit; 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:
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(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.
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(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. 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.
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(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
[(including the Facility B Letter of Credit described in the proviso to
SECTION 3.2(V))] and immediately upon the date hereof for the Existing
Letters 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,
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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 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 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.
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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.
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.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1. INITIAL ADVANCE AND FACILITY B LETTER OF CREDIT. The initial
Advance 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,
both certified by the appropriate governmental officer in its
jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of the
Borrower, of its by-laws and of its 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 or Assistant
Secretary of the Borrower, which shall identify by name and title and
bear the signature of the officers of the Borrower 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) Such other documents as any Lender or its counsel may have reasonably
requested.
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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.
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(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.
(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 transactions contemplated
hereby.
(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 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.
(iii) The amounts and forms of consideration paid by the Acquisition
Subsidiary for shares of common stock of Brenco in connection with the
Offer to Purchase shall be acceptable to the Required Lenders and
shall not exceed $[___] per share.
(iv) The terms of the Offer to Purchase shall be acceptable to the Required
Lenders and 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
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purchasing tendered shares to take place by September 30, 1996,
PROVIDED that the tender offer price is $[___] per share or less and
(ii) in immaterial aspects of a type to be agreed upon by the Agent
and the Borrower.
(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 in connection with the Offer to Purchase shall be accurate
in all material respects as of the 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 and the Required Lenders shall have received an opinion of
counsel satisfactory to the Required Lenders in substantially the
form of EXHIBIT D-3.
(vii) The Agent and the Required Lenders shall have received pro forma
opening financial statements of the Borrower and its consolidated
Subsidiaries giving effect to the [Brenco Acquisition][purchase of
shares pursuant to the Offer to Purchase] which must not be materially
less favorable, in the reasonable judgment of the Agent and the
Required Lenders, than the projections previously provided to them and
which must demonstrate, in the reasonable judgment of the Agent and
the Required Lenders, that the Borrower and its Subsidiaries
(including, without limitation, the Acquisition Subsidiary) can repay
their debts and satisfy their respective other obligations as and when
due, and can comply with the financial covenants acceptable to the
Agent and the Required Lenders, along with such information as the
Agent and the Required Lenders may reasonably request to confirm the
tax, legal and business assumptions made in such pro forma financial
statements.
(viii) The Agent shall have received such corporate documentation pertaining
to Brenco as the Agent shall reasonably request.
(ix) All fees required to be paid to the Agent and the Lenders shall have
been paid in full.
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 Brenco's
directors or shareholders shall have approved the Merger on terms
substantially similar to those set forth in the draft dated as of
[__________] of the Acquisition Agreement dated as of [____________]
between the Borrower, the Acquisition Subsidiary and Brenco (the
"Acquisition Agreement"), which terms are acceptable to the Required
Lenders.
(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
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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) Not more than [____%] of the shareholders of Brenco shall have
exercised dissenters' rights.]
(v) 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.
(vi) 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 of
counsel satisfactory to the Required Lenders substantially in the form
of EXHIBIT D-4].
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents and warrants to the Lenders that:
5.1. CORPORATE EXISTENCE AND STANDING. 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
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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. 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, 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, 1995, 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, 1994, 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. Since the date of the consolidated
pro forma financial statements delivered to the Agent prior to the Closing Date,
there has been no change in the business, Property, prospects, condition
(financial or otherwise), projections, or results of operations of Brenco, the
Borrower and their respective 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
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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,
1991. 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 $1,000,000. As of December
31, 1995, neither the Borrower nor any other member of the Controlled Group has
incurred any withdrawal liability to Multiemployer Plans. 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, neither the Borrower nor any other member of the Controlled Group has
withdrawn from any Plan or initiated steps to do so, and no steps have been
taken to reorganize or 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. 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.
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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.
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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 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
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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
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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
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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
the Subsidiaries) consolidating unaudited balance sheets as at the
close of each such period and condensed consolidated and (for itself
and the 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.
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(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 Acquisition Subsidiary will use the
proceeds of the Facility A Advances to provide funds for the purchase of the
shares of common stock of Brenco tendered in connection with the Offer to
Purchase, for the purchase of the shares of common stock of Brenco to be
purchased in connection with the Merger and for the payment of expenses incurred
in connection with the Brenco Acquisition. 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
purchase of Brenco pursuant to 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 (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.
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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
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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) Additional Indebtedness not to exceed $20,000,000 in the aggregate.
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 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 and (ii) 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, PROVIDED
FURTHER that 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)
$[_____________] 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, effective on the date of such
disposition, the Borrower permanently reduces the Aggregate Commitment
by an amount at least equal to the value of the proceeds (net of
reasonable expenses of disposition) of such disposition (and, in
connection with such reduction of the Aggregate Commitment, prepays
any Advances or cash collateralizes any Facility B Letters of Credit
as necessary to keep
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the aggregate principal amount of outstanding Advances and Facility B
Letter of Credit Obligations from exceeding the Aggregate Commitment
after giving effect to such reduction).
(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 $2,000,000.
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.
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 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 $5,000,000 in
aggregate principal amount, any Investments in any debt instruments or
stock of any Person, and (II), at any time that Loans outstanding
exceed $5,000,000 in aggregate principal amount, Investments of up to
(x) $10,000,000 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
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Moody's plus (y) an additional $5,000,000 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, (b) created for the
purpose of facilitating a Permitted Acquisition or (c) created
pursuant to any reorganization by the Borrower of its consolidated
assets not otherwise prohibited hereunder, PROVIDED that (i) the
Borrower will cause any such new Domestic Subsidiary created pursuant
to a reorganization described in 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.
(vii) Investments consisting of notes received as part of the sales proceeds
of asset sales permitted pursuant to the terms of SECTION 6.13.
(viii) Investments in other Persons represented by Financial Guaranties and
other Contingent Obligations permitted under SECTION 6.11.
(ix) Investments held by a Subsidiary which Subsidiary is 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 $5,000,000 at any one time outstanding.
(b) make any Acquisition of any Person, except for Permitted
Acquisitions. Upon the consummation of any Permitted Acquisition, (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 (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 not a Foreign 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.
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
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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
$2,000,000 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.
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(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 $5,000,000
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 that, when expended, will exceed the
sum of (i) $5,000,000 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 $4,000,000 during any one fiscal year 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 only the
Borrower and/or one or more Domestic Subsidiaries or Wholly-Owned Subsidiaries,
(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 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
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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 [____ to 1.0].
6.22.2. LEVERAGE RATIO. At all times, a Leverage Ratio not exceeding
[____ to 1.0].
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 .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) $[______________] 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.]
6.23. 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,
(i) shall not exceed $52,000,000 at any time during the term of this Agreement,
and (ii) shall not exceed $40,000,000 at any time prior to July __, 1997.
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 45 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
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
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amount to be determined by the Agent after consultation with the Borrower, but
which notional amount shall not be required to exceed [___] percent (__%) of the
Aggregate Facility A Commitment.]
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 [ ___] business
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 $2,000,000 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 $2,000,000 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 $2,000,000 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 $2,000,000 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.
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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 $2,000,000, 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 $15,000,000 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 $2,000,000.
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 $2,000,000 or requires
payments exceeding $1,000,000 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
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(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
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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) SECTION 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 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.
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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
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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.
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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.
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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
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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 (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
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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.l0. 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
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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
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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, such Lender's obligations under the Loan
Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any such Note (and the
"Lender") for all purposes under the Loan Documents, 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, and 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.
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.
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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 [$2,500] 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.
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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:
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(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
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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. Notwithstanding any payments made or obligations
performed by the Borrower by reason of this Article XIV (including but not
limited to application of funds on account of such payments of obligations), the
Borrower hereby irrevocably waives and releases any and all rights it may have
at any time (whether arising directly or indirectly, by operation of law,
contract or otherwise) to assert any claim against any Borrowing Subsidiary or
any other Person or against any direct or indirect security on account of
payments made or obligations performed under or pursuant to this Article XIV,
including without limitation any and all rights of subrogation, reimbursement,
exoneration, contribution or indemnity, and any and all rights that would result
in the Borrower being deemed a "creditor" under the United States Bankruptcy
Code of any Borrowing Subsidiary or any other person.
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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
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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
[OTHER LENDERS]
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EXHIBIT C
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (as the same may be modified, amended, supplemented
and/or restated from time to time, this "Agreement"), dated as of June 15, 1996,
by and among (1) Varlen Corporation, a Delaware corporation ("Varlen"), (2) BAS,
Inc., a Virginia corporation and a wholly owned subsidiary of Varlen (the
"Purchaser"), and (3) Brenco, Incorporated, a Virginia corporation (the
"Company").
RECITALS
The respective Boards of Directors of Varlen, the Purchaser and the Company
have each determined that it is advisable for Varlen, through the Purchaser, to
acquire all of the Company's outstanding Common Stock, par value $1.00 per share
(the "Shares"), at a price of $16.125 per Share in cash pursuant to the offer
described below in Article 1 and the merger described below in Article 2, as a
result of which the Company will become a wholly owned subsidiary of Varlen. The
Board of Directors of the Company has duly approved such offer and resolved to
recommend its acceptance by the holders of Shares. The respective Boards of
Directors of Varlen, the Purchaser and the Company have each duly approved the
merger of the Purchaser and the Company following the consummation of such
offer.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Varlen, the Purchaser and the Company
hereby agree as follows:
ARTICLE 1: THE OFFER
Section 1.1 THE OFFER. (a) Provided that none of the conditions set forth
in ANNEX I to this Agreement shall have occurred, the Purchaser (or one or more
other direct or indirect wholly owned subsidiaries of Varlen) shall promptly,
and in no event later than one business day after the date of this Agreement,
publicly announce, and within five business days thereafter commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), an offer to purchase any and all outstanding Shares at a price
of $16.125 per Share, net to the seller in cash and without any interest thereon
(the "Offer", which term shall include any amendments to such offer not
prohibited by this Agreement). The obligation of the Purchaser to consummate the
Offer, to accept for payment and to pay for any Shares tendered shall be subject
to those conditions set forth in ANNEX I to this Agreement. Without the consent
of the Company, the Purchaser shall not reduce the price to be paid per Share
pursuant to the Offer, change the form of consideration to be paid in the Offer
or the Merger (as hereinafter defined), increase the minimum number of Shares to
be purchased in the Offer or amend any other term of the Offer (including the
conditions set forth on ANNEX I to this Agreement) in a manner materially
adverse to the holders of the Shares. The conditions of the Offer are for the
sole benefit of Varlen and the Purchaser and may be asserted by Varlen and the
Purchaser regardless of the circumstances giving rise to any such conditions or,
subject to the preceding sentence, may be waived by Varlen and the Purchaser in
whole or in part.
(b) On the date that the Purchaser commences the Offer (within the meaning
of Rule 14D-2 under the Exchange Act), Varlen and the Purchaser shall file with
the Securities and Exchange Commission (the "Commission") a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer (the "Schedule 14D-1")
that will comply in all material respects with the provisions of applicable
federal securities law and will contain an Offer to Purchase (which, along with
the related letters of transmittal and summary advertisements, together with any
supplements or amendments thereto, are referred to herein as the "Offer
Documents"). The Schedule 14D-1 and the Offer Documents, on the date the
Schedule 14D-1 is filed with the Commission and on the date the Offer Documents
are first published, sent or given to securityholders, as the case may be, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or
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necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and Varlen and the Purchaser agree
promptly to correct (and the Company, with respect to written information
supplied by it specifically for use in the Schedule 14D-1 and the Offer
Documents, agrees to promptly request that Varlen and the Purchaser correct) the
Schedule 14D-1 and/or the Offer Documents if and to the extent that any of them
shall have become false or misleading in any material respect. Varlen and the
Purchaser shall take all steps necessary to cause the Schedule 14D-1 as so
corrected to be filed with the Commission and such Offer Documents as so
corrected to be disseminated to securityholders, in each case as and to the
extent required by applicable federal securities laws. None of the information
relating to Varlen and its affiliates supplied in writing by Varlen specifically
for inclusion in the Schedule 14D-9 (as defined hereinbelow) will, at the time
the Schedule 14D-9 is filed with the Commission, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 1.2 COMPANY ACTIONS. (a) The Company represents that the Board of
Directors of the Company (the "Board of Directors") has duly approved the Offer
and the Merger and resolved to recommend acceptance of the Offer by holders of
Shares and approval of the Merger (if such approval is required by the Virginia
Stock Corporation Act, as amended (the "Virginia Act")) by holders of Shares.
The Company represents and warrants that its Board of Directors has: (1)
exempted Varlen, the Purchaser, their respective direct and indirect
subsidiaries and the Offer, the Merger and the other transactions contemplated
by this Agreement from the restrictions and other provisions of Article 14,
SectionSection 13.1-725-13.1-728 (AFFILIATED TRANSACTIONS) of the Virginia Act
in the manner provided by Section 13.1-727.B.1.(iv) thereof, by the adoption of
resolutions substantially in the form set forth in ANNEX II hereto; (2) exempted
Varlen, the Purchaser, their respective direct and indirect subsidiaries and the
Offer, the Merger and the other transactions contemplated by this Agreement from
the super majority shareholder vote provisions of Article I of the Articles of
Incorporation, as amended, of the Company (the "Charter"), by the adoption of
resolutions substantially in the form set forth in ANNEX II hereto; (3) in
connection with the provisions of Article 15 (DISSENTER'S RIGHTS), Section
13.1-730 of the Virginia Act, approved the Merger by a majority of
"disinterested directors" (as defined in Section 13.1-725 of the Virginia Act),
by the adoption of resolutions substantially in the form set forth in ANNEX II
hereto; and (4) approved this Agreement, with the effect of (among other things)
exempting Varlen, the Purchaser, the Offer and the Merger from the restrictions
and provisions of Article 14.1, SectionSection 13.1-728.1-13.1-728.9 (CONTROL
SHARE ACQUISITIONS) of the Virginia Act. The Company and its Board of Directors
(including the "disinterested director" members thereof) shall take such other
and further actions necessary or appropriate, at the request of Varlen or the
Purchaser to: (A) exempt Varlen, the Purchaser, their direct or indirect
subsidiaries, the Offer, the Merger and the other transactions contemplated by
this Agreement from the provisions of any takeover, affiliated transaction,
business combination, control share acquisition or other provision of: (i) law
or regulation adopted by the Commonwealth of Virginia or any department or
agency thereof, or (ii) the Charter or Bylaws of the Company, and (B) maintain
the shareholder vote required to approve the Merger at the two-thirds level.
(b) The Company agrees to file with the Commission, and mail to the
Company's shareholders, a Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9") containing the recommendation of the Board of
Directors that the holders of Shares accept the Offer. The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws. The Schedule 14D-9, on the date filed with the Commission and
on the date first published, sent or given to the Company's securityholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Company agrees promptly to correct (and Varlen and the
Purchaser, with respect to written information supplied by either of them
specifically for use in the Schedule 14D-9, agree to promptly request that the
Company correct) the Schedule 14D-9 if and to the extent that it shall have
become false or misleading in any material respect. The Company shall take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
Commission and mailed to the Company's securityholders to
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the extent required by applicable federal securities laws. None of the
information relating to the Company and its affiliates supplied in writing by
the Company specifically for inclusion in the Schedule 14D-1 will, at the time
the Schedule 14D-1 is filed with the Commission, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) The Company will promptly furnish Varlen or the Purchaser with mailing
labels containing the names and addresses of the record holders of Shares and
lists of securities positions of Shares held in stock depositories, each as of a
recent date, and shall furnish the Purchaser with such additional information,
including updated lists of securityholders, mailing labels and lists of
securities positions, and other assistance as the Purchaser may reasonably
request for the purpose of communicating the Offer to the holders of Shares.
Varlen and the Purchaser agree to hold the foregoing information confidential,
to use it only in connection with the Offer and the Merger, and in the event
this Agreement is terminated in accordance with its terms to cause such lists to
be returned to the Company.
Section 1.3 DIRECTORS. Promptly upon the acceptance for payment of, and
payment by the Purchaser in accordance with the Offer for, Shares constituting
50% or more of all Shares then outstanding pursuant to the Offer, and from time
to time thereafter, the Purchaser shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors as
will give the Purchaser representation on the Board of Directors equal to at
least that number of directors which equals the product of the total number of
directors on the Board of Directors (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that such number of
Shares so accepted for payment and paid for or owned by the Purchaser or Varlen
bears to the number of Shares outstanding, and the Company shall, at such time,
use its best efforts to cause the Purchaser's designees to be so elected;
PROVIDED, HOWEVER, that the Purchaser shall have the right (in its discretion)
to designate a number of directors less than such product; AND PROVIDED FURTHER,
HOWEVER, that at all times prior to the Merger there shall be at least two
members of the Board of Directors of the Company selected by the current members
of such Board. Subject to applicable law, the Company shall take all action
necessary to effect any such election (including mailing to its shareholders the
information required Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, in form and substance reasonably satisfactory to Varlen)
and use its reasonable best efforts to cause the resignation of such directors,
and/or an increase in the number of its directors, as may be directed by Varlen
and required to implement the provisions of this Section 1.3.
ARTICLE 2: THE MERGER
Section 2.1 THE MERGER. At the Effective Time (as defined in Section 2.3
hereof), in accordance with this Agreement and the Virginia Act, the Purchaser
shall be merged with and into the Company, the separate existence of the
Purchaser (except as may be continued by operation of law) shall cease, and the
Company shall continue as the surviving corporation of the Merger. The Company,
after the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation." At the election of Varlen, any other direct or indirect wholly
owned subsidiary of Varlen may be substituted for the Purchaser as a constituent
corporation in the merger for purposes of this Section 2.1.
Section 2.2 EFFECT OF THE MERGER. At the Effective Time, the Surviving
Corporation shall continue its corporate existence under the laws of the
Commonwealth of Virginia and shall succeed to all rights, privileges,
immunities, franchises, property, debts due, liabilities and obligations of the
Purchaser and the Company in accordance with the provisions of the Virginia Act.
Section 2.3 CONSUMMATION OF THE MERGER. As soon as is practicable after
the satisfaction or waiver of the conditions set forth in Article 6 hereof, the
parties hereto will cause the Merger to be consummated by delivering to the
State Corporation Commission of the Commonwealth of Virginia (the "Virginia
Commission") articles of merger (the "Articles of Merger") in such form as
required by,
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and executed and acknowledged in accordance with, the relevant provisions of the
Virginia Act. The Merger shall become effective as of the time that the Virginia
Commission finds that the Articles of Merger comply with the requirements of law
and that all required fees have been paid and it shall issue a certificate of
merger with respect to the Merger for record in accordance with the relevant
provisions of the Virginia Act (or at such later time specified as the effective
time in the Articles of Merger). The term "Effective Time" shall mean the date
and time at which the Merger becomes effective.
Section 2.4 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The
articles of incorporation of the Surviving Corporation shall be the articles of
incorporation of the Company as in effect immediately prior to the Effective
Time, until thereafter amended as provided therein and under the Virginia Act.
The Bylaws of the Surviving Corporation shall be the Bylaws of the Purchaser as
in effect immediately prior to the Effective Time until thereafter amended as
provided therein and under the Virginia Act. The directors of the Purchaser
immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation, and the officers of the Purchaser immediately prior to
the Effective Time will be the initial officers of the Surviving Corporation, in
each case until their successors are elected and qualified.
Section 2.5 CONVERSION OF SECURITIES. (a) At the Effective Time, by
virtue of the Merger and without any action on the part of the Purchaser, the
Company, the Surviving Corporation or the holder of any of the following
securities:
(1) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares to be cancelled pursuant to Section 2.5(b) hereof
and Shares held by any holder who properly exercises and does not waive or
withdraw dissenter's rights with respect to his Shares under the Virginia
Act ("Dissenting Shares")) shall be cancelled and extinguished and be
converted into and become a right to receive $16.125 in cash per Share (or
any such higher price per Share as may be paid in the Offer) without any
interest thereon (the "Merger Consideration");
(2) Each Share which is issued and outstanding immediately prior to the
Effective Time and owned by Varlen, the Purchaser or the Company or any
direct or indirect subsidiary of Varlen, the Purchaser or the Company, shall
be cancelled and retired, and no payment shall be made with respect thereto;
and
(3) Each share of Common Stock of the Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one validly issued, fully paid and nonassessable share of Common Stock of
the Surviving Corporation.
(b) The holders of Dissenting Shares, if any, shall be entitled to payment
for such Shares only to the extent permitted by and in accordance with the
applicable provisions of the Virginia Act; PROVIDED, HOWEVER, that if, in
accordance with such provisions of the Virginia Act, any holder of Dissenting
Shares shall waive or withdraw such right to payment of the fair value of such
Shares, each such Share shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration provided in Section 2.5(a)(1) of this
Agreement. The holders of Dissenting Shares shall have and possess only such
rights and privileges as a shareholder of the Company as are provided for under
Article 15 (DISSENTER'S RIGHTS) of the Virginia Act.
Section 2.6 COMPANY STOCK INCENTIVE PLANS. (a) Prior to the Effective
Time, the Board of Directors (or, if appropriate, any committee thereof) shall
adopt, subject to the terms of the Stock Option Plans (as hereinafter defined),
such resolutions as are necessary or appropriate, if any, to adjust the terms of
all outstanding employee stock options to purchase Shares (collectively, the
"Options") granted under any stock option plan of the Company (collectively, the
"Stock Option Plans", which term shall include (without limitation) the
Company's 1988 Stock Option Plan, as amended) to provide for the cancellation,
effective as of the Effective Time, of such Options (and any stock appreciation
rights or limited stock appreciation rights) as set forth in this Section
2.6(a). Not later than immediately prior to the Effective Time, each Option,
whether or not then exercisable or
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vested, shall become fully exercisable and vested. The Company shall use its
reasonable best efforts to insure that each Option outstanding immediately prior
to the Effective Time shall be cancelled in exchange for a payment, not later
than immediately prior to the Effective Time, from the Company (subject to any
applicable withholding taxes) in cash equal to the product of (x) the total
number of Shares subject to such Option and (y) the excess, if any, of the
Merger Consideration over the exercise price per Share subject to such Option.
Any stock appreciation rights or limited stock appreciation rights shall be
cancelled as of immediately prior to the Effective Time without any payment
therefor.
(b) Prior to the Effective Time, the Board of Directors (or, if appropriate,
any committee thereof) shall adopt, subject to the terms of the Restricted Stock
Plans (as hereinafter defined), such resolutions as are necessary or
appropriate, if any, to adjust the terms of all restricted Shares (collectively,
the "Restricted Shares") granted under any restricted stock plan of the Company
(collectively, the "Restricted Stock Plans", which term shall include (without
limitation) the Company's 1987 Restricted Stock Plan, as amended) to provide for
the cancellation, effective as of the Effective Time, of such Restricted Shares
as set forth in this Section 2.6(b). Not later than immediately prior to the
Effective Time, each Restricted Share, whether or not then unrestricted or
vested, shall become fully unrestricted, exercisable and vested. The Company
shall use its reasonable best efforts to insure that each Restricted Share
outstanding immediately prior to the Effective Time shall be cancelled in
exchange for the Merger Consideration.
(c) Effective as of the date of this Agreement, the Board of Directors (or,
if appropriate, any committee thereof) shall have taken the appropriate action
with respect to the Company's Employee Stock Savings Plan (the "Savings Plan")
to provide that: (i) until the earlier to occur of the Effective Time or any
termination of this Agreement, participants in the Savings Plan will not be
eligible to receive matching Shares on any Shares purchased by such participants
after the date of this Agreement, and (ii) any right of participants in the
Savings Plan to receive matching Shares from the Company as of the date of this
Agreement accrued as a result of Shares purchased prior to the date of this
Agreement shall be cancelled in exchange for a payment, not later than
immediately prior to the Effective Time, from the Company (subject to any
applicable withholding taxes) in cash equal to the product of (x) the total
number of such accrued matching Shares and (y) the Merger Consideration.
(d) Except as provided herein, the Stock Option Plans, Restricted Stock
Plans and any other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the Company or
any subsidiary (collectively with the Stock Option Plans and Restricted Stock
Plans, referred to as the "Stock Incentive Plans") shall terminate as of the
Effective Time. The Company shall use its reasonable best efforts to ensure that
following the Effective Time no holder of an Option or Restricted Shares nor any
other participant in any Stock Incentive Plan shall have any right thereunder to
acquire equity securities of the Company or the Surviving Corporation or any
subsidiary thereof and, if requested by Varlen, to obtain the written
acknowledgement of such holders and participants with respect thereto.
Section 2.7 EXCHANGE OF CERTIFICATES. (a) From and after the Effective
Time, Harris Trust Company of New York shall act as paying agent (the "Paying
Agent") in effecting the exchange, for the Merger Consideration multiplied by
the number of Shares formerly represented thereby, of certificates (the
"Certificates") that, prior to the Effective Time, represented Shares entitled
to payment pursuant to Section 2.5(a) hereof. At or before the Effective Time,
Varlen or the Purchaser shall deposit with the Paying Agent in trust for the
benefit of the holders of Certificates immediately available funds in an
aggregate amount (the "Payment Fund") equal to the product of the Merger
Consideration multiplied by the number of Shares entitled to payment pursuant to
Section 2.5(a) hereof. Upon the surrender of each such Certificate, the Paying
Agent shall pay the holder of such Certificate the Merger Consideration
multiplied by the number of Shares formerly represented by such Certificate,
without any interest thereon, in exchange therefor, and such Certificate shall
forthwith be cancelled. Until so surrendered and exchanged, each such
Certificate shall represent solely the right to receive the Merger Consideration
multiplied by the number of Shares represented by such Certificate, without any
interest thereon. If any cash is to be paid to a name other than the name in
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which the Certificate representing Shares surrendered in exchange therefor is
registered, it shall be a condition to such payment that the person requesting
such payment shall pay to the Paying Agent any transfer or other taxes required
by reason of the payment of such cash to a name other than that of the
registered holder of the Certificate surrendered, or such person shall establish
to the satisfaction of the Paying Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Paying Agent nor any
party hereto shall be liable to a holder of Shares for any Merger Consideration
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(b) The Payment Fund shall be invested by the Paying Agent, as directed by
Varlen or the Purchaser, in: (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) obligations of any
United States state or any political subdivision of such 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 Standard & Poor's
Corporation ("S&P") or A or better by Moody's Investors Services, Inc.
("Moody's"), (iii) commercial paper rated A-1 or better by S&P or P-1 or better
by Moody's, and/or (iv) certificates of deposit and bankers' acceptances issued
by, and time deposits with, commercial banks (whether foreign or domestic)
having capital and surplus in excess of $100,000,000; and any net earnings with
respect thereto shall be paid to Varlen as and when requested by Varlen, and
Varlen shall replace any principal lost through any investment made pursuant to
this Section 2.7(b).
(c) The Paying Agent shall, pursuant to irrevocable instructions to be given
by Varlen or the Purchaser, make the payments referred to in Section 2.5(a) out
of the Payment Fund. Promptly following the date which is nine months after the
Effective Time, the Paying Agent shall deliver to Varlen all cash, certificates
and other documents in its possession relating to the transactions described in
this Agreement, and the Paying Agent's duties shall terminate. Thereafter, each
holder of a Certificate formerly representing a Share may surrender such
Certificate to the Surviving Corporation or Varlen and (subject to applicable
abandoned property, escheat and similar laws) receive in exchange therefor the
Merger Consideration, without any interest thereon, but shall have no greater
rights against the Surviving Corporation or Varlen than may be accorded to
general creditors of the Surviving Corporation or Varlen under applicable law.
(d) Promptly after the Effective Time, the Paying Agent shall mail each
record holder of Certificates that immediately prior to the Effective Time
represented Shares a form of letter of transmittal and instructions for use in
surrendering such Certificates and receiving the Merger Consideration therefor.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Certificates which
theretofore represented Shares. If, after the Effective Time, Certificates
formerly representing Shares are presented to the Surviving Corporation or the
Paying Agent, they shall be cancelled and exchanged for the Merger
Consideration, as provided in this Article 2, subject to applicable law in the
case of Dissenting Shares.
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF VARLEN AND THE PURCHASER
Varlen and the Purchaser each hereby represents and warrants to, and agrees
with, the Company as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION. Each of Varlen and the
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite
corporate power to carry on its respective business as now conducted. Each of
Varlen and the Purchaser is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or leased or the nature of its activities makes such
qualification necessary, except for failures to be so qualified or in good
standing which would not, in the aggregate, materially impair the ability of
Varlen and the Purchaser to
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perform their obligations hereunder. The Purchaser has not engaged in any
material business or activity of any kind, or entered into any material
agreement or arrangement with any person or entity or incurred, directly or
indirectly, any material liabilities or obligations, except in connection with
its incorporation or with the negotiation of this Agreement and the agreements
relating to the financing of the Offer, the Merger and the other transactions
contemplated thereby (the "Financing") and the consummation of the transactions
contemplated hereby and thereby.
Section 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Varlen and the
Purchaser has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Varlen and the Purchaser and the consummation by Varlen and the Purchaser of
the transactions contemplated hereby have been duly authorized by the respective
Boards of Directors of Varlen and the Purchaser and no other corporate
proceedings on the part of Varlen or the Purchaser are necessary to authorize
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Varlen and the Purchaser and constitutes a valid and binding obligation of each
of them, enforceable against each of them in accordance with its terms except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally and by general equitable principles.
Section 3.3 COMPLIANCE. (a) Neither the execution and delivery of this
Agreement by Varlen and the Purchaser nor the consummation by them of the
transactions contemplated hereby, nor compliance by Varlen and the Purchaser
with any of the provisions hereof, does or will: (i) violate, conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or right of amendment of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Varlen or the Purchaser or
any other direct or indirect subsidiary of Varlen under, any of the terms,
conditions or provisions of (x) the charter documents or bylaws of Varlen or the
Purchaser or any other direct or indirect subsidiary of Varlen or, (y) except
for the Revolving Credit Agreement, dated as of December 6, 1993, as amended,
among Varlen, the subsidiaries thereof party thereto, the lenders named therein,
and The First National Bank of Chicago (the "Agent Bank"), as agent, which will
be refinanced simultaneously with the consummation of the Offer, any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Varlen or the Purchaser or any other direct or
indirect subsidiary of Varlen is a party, or to which any of them, or any of
their respective properties or assets, may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in Section 3.3(b),
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Varlen or the Purchaser or any other direct or indirect
subsidiary of Varlen or any of their respective properties or assets; except, in
the case of each of clauses (i)(y) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances which, in the aggregate,
would not materially impair the ability of Varlen and the Purchaser to perform
their obligations hereunder.
(b) Other than in connection with or in compliance with the provisions of
the Virginia Act, the Securities Act of 1933, as amended (the "Securities Act"),
the Exchange Act, the "take-over" or "blue sky" laws of any state, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act") and the laws and regulations of any
states or foreign jurisdictions under which a filing or consent may be required
for Varlen's acquisition of control of the Company or any of its subsidiaries,
and except for any notices, filings, authorizations, consents or approvals which
are required because of the regulatory status of the Company and its
subsidiaries or facts specifically pertaining to them, no notice to, filing
with, or authorization, consent or approval of, any domestic or foreign public
body or authority is necessary for the consummation by Varlen or the Purchaser
of the transactions contemplated by this Agreement, except where the failure to
give
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such notices, make such filings, or obtain authorizations, consents or approvals
would, in the aggregate, not materially impair the ability of Varlen and the
Purchaser to perform their obligations hereunder.
Section 3.4 FINANCING. Varlen has received (and has furnished to the
Company copies of) written commitments from one or more banks and other
financial institutions (as the case may be, the "Banks") to provide the
Financing. The Schedule 14D-1 will contain true and accurate descriptions of the
commitments of the Banks. The Financing will not violate Regulations G, T, U or
X of the Board of Governors of the Federal Reserve System.
Section 3.5 BROKERS AND FINDERS. Neither Varlen nor the Purchaser nor any
of their respective officers, directors, employees or agents has employed any
broker, finder, investment banker or other person, and none of the foregoing
have incurred any liability for any brokerage fees, commissions or finders'
fees, in connection with the transactions contemplated hereby, except that
Varlen and the Purchaser have engaged Lehman Brothers Inc. in connection with
the transactions contemplated hereby and the Agent Bank (and/or affiliates
thereof) in connection with the Financing. The Schedule 14D-1 contains a true
and accurate description of the fee arrangements between Varlen and Lehman
Brothers and the Agent Bank (and any affiliates thereof).
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and agrees with, Varlen and
the Purchaser as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as hereinafter defined) is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia and
has the requisite power and authority (corporate and otherwise) to carry on its
business as it is now being conducted. The subsidiaries listed in Exhibit 21 of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the "Latest 10-K") and those Previously Disclosed (as hereinafter defined)
are the only subsidiaries of the Company (such subsidiaries listed and
Previously Disclosed, "Subsidiaries"). The Company and each Subsidiary is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except for failures
to be so qualified or in good standing which do not have a Material Adverse
Effect (as hereinafter defined). Copies of the Charter and Bylaws of the Company
have heretofore been delivered to Varlen and the Purchaser and such copies are
accurate and complete as of the date hereof. For purposes of this Agreement, an
occurrence, event, fact or circumstance (or any group, series or set of
occurrences, events, facts or circumstances) ("Occurrences") has a "Material
Adverse Effect" if such Occurrences, individually or in the aggregate, resulted
in, results in or may reasonably be expected to result in a material adverse
effect on or change in: (i) the business, assets, properties, condition
(financial or otherwise), results of operations or prospects of (x) the Company
or (y) the Company and the Subsidiaries taken as a whole, (ii) the ability of
Varlen or the Purchaser to consummate the Offer or the Merger or the other
transactions contemplated hereby, or (iii) the ability of the Company to perform
its obligations hereunder. For purposes of this Agreement, a fact shall have
been "Previously Disclosed" if it is contained in the Latest 10-K, the Proxy
Statement furnished by the Company to its shareholders in connection with the
Company's 1996 Annual Meeting of Shareholders (the "Latest Proxy Statement"),
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, as amended prior to the date hereof (the "Latest 10-Q"), or was otherwise
disclosed in writing by the Company to Varlen prior to the execution of this
Agreement.
Section 4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of: (i) 15,000,000 Shares, of which, as of June 14, 1996, 10,207,440
Shares (including Restricted Shares) were issued and outstanding, and (ii)
1,000,000 shares of Preferred Stock, par value $1.00 per share, none of which
are issued or outstanding. All of the issued and outstanding Shares have been
validly
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issued and are fully paid and nonassessable and free of preemptive rights. As of
June 14, 1996, the Company had outstanding: (1) Options to purchase 442,000
Shares heretofore granted under the Company's Stock Option Plans and like number
of Shares reserved for issuance upon the exercise thereof, and (2) 62,576
Restricted Shares heretofore granted under the Company's Restricted Stock Plans.
Since January 31, 1996, the Company has not issued any Options, Restricted
Shares or shares of its capital stock except upon exercise of Options granted
prior to January 31, 1996 and except as Previously Disclosed with respect to
Shares issued under the Savings Plan. Except as set forth above: (A) there are
no shares of capital stock of the Company authorized, issued or outstanding and
(ii) there are no outstanding subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating the Company or any of its Subsidiaries to issue, transfer or sell any
shares of the capital stock or any securities convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of the capital stock
of the Company. Following the Merger, the Company will have no obligation to
issue, transfer or sell any shares of its capital stock pursuant to any Stock
Incentive Plan, other employee benefit plan, or otherwise. All of the
outstanding shares of capital stock of each of the Subsidiaries have been
validly issued and are fully paid and nonassessable and are owned by either the
Company or another Subsidiary free and clear of all pledges, liens, security
interests, charges, claims, equities, options, proxies, voting restrictions,
rights of first refusal and other limitations on disposition or voting and
encumbrances of any kind. There are no outstanding subscriptions, options,
warrants, calls, rights, convertible securities or other agreements or
commitments of any character relating to the issued or unissued capital stock of
any of the Subsidiaries or securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of such capital stock, or
otherwise obligating any Subsidiary to issue, transfer or sell any such capital
stock or other securities. There are no voting trusts or other agreements or
understandings to which the Company or any of its subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of its
Subsidiaries.
Section 4.3 CAPITALIZATION OF SUBSIDIARIES. The name, jurisdiction of
incorporation or organization and percentage of outstanding capital stock owned,
directly or indirectly, by the Company, with respect to each direct and indirect
Subsidiary of the Company have been Previously Disclosed. Except as Previously
Disclosed, the Company and its Subsidiaries own no direct or indirect equity
interest in any corporation (other than direct or indirect subsidiaries of the
Company), partnership, joint venture or other entity, domestic or foreign, which
in the aggregate are material to the Company and its Subsidiaries taken as a
whole.
Section 4.4 AUTHORITY RELATIVE TO AGREEMENT. The Company has the requisite
power and authority (corporate and otherwise) to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by it of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company and, except for the
requisite approval by the holders of Shares entitled to vote (if required under
the Virginia Act), or as provided herein, no other proceedings on the part of
the Company are necessary to authorize the execution, delivery and performance
of this Agreement and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
Section 4.5 NO CONFLICTS. (a) Neither the execution and delivery of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, nor compliance by the Company with any of the
provisions hereof, does or will: (i) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or right of amendment of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties
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or assets of the Company or any of its Subsidiaries under any of the terms,
conditions or provisions of: (x) the Charter or Bylaws of the Company or any of
its Subsidiaries, or (y) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the Company
or any of its subsidiaries is a party or to which any of them or any of their
respective properties or assets may be subject, or (ii) subject to compliance
with the statutes and regulations referred to in Section 4.5(b), violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to the Company and its Subsidiaries or any of their respective
properties or assets, except in the case of clause (i)(y) above, for the
Company's 7.50% Senior Notes due 2002 and the Company's 7.06% note due 2003, and
except, in the case of each of clauses (i)(y) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances which, in the
aggregate, do not have a Material Adverse Effect.
(b) Other than in connection with or in compliance with the provisions of
the Virginia Act, the Securities Act, the Exchange Act, the "takeover" or "blue
sky" laws of any state, the HSR Act and regulations of any states or foreign
jurisdictions under which a filing or consent may be required for Varlen's
acquisition of control of the Company or any of its Subsidiaries, no notice to,
filing with, or authorization, consent or approval of, any domestic or foreign
public body or authority is necessary for the consummation by the Company of the
transactions contemplated by this Agreement, except where the failure to give
such notices, make such filings or obtain authorizations, consents or approvals
do not have a Material Adverse Effect.
Section 4.6 COMPANY REPORTS AND FINANCIAL STATEMENTS. Since December 31,
1995, the Company has filed with the Commission all forms, reports, statements
and documents required to be filed by it pursuant to the Securities Act and the
rules and regulations promulgated thereunder and the Exchange Act and the rules
and regulations promulgated thereunder (collectively, the "Company Filings",
which term shall include (without limitation) the Latest 10-K, Latest 10-Q and
Latest Proxy Statement), all of which complied as of the date filed in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act (as appropriate). None of the Company Filings as of the dates they
were respectively filed with the Commission contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets included in the Company Filings (including, in each
case, any related notes) fairly presented the consolidated financial position of
the Company and its consolidated subsidiaries as of its respective dates and
each of the consolidated statements of income, shareholders' equity and cash
flows included in the Company Filings (including, in each case, any related
notes) fairly presented the consolidated results of operations and cash flows of
the Company and its Subsidiaries for the respective periods set forth therein,
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, subject (in the case of the
unaudited interim financial statements) to normal year-end audit adjustments.
Section 4.7 LITIGATION. Except as Previously Disclosed, as of the date
hereof there are no claims, actions, proceedings or, to the best knowledge of
the Company, investigations pending against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, before any court, administrative, governmental or regulatory
authority or body (collectively "Litigations"): (i) that are required to be
disclosed in any Company Filing and are not so disclosed, or (ii) that, if
adversely decided, would have a Material Adverse Effect.
Section 4.8 EMPLOYEE BENEFIT PLANS. (a) The Company Filings contain a
true and complete summary or list of or otherwise describe all material
employment contracts and other employee benefit arrangements to which the
Company or any of its Subsidiaries is a party with "change of control" or
similar provisions and all severance agreements with executive officers
(collectively, the "Change of Control Benefit and Severance Arrangements"). The
Company has Previously Disclosed all other employee benefit plans, agreements
and arrangements which are maintained or contributed to by the Company or any of
its Subsidiaries for its employees, officers or directors, including (without
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limitation) all bonus, incentive compensation, deferred compensation, profit
sharing, stock option, stock purchase, insurance, pension, retirement and other
employee benefit plans (collectively, the "Benefit Plans"). True and complete
copies of all such Change of Control Benefit and Severance Arrangements and
Benefit Plans, including (but not limited to) any trust instruments and/or
insurance contracts, if any, forming a part thereof, and all amendments thereto,
have been delivered to Varlen. The Company's estimate of the total amount of all
payments which may be payable under the Change of Control Benefit and Severance
Arrangements, other than upon cancellation of the Options and Restricted Shares
pursuant to Section 2.6, is $3,435,000.
(b) The Company has delivered to Varlen copies of each of its Benefit Plans
which are employee pension benefit plans (within the meaning of Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including all amendments thereto to date ("Employee Pension Benefit Plans").
Except as required by law or as Previously Disclosed, there have been no
amendments or other changes in such Employee Pension Benefit Plans which would
for any period after December 31, 1995 increase coverage or benefits thereunder
in any material respect. Except as Previously Disclosed, each such Employee
Pension Benefit Plan: (i) is in material compliance with all of the provisions
of ERISA and the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
has no accumulated funding deficiency (within the meaning of Section 302(a) of
ERISA), whether or not waived, and (iii) has not been involved in any non-exempt
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code. Except as Previously Disclosed, neither the Company nor any of
its Subsidiaries has incurred or has any reasonable basis to believe it will
incur any material liability to the Pension Benefit Guaranty Corporation with
respect to any funded Employee Pension Benefit Plan. Certified copies of the
most recent actuarial statements with respect to each Employee Pension Benefit
Plan subject to Title IV of ERISA have been previously provided to Varlen. Since
December 31, 1991, neither the Company nor any of its Subsidiaries has had any
obligation to contribute to any multiemployer plan (as defined in Section
4001(a)(3) of ERISA). Neither the Company nor any of its Subsidiaries provides
benefits under any employee welfare benefit plan (as such term is defined in
Section 3(1) of ERISA) to any person following the termination of employment,
except for: (A) "COBRA" continuation coverage obligations under Section 601 et
seq. of ERISA and Section 4980B of the Code, (B) the Company's and Subsidiaries'
severance plan for salaried employees, (C) retiree life insurance coverage, and
(D) retiree medical and dental coverages to age 65. The Company's and
Subsidiaries' aggregate annual expense for the fiscal year ended December 31,
1995 for all employee welfare benefit plans (x) providing for health and medical
benefits for the employees of the Company and its Subsidiaries, and (y)
described in the foregoing sentence, did not exceed (in the aggregate)
$2,547,000.
Section 4.9 TAXES. Except as Previously Disclosed, the Company and each of
its Subsidiaries (collectively, the "Group") has filed or been included in all
federal income tax returns and other material returns (collectively, "Tax
Returns") relating to Taxes (as hereinafter defined) required to be filed
(taking into account any extensions of time for filing or sending such Tax
Returns). Except as Previously Disclosed, the Group has paid or made provision
for (by a tax accrual or tax reserve on the most recent consolidated balance
sheet of the Group contained in the Company Filings), all Taxes (except for such
Taxes which if not so paid or provided for do not have a Material Adverse Effect
in respect of all taxable periods or portions thereof ending on or before the
date of such balance sheets. Except as Previously Disclosed, any material Taxes
incurred or accrued since December 31, 1992 have arisen in the ordinary course
of business. Except as Previously Disclosed, the Group is not delinquent in the
payment of any federal income or other material Taxes and there are no
outstanding deficiencies, assessments or written proposals for assessment of
federal income or other material Taxes proposed, asserted or assessed against
the Group; and, to the best knowledge of the Company, there are no events,
occurrences, facts or circumstances which could provide a basis for any such
deficiency, assessment or proposal. As used herein, "Taxes" means: (i) all net
income, gross income, gross receipts, sales, use, transfer, franchise, profits,
withholding, payroll, employment, excise, severance, property or windfall
profits taxes, or other taxes of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority (federal,
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state, local or foreign) upon the Company or any of its Subsidiaries with
respect to all periods or portions thereof ending on or before the Effective
Time, and/or (ii) any liability of the Company or any of its Subsidiaries for
the payment of any amounts of the type described in the immediately preceding
clause (i) as a result of being a member of an affiliated or combined group.
Section 4.10 ABSENCE OF CERTAIN CHANGES. Except as contemplated by this
Agreement or as Previously Disclosed, since December 31, 1995 there has not
been: (i) any material adverse change in the business, assets, properties,
condition (financial or otherwise), results of operations or prospects of (x)
the Company or (y) the Company and the Subsidiaries taken as a whole; (ii) any
damage, destruction or loss (whether or not covered by insurance) having a
Material Adverse Effect; (iii) any change by the Company in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (iv) any declaration, payment or setting aside
for payment of any dividend or any redemption, purchase or other acquisition of
any shares of capital stock or securities of the Company other than as provided
or permitted in this Agreement and except for regular quarterly cash dividends
not in excess of $.07 per Share on the Shares; (v) any return of any capital or
other distribution of assets to shareholders of the Company as such; (vi) any
direct or indirect material purchase or other acquisition of stock, other
securities or other assets (other than purchases of such other assets in the
ordinary course of business and at arms-length purchase prices) of any person
and any direct or indirect loan, advance (other than advances to employees for
travel expenses in the ordinary course of business) or capital contribution to
any person in which the Company or any of its Subsidiaries has an equity
interest; (vii) any grant of any general increase in the compensation of its
directors, officers or employees or any increase in the compensation payable or
to become payable to any such director, officer or employee (including, in
either case, any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment or any Change of Control Benefit and Severance
Arrangement), except for (a) reasonable increases in the ordinary course of
business and consistent with past practice (but excluding increases pursuant to
any Change of Control Benefit and Severance Arrangement), and (b) increases
pursuant to collective bargaining agreements in existence as of the date of this
Agreement; or (viii) any agreement to take, whether in writing or otherwise, any
action which, if taken prior to the date hereof, would have made any
representation or warranty in this Article 4 untrue or incorrect in any material
respect. Since December 31, 1995 the Company and its Subsidiaries have conducted
their respective businesses only in the ordinary course.
Section 4.11 BROKERS AND FINDERS. Neither the Company nor any of its
officers, directors, employees or agents has employed any broker, finder,
investment banker or other person, and none of the foregoing have incurred any
liability for any brokerage fees, commissions or finders' fees, in connection
with the transactions contemplated hereby, except that the Company has engaged
Wheat, First Securities, Inc. to determine the fairness, from a financial point
of view, of the Offer price and Merger Consideration to the public shareholders
of the Company. The Schedule 14D-9 will contain a true and accurate description
of the fee arrangements between the Company and Wheat, First Securities, Inc.
Section 4.12 LIABILITIES. Except as disclosed in the Company Filings or
otherwise Previously Disclosed, the Company and its Subsidiaries do not have any
material direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise ("Liabilities"), of a kind required by generally accepted
accounting principles to be set forth in a financial statement, other than (i)
liabilities fully and adequately reflected or reserved against on the Company's
balance sheet included in the Latest 10-Q, (ii) liabilities incurred since March
31, 1996 in the ordinary course of business, and (iii) liabilities which are not
material to the Company and its Subsidiaries taken as a whole.
Section 4.13 CONTRACTS. All contracts and other agreements to which the
Company or any of its Subsidiaries is a party or by or to which either the
Company or any of its Subsidiaries or its or their assets or properties are
bound or subject and that are or were required to have been filed as exhibits to
the Company Filings have been so filed. All of such contracts and other
agreements are in full force
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and effect and neither the Company nor any subsidiary of the Company is in
default under any of them, nor, to the best knowledge of the Company, is any
other party to any such contract or other agreement in default thereunder, nor,
except as provided in Section 4.5, does any condition exist that with notice or
lapse of time or both would constitute a default thereunder, nor would the
transactions contemplated hereby constitute a default thereunder if such
defaults, individually or in the aggregate, have a Material Adverse Effect.
Section 4.14 BOARD ACTIONS. The Board of Directors of the Company has
taken the actions specified in Section 1.2(a) hereof. Neither the Offer, the
Merger nor any of the other transactions contemplated by this Agreement are or
after the date hereof will be subject to: (1) any of the restrictions or other
provisions of restrictions of Article 14, Sections 13.1-725-13.1-728 (AFFILIATED
TRANSACTIONS) of the Virginia Act; (2) any of the supermajority shareholder
voting provisions of Article I of the Company's Charter; or (3) any of the
restrictions or other provisions of Article 14.1, SectionSection
13.1-728.1-13.1-728.9 (CONTROL SHARE ACQUISITIONS) of the Virginia Act. The
Company has heretofore delivered to Varlen and the Purchaser a written opinion
of Virginia counsel to the Company reasonably satisfactory to Varlen with
respect to the foregoing matters. Neither the Company nor any of the members of
its Board of Directors (including the "disinterested director" members thereof)
shall take any action to: (A) subject Varlen, the Purchaser, their direct or
indirect subsidiaries, the Offer, the Merger or any of the other transactions
contemplated by this Agreement to be subject to the provisions of any takeover,
affiliated transaction, business combination, control share acquisition or other
provision of: (i) law or regulation adopted by the Commonwealth of Virginia
(including the Virginia Act) or any department or agency thereof, or (ii) the
Charter or Bylaws of the Company, or (B) increase (above two-thirds) the
shareholder vote required to approve the Merger.
Section 4.15 CASH AND CASH EQUIVALENTS. The aggregate amount of cash and
cash equivalents held by the Company and its Subsidiaries as reflected in the
financial reports at the end of May 1996 was not less than $13,665,000.
ARTICLE 5: CERTAIN COVENANTS
Section 5.1 CONDUCT OF BUSINESS. Except as otherwise expressly
contemplated hereby or as Previously Disclosed, the Company covenants and agrees
that, unless Varlen or the Purchaser shall otherwise agree in writing, prior to
the Effective Time or such earlier time as designees of the Purchaser constitute
a majority of the Board of Directors of the Company:
(A) the business of the Company and its Subsidiaries shall be conducted
only in, and the Company and its Subsidiaries shall not take any material
action except in, the ordinary course of business and consistent with past
practice, and the Company shall use its reasonable best efforts to maintain
and preserve its and its Subsidiaries' business organization, assets,
employees and advantageous business relationships;
(B) neither the Company nor any of its Subsidiaries shall: (1) amend or
propose to amend its articles of incorporation or bylaws; (2) split, combine
or reclassify any shares of its capital stock or declare, set aside or pay
any dividend payable in cash, stock or property with respect to its capital
stock, except as permitted by Section 4.10 and except for any dividend by a
wholly-owned Subsidiary payable to the Company or another wholly-owned
Subsidiary; (3) issue, sell, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable or exercisable
for, or options, warrants, calls, commitments or rights of any kind to
acquire, any capital stock of any class of the Company or any of its
Subsidiaries other than Shares which the Company is required to issue
pursuant to the Options outstanding on June 14, 1996; (4) transfer, lease,
license, sell, mortgage, pledge, dispose of or encumber any material assets
of the Company or any of its Subsidiaries other than in the ordinary course
of business and consistent with past practices; (5) redeem, purchase or
otherwise acquire directly or indirectly any of the capital stock or other
equity securities of the Company; (6) adopt a plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of the Company or
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any of its Subsidiaries, except for mergers among wholly-owned Subsidiaries;
(7) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof
or make any investment with respect thereto; (8) directly or indirectly: (i)
incur or modify any long-term indebtedness or short-term indebtedness for
money borrowed or other material liability other than in the ordinary course
of business and consistent with past practice, (ii) incur any additional
indebtedness for money borrowed other than in the ordinary course of
business and consistent with past practice, or (iii) make any loans or
advances other than in the ordinary course of business and consistent with
past practice and intercompany loans and advances among the Company and its
wholly-owned Subsidiaries; (9) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent or otherwise),
other than the payment, discharge or satisfaction of liabilities in the
ordinary course of business and consistent with past practice; (10) waive,
release, grant or transfer any rights of value or modify or change in any
material respect any existing license, lease, contract or other document,
other than in the ordinary course of business and consistent with past
practice; or (11) enter into any material commitment or transaction, other
than in the ordinary course of business and consistent with past practice;
(C) neither the Company nor any of its Subsidiaries shall: (1) grant any
increase in the compensation payable or to become payable by the Company or
any of its Subsidiaries to any of its directors, executive officers or key
employees or adopt any new, or amend or otherwise increase the amounts
payable or to become payable under any existing, bonus, incentive
compensation, severance, deferred compensation, profit sharing, stock
option, stock purchase, insurance, pension, retirement or other employee
benefit plan (including (but not limited to) the granting of stock options,
stock appreciation rights or restricted stock), or (2) enter into or amend
any employment or change-in-control agreement with, or, except in accordance
with the existing written policies and agreements of the Company, grant any
severance or termination pay to any director, officer or employee of the
Company or any of its Subsidiaries; and
(D) neither the Company nor any of its Subsidiaries shall agree, in
writing or otherwise, to take any of the foregoing actions or any action
which would make any representation or warranty of the Company untrue or
incorrect in any material respect.
Section 5.2 PROXY STATEMENT. Promptly after the date of this Agreement,
the Company and Varlen shall properly prepare and the Company shall file with
the Commission as soon as is reasonably practicable a preliminary proxy
statement, together with a form of proxy, or (as directed by Varlen) a
preliminary information statement, with respect to a meeting of the Company's
shareholders at which such shareholders will be asked to approve this Agreement
and the Merger (if and to the extent required by the Virginia Act) and, as
promptly as practicable thereafter or as otherwise directed by Varlen, and
subject to compliance with the rules and regulations of the Commission, the
Company shall mail a definitive proxy statement or information statement (as
directed by Varlen) and related materials to the shareholders of the Company (if
and to the extent required by the Virginia Act and/or the Exchange Act). As used
herein, the term "Proxy Statement" shall mean such proxy or information
statement at the time it initially is mailed to the Company's shareholders and
all amendments or supplements thereto, if any, similarly filed and mailed. As
soon as practicable after the date hereof, the Company and Varlen shall promptly
and properly prepare and file any other filings required under the Exchange Act,
the Securities Act or any other federal or state securities or corporate laws
relating to the Offer, the Merger and the other transactions contemplated herein
(the "Other Filings"). Each of the parties hereto shall notify the other parties
hereto promptly of the receipt by it of any comments of the Commission and of
any request by the Commission for amendments or supplements to the Proxy
Statement or by the Commission or any other governmental official with respect
to any Other Filing or for additional information, and will supply the other
parties hereto with copies of all correspondence between it and its
representatives, on the one hand, and the Commission or the members of its staff
or any other appropriate governmental official, on the other hand, with respect
to the Proxy Statement and any Other Filings. The Company, Varlen and the
Purchaser each shall use its reasonable best efforts to obtain and furnish the
information required to be included in the Proxy Statement
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and any Other Filings; and the Company, after consultation with Varlen, shall
use its reasonable best efforts to respond promptly to any comments made by the
Commission or any other governmental official with respect to the Proxy
Statement, any Other Filings and any preliminary version thereof and cause the
Proxy Statement and any related materials to be mailed to its shareholders at
the earliest practicable date. The information provided and to be provided by
Varlen, the Purchaser and the Company, respectively, for use in the Proxy
Statement and any Other Filings shall not, on the date the Proxy Statement is
first mailed to the Company's shareholders or any Other Filing is filed with the
appropriate governmental official and, in the case of the Proxy Statement, on
the date of the meeting of the Company's shareholders referred to in Section 5.3
hereof, contain any statement which, at the time of and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or omit to state any material fact in order to make the
statements therein not false or misleading or necessary to correct any statement
in any earlier communication which has become false or misleading. Varlen, the
Company and the Purchaser each agree to correct any such information provided by
it for use in the Proxy Statement or any Other Filings which shall have become
false or misleading. The Proxy Statement shall comply as to form in all material
respects with all applicable requirements of the federal securities laws.
Section 5.3 ACTION OF COMPANY SHAREHOLDERS; VOTING OF SHARES. Promptly
after consummation of the Offer, the Company shall take all action necessary, in
accordance with the Virginia Act and its Charter and Bylaws, to convene a
meeting of its shareholders (the "Special Meeting") as promptly as practicable
to consider and vote upon the Merger (if and to the extent required by the
Virginia Act). The affirmative vote of shareholders required for approval of the
Merger shall be no greater than the holders of two-thirds of the votes entitled
to be cast. Unless in the written opinion of legal counsel to the Company (the
delivery of which shall be confirmed in writing to Varlen by such counsel) any
of the following actions would create a substantial risk of violating the
fiduciary duties of the Board of Directors to the shareholders of the Company:
(1) the Proxy Statement shall contain the recommendation of the Board of
Directors that the shareholders of the Company vote to adopt and approve the
Merger and this Agreement, and (ii) the Company shall, if proxies are solicited,
use its reasonable best efforts to solicit from its shareholders proxies in
favor of such adoption and approval and to take all other action necessary or,
in the reasonable judgment of Varlen, helpful to secure the vote or consent of
shareholders required by the Virginia Act to effect the Merger. At the Special
Meeting, Varlen, the Purchaser and their direct and indirect subsidiaries shall
vote, or cause to be voted, all of the Shares then owned by any of them in favor
of the Merger.
Section 5.4 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable this Agreement, the definitive agreements providing
for the Financing (the "Financing Agreements") and the transactions contemplated
hereby and thereby, and to cooperate with each other in connection with the
foregoing, including using its reasonable best efforts: (A) to obtain all
necessary exemptions, waivers, consents, authorizations and approvals from the
Department of Justice, the Federal Trade Commission and other governmental or
regulatory agencies or authorities and to make all necessary registrations and
filings (including (but not limited to) filings with governmental or regulatory
agencies or authorities, if any) and to take all reasonable steps, including the
use of such voting trusts as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any governmental agency or
authority; (B) to obtain all necessary exemptions, waivers, consents,
authorizations and approvals from other parties to material loan agreements,
leases and other contracts as are required to be obtained under the terms of
such instruments or under any federal, state or foreign law or regulations, (C)
to defend against and respond to any suit, action, proceeding or investigation
relating to this Agreement or the transactions contemplated hereby commenced by
any third party, (D) to effect all necessary registrations and filings and
submissions of information requested by governmental authorities, and (E) to
fulfill all conditions to this Agreement.
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Section 5.5 NO NEGOTIATIONS, ETC. Neither the Company nor any of its
Subsidiaries, nor any of their respective directors, officers, employees,
investment bankers, representatives or agents, shall, directly or indirectly,
make, solicit, initiate or encourage the initiation of, any inquiries or
proposals from, or provide any confidential information or participate in any
discussions or negotiations with, or otherwise cooperate in any way with or
assist, any person (other than Varlen and its subsidiaries, those third parties
Previously Disclosed and their respective directors, officers, employees,
investment bankers, commercial banks, representatives and agents) concerning any
merger, consolidation, other business combination, recapitalization, liquidation
or dissolution or any purchase or other acquisition or sale or other disposition
of assets (other than in the ordinary course of business) or shares of capital
stock of the Company or any of its Subsidiaries or any similar transaction
involving the Company or (except as Previously Disclosed) any Subsidiary or
division of the Company or any Subsidiary; PROVIDED, HOWEVER, that (i) nothing
contained in this Section 5.5 shall prohibit the Company or its Board of
Directors from taking and disclosing to the Company's shareholders a position
contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act, and
(ii) in the event that the Company shall receive an unsolicited proposal from a
third party which the Company's Board of Directors determines, based on the
advice of its legal counsel and independent financial advisor, is capable of
consummating such transaction, for the acquisition for cash of all the
outstanding Shares on terms that the Company's Board of Directors determines,
based on the advice of its financial advisor (the receipt of which advice shall
be confirmed in writing to Varlen by the Company), are economically superior to
those of the Offer and the Merger and which in the written opinion of legal
counsel to the Company (the delivery of which shall be confirmed in writing to
Varlen by such counsel) a failure to consider by the Board of Directors of the
Company would create a substantial risk of violating their fiduciary duties to
shareholders, the Company may provide information to such third party to the
same extent that such information has been provided to the Purchaser and Varlen.
The Company will promptly advise Varlen of, and communicate to Varlen the terms
of, any such inquiry or proposal the Company may receive, and will advise Varlen
prior to providing any such information.
Section 5.6 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Varlen, and Varlen and the Purchaser shall give prompt notice to the
Company, of (i) the obtaining by it of actual knowledge as to the matters set
forth in clauses (x) and (y) below, or (ii) the occurrence, or failure to occur,
of any event which occurrence or failure to occur would be likely to cause (x)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, or (y) any material failure of the Company,
Varlen or the Purchaser, as the case may be, or of any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement or the
Financing Agreements; PROVIDED, HOWEVER, that no such notification shall affect
the representations or warranties or obligations of the parties or the
conditions to the obligations of the parties hereunder.
Section 5.7 ACCESS TO INFORMATION. (a) The Company shall, and shall cause
its Subsidiaries, officers, directors, employees and agents to, afford to
Varlen, the Purchaser and the financial institutions and others referred to in
Section 3.4 and to the officers, employees and agents of Varlen, the Purchaser
and such financial institutions and others complete access at all reasonable
times to, from the date hereof to the Effective Time, their respective officers,
employees, agents, properties, books, records and contracts, and shall furnish
Varlen, the Purchaser and such financial institutions and others all financial,
operating and other data and information as Varlen and such financial
institutions and others, through their respective officers, employees or agents,
may reasonably request.
(b) Varlen and the Purchaser shall, and shall cause their officers,
employees, agents and representatives, (collectively, the "Varlen
Representatives") to, keep confidential all non-public, confidential or
proprietary information provided by the Company (other than any such information
which (i) is or becomes generally available to the public other than as a result
of disclosure by Varlen, the Purchaser or the Varlen Representatives, (ii)
becomes available to Varlen, the Purchaser or the Varlen Representatives on a
nonconfidential basis from a source other than the Company, which source has
represented to Varlen, the Purchaser or the Varlen Representatives that such
source is entitled to
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disclose it or (iii) was known to Varlen, the Purchaser or the Varlen
Representatives on a nonconfidential basis prior to its disclosure to Varlen,
the Purchaser or the Varlen Representatives) and all analyses, compilations,
data, studies or other documents based in whole or in part on any such furnished
information prepared by Varlen, the Purchaser or the Varlen Representatives
(collectively, the "Information"); and Varlen and the Purchaser shall not, and
shall cause the Varlen Representatives not to, without the prior written consent
of the Company, disclose the Information, in any manner whatsoever, in whole or
in part, or use the Information for any purpose other than evaluating the Offer,
the Merger and the other transactions contemplated by this Agreement, and
obtaining the Financing; PROVIDED, HOWEVER, that Varlen, the Purchaser and the
Varlen Representatives may provide such Information in response to judicial or
administrative process or applicable governmental laws, rules, regulations,
orders or ordinances, but only that portion of the Information which, on the
advice of counsel, is legally required to be furnished and provided that Varlen
notifies the Company of the obligation to provide such Information prior to such
disclosure and fully cooperates with the Company to protect the confidentiality
of such Information under applicable law; AND PROVIDED, FURTHER, HOWEVER, that
Varlen, the Purchaser and the Varlen Representatives may include some or all of
the Information in the Schedule 14D-1, Offer Documents and the Proxy Statement,
if advised by the counsel that it is legally necessary or advisable to do so.
The Information, and all copies thereof, will be destroyed or returned
immediately, without retaining any copies thereof, if this Agreement is
terminated.
(c) No investigation after the date hereof pursuant to this Section 5.7 or
otherwise shall affect any representations or warranties of the parties herein
or the conditions to the obligations of the parties hereto.
(d) During the period from the date of this Agreement to the Effective Time,
Varlen (at its discretion) may locate one or more of its representatives at the
Midlothian, Virginia offices of the Company. During such period the Company will
cause one or more of its designated representatives to consult as requested by
Varlen on a regular basis with such representatives of Varlen and to discuss the
general status of ongoing operations of the Company. The Company will promptly
notify Varlen of any significant change in the normal course of business or in
the operation of the properties of the Company and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or threat or settlement of
significant litigation, in each case involving the Company, and will keep Varlen
fully informed of such events and permit Varlen's Representatives access to all
materials prepared in connection therewith.
Section 5.8 CONFIDENTIALITY AND STANDSTILL AGREEMENTS. The Confidentiality
Agreement, dated March 27, 1996, between the Company and Varlen is hereby
terminated by the mutual consent of such parties, and shall no longer be of any
force or effect. The Company shall not consent to the termination or amendment
of the confidential information, nondisclosure or non-use provisions of any
similar agreement with a third party without the prior written consent of Varlen
or the Purchaser and shall use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
proper to maintain in full force and effect, and to enforce strict compliance
with, such confidential information, nondisclosure and non-use provisions. The
Company shall also use its reasonable best efforts to obtain a similar
confidential information, nondisclosure, non-use and standstill agreement from
any third party with or for whom the Company or any Subsidiary has taken any
action or received any proposal not prohibited under Section 5.5.
Section 5.9 INDEMNIFICATION AND INSURANCE. (a) The Charter or Bylaws of
the Surviving Corporation shall contain provisions no less favorable with
respect to indemnification than those that are set forth in the Company's
Charter and Bylaws, as amended to the date of this Agreement, which provisions
shall not be amended, repealed or otherwise modified for a period of five years
after the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who on or prior to the Effective Time were directors,
officers, employees or agents of the Company (the "Indemnified Parties"). Varlen
shall cause the Surviving Corporation to fulfill its indemnification obligations
as set forth in this Section 5.9.
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(b) Varlen shall use its reasonable best efforts to cause to be maintained
in effect for three years from the Effective Time the current policy (or
successor policies) of the directors' and officers' liability insurance
maintained by the Company (PROVIDED that Varlen may substitute therefor policies
of at least the same coverage containing terms and conditions which are not
materially less advantageous) with respect to matters occurring prior to the
Effective Time, to the extent available; PROVIDED, HOWEVER, that in no event
shall Varlen or the Company be required to expend more than an amount per year
equal to 150% of current annual premiums paid by the Company (which the Company
represents and warrants to be not more than $54,000) to maintain or procure
insurance coverage pursuant hereto.
(c) The provisions of this Section 5.9 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his heirs and his
personal representatives, shall be binding upon the Surviving Corporation and
its successors and assigns and shall continue and survive the Effective Time
according to their terms.
ARTICLE 6: CONDITIONS
Section 6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to consummate and effect the
Merger shall be subject to the fulfillment, at or prior to the Effective Time,
of each of the following conditions:
(A) this Agreement and the Merger shall have been approved and adopted
by the requisite vote or consent of the shareholders of the Company (if
required by the Virginia Act and the Company's Charter and Bylaws, subject
to Sections 1.2(a) and 4.14);
(B) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated; and
(C) no injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, nor any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, shall be in effect
which would make the acquisition or holding by Varlen or its subsidiaries of
the Shares or shares of common stock of the Surviving Corporation illegal or
otherwise prevent the consummation of the Merger.
Section 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate and effect the Merger is also subject to
the fulfillment of the following condition: the representations and warranties
of Varlen and the Purchaser set forth in Article 3 shall be true and correct in
all material respects as of the Effective Time, and each of Varlen and the
Purchaser shall have performed in all material respects each obligation and
agreement and complied with each covenant to be performed and complied with by
it hereunder on or prior to the Effective Time.
Section 6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF VARLEN AND THE
PURCHASER. The obligations of Varlen and the Purchaser to consummate and effect
the Merger are also subject to the fulfillment of following conditions:
(A) the Purchaser shall have purchased Shares pursuant to the Offer;
(B) none of the occurrences, events, facts or circumstances set forth in
any of paragraphs (a) through (h) of ANNEX I hereto shall have occurred or
be prevailing at or prior to the Effective Time;
(C) the opinion of Virginia counsel to the Company referred to in
Section 4.14 hereof shall have been confirmed or reissued by such counsel,
as of the date of the Effective Time and without material modification or
qualification; and
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(D) the Company shall not have received demands for payment of the fair
value of Shares (pursuant to Article 15 (DISSENTER'S RIGHTS) of the Virginia
Act) with respect to more than 5% of the outstanding Shares.
ARTICLE 7: TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether prior to or after approval by the
shareholders of the Company:
(A) By mutual written consent of the Boards of Directors of Varlen and
the Company;
(B) By either the Company or Varlen if any court of competent
jurisdiction or other governmental body shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable best efforts to lift),
in each case, permanently restraining, enjoining or otherwise prohibiting
the Offer or the Merger and such order, decree, ruling or other action shall
have become final and non-appealable;
(C) By the Company, if the Offer shall have been terminated, or the
Offer shall have expired, without the purchase of any Shares thereunder
within two business days thereof and such non-purchase shall not have been
due to a failure to satisfy any of the conditions of the Offer as set forth
in ANNEX I; PROVIDED that the Company may not terminate this Agreement
pursuant to this Section 7.1(C) if the Company is in breach of this
Agreement;
(D) By the Company, if the Effective Time shall not have occurred on or
before December 31, 1996 due to a failure of any of the conditions to the
obligations of the Company to effect the Merger set forth in Section 6.1 or
6.2; PROVIDED that the Company may not terminate this Agreement pursuant to
this Section 7.1(D) if the Company's failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, in whole or in part,
the failure of the Effective Time to occur on or before such date;
(E) By the Company if: (1) any corporation, partnership, person, other
entity or, group (as defined in Section 13(d)(3) of the Exchange Act) other
than Varlen or the Purchaser or any of their respective subsidiaries or
affiliates (a "Qualified Person") shall have commenced (within the meaning
of Rule 14d-2 under the Exchange Act) a cash tender offer for any and all
Shares at a price in excess of $16.125 per Share, or (2) any Qualified
Person shall have made a bona fide written proposal involving a merger or
consolidation of the Company or the acquisition of all the Shares or all or
a substantial portion of its assets which would result in a cash
distribution to shareholders of the Company in excess of $16.125 per Share
(any such proposal described in subclause (1) or (2) being referred to as a
"Qualified Proposal"), and the Board of Directors of the Company shall have
been advised in a writing by its legal counsel (the delivery of which advice
shall have been confirmed in writing to Varlen by such counsel) that there
would be a substantial risk of liability for breach of their fiduciary
obligations to shareholders if they failed to recommend such offer or accept
such Qualified Proposal; PROVIDED, HOWEVER, that the Company may not
terminate this Agreement pursuant to this Section 7.1(E): (i) until the
expiration of five business days after notice of such Qualified Proposal has
been delivered to Varlen, or (ii) unless otherwise consented to in writing
by Varlen, if any such offer or Qualified Proposal is made in breach of, or
as a result of a breach of, Section 5.5;
(F) By either of Varlen or the Purchaser, if due to a failure to satisfy
any of the conditions of the Offer as set forth in ANNEX I: (i) Varlen or
any of its subsidiaries or affiliates shall not have commenced the Offer, or
shall have terminated the Offer, or (ii) the Offer shall have expired
without the purchase of any Shares thereunder within two business days
thereof, or (iii) Varlen shall have determined not to proceed with the
Merger; PROVIDED that neither Varlen nor the Purchaser may terminate this
Agreement pursuant to this Section 7.1(F) if either Varlen or the Purchaser
is in material breach of this Agreement;
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(G) By either of Varlen or the Purchaser, if the Effective Time shall
not have occurred on or before December 31, 1996 due to a failure of any of
the conditions to the obligations of Varlen and the Purchaser to effect the
Merger set forth in Section 6.1 or 6.3; PROVIDED that neither Varlen nor the
Purchaser may terminate this Agreement pursuant to this Section 7.1(G) if
Varlen's or the Purchaser's failure to fulfill any material obligation under
this Agreement has been the cause of, or resulted in, in whole or in part,
the failure of the Effective Time to occur on or before such date; or
(H) By either of Varlen or the Purchaser, if prior to the purchase of
Shares in the Offer, the Board of Directors of the Company shall have: (1)
withdrawn, or modified in a manner adverse to Varlen or the Purchaser, its
approval or recommendation of the Offer or the Merger or any of its other
actions taken in accordance with Section 1.2(a) and/or 4.14 hereof, (2)
taken any of the actions referred to in Section 1.2(a) and/or 4.14 hereof
for the benefit of any person (other than Varlen, the Purchaser or any of
their respective subsidiaries) or any transaction (other than the Offer and
Merger), or (3) resolved to do any of the foregoing.
Section 7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 7.1: (i) this Agreement shall forthwith become
null and void, and there shall be no liability on the part of Varlen, the
Purchaser or the Company, except as set forth in this Section 7.2 and in
Sections 5.7(b) and 7.5; and (ii) the Purchaser shall terminate the Offer, if
still pending, without purchasing any additional Shares thereunder; PROVIDED,
HOWEVER, that the foregoing shall not relieve any party for liability for
damages actually incurred as a result of any breach of this Agreement.
Section 7.3 AMENDMENT. This Agreement may be amended at any time prior to
the filing of the Articles of Merger with the Virginia Commission; PROVIDED that
any such amendment is set forth in an instrument in writing executed by each of
the parties hereto and is previously approved by action of the Board of
Directors of each of the parties hereto; and PROVIDED FURTHER that if this
Agreement and the Merger are subject to shareholder approval then, after
approval of the Merger by the shareholders of the Company, no amendment may be
made without the further approval of the shareholders of the Company which would
do any of the following: (i) reduce or (to the extent prohibited by the Virginia
Act) increase the Merger Consideration or alter or change the form thereof; (ii)
alter or change any other of the terms and conditions of this Agreement if any
of the alterations or changes, alone or in the aggregate, would adversely affect
the shareholders of the Company; or (iii) alter or change any of the terms and
conditions of the Charter (except as may otherwise be provided herein).
Section 7.4 WAIVER. At any time prior to the Effective Time, whether
before or after the Special Meeting, any party hereto, by action taken by its
Board of Directors, may: (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, or (ii) subject to the
second proviso contained in Section 7.3, waive compliance with any of the
agreements of any other party or with any conditions of its own obligations. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party by a duly authorized officer.
Section 7.5 EXPENSES. Each party shall pay its own costs and expenses
relating to this Agreement and the transactions contemplated hereby, and nothing
in this Agreement shall preclude any such payment, except that if this Agreement
is terminated by the Company pursuant to Section 7.1(E) or if this Agreement
and/or the Offer is terminated by Varlen or the Purchaser by reason of the
occurrence of any Event (as defined in ANNEX I hereto) described in either (I)
paragraph (a), (b) or (g) of ANNEX I hereto, (ii) paragraph (c) of ANNEX I
hereto (but only if such Event is due, in whole or in part, to any (x) act of
the Company of any affiliate thereof, or (y) other Occurrence (as defined in
Section 4.1) not beyond the control of the Company or any affiliate thereof) or
(iii) clause (vi) of paragraph (c) of ANNEX I hereto, the Company shall pay to
Varlen, a termination fee of $6,500,000 plus an amount sufficient to reimburse
Varlen and its subsidiaries for all fees, costs and expenses (including
investment banking, professional and commitment fees) relating to this
Agreement, the Financing and the transactions contemplated hereby and thereby
(PROVIDED that the Company shall not be obligated to
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reimburse Varlen and its subsidiaries for more than $2,000,000 of such fees,
costs and expenses). Such termination fee shall be due and payable (1) on the
date of (and as a condition precedent to) any termination of this Agreement by
the Company as aforesaid, and (ii) within two business days after any
termination of this Agreement by Varlen or the Purchaser as aforesaid. Any such
reimbursement shall be due and payable within two business days after the
submission by Varlen to the Company of any invoice or statement therefor.
ARTICLE 8: GENERAL PROVISIONS
Section 8.1 CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to the
provisions of Article 7, and subject to the provisions of Article 6 hereof, the
closing of this Agreement shall take place at the offices of Mays & Valentine,
NationsBank Center, 1111 East Main Street, Richmond, Virginia 23218-1122, as
soon as practicable following the meeting of the shareholders of the Company or
other shareholder action referred to in Section 5.3 hereof, or at such other
place, time and date as the parties may mutually agree.
Section 8.2 PUBLIC STATEMENTS. The parties agree to consult with each
other prior to issuing any public announcement or statement with respect to the
Offer or the Merger, and shall not issue or make any such announcement or
statement to which the other parties shall reasonably object (subject to the
requirements of federal and state securities laws and to Section 5.2).
Section 8.3 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by guaranteed overnight service or telecopier to the parties
at the following addresses (or at such other addresses as shall be specified by
the parties by like notice):
If to Varlen, the Purchaser or (after the Effective Time) the Company:
Varlen Corporation
55 Shuman Boulevard, Suite 500
Naperville, Illinois 60566
ATTENTION: Richard L. Wellek
President & Chief Executive Officer
Telecopier No. (708) 420-7123
Telephone No. (708) 420-0400
with a copy to:
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022
ATTENTION: Claude A. Baum, Esq.
Telecopier No. (212) 308-2041
Telephone No. (212) 326-3500
If to the Company (before the Effective Time):
Brenco, Incorporated
One Park West Circle, Suite 201
Midlothian, Virginia 23113
ATTENTION: Needham B. Whitfield
Chairman & Chief Executive Officer
Telecopier No. (804) 379-4668
Telephone No. (804) 379-2900
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with a copy to:
Mays & Valentine
NationsBank Center
1111 East Main Street
Richmond, Virginia 23218
ATTENTION: F. Claiborne Johnston, Jr., Esq.
Telecopier No. (804) 697-1214
Telephone No. (804) 697-1339
Section 8.4 INTERPRETATION. For purposes of this Agreement the Company
shall not be deemed to be an affiliate or subsidiary of the Purchaser or Varlen
and neither the Purchaser nor Varlen shall be deemed to be an affiliate of the
Company. The headings contained in this Agreement are for convenience of
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Article, Section and Annex references in this
Agreement are to the referenced Articles and Sections of, and Annexes to, this
Agreement, unless the context otherwise requires.
Section 8.5 REPRESENTATIONS AND WARRANTIES; ETC. The respective
representations and warranties of the Company, Varlen and the Purchaser
contained herein shall expire with, and be terminated and extinguished upon,
consummation of the Merger.
Section 8.6 MISCELLANEOUS. This Agreement: (i) constitutes the entire
agreement, and supersedes all other prior agreements and undertakings (both
written and oral), among the parties hereto, or any of them, with respect to the
subject matter hereof; (ii) except for Sections 2.6 and 5.9 hereof, is not
intended to confer upon any other person any rights or remedies hereunder; (iii)
shall not be assigned or delegated by any party hereto, except that the
Purchaser may assign all or any portion of its rights and obligations hereunder
to Varlen or to one or more direct or indirect wholly-owned subsidiaries of
Varlen which in a written instrument shall make all the representations and
warranties of the Purchaser set forth herein and shall agree to assume all of
the Purchaser's obligations hereunder and be bound by all of the terms and
conditions of this Agreement (PROVIDED, HOWEVER, that no such assignment or
delegation shall relieve the Purchaser of its obligations hereunder); and (iv)
shall be governed in all respects, including validity, interpretation and
effect, by the internal laws of the Commonwealth of Virginia, without giving
effect to the principles of conflict of laws thereof. This Agreement may be
executed in two or more counterparts, which together shall constitute a single
agreement.
Section 8.7 SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
and agrees that the other parties hereto would be irreparably damaged in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, each of the
parties hereto agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
subject matter jurisdiction, in addition to any other remedy to which such party
may be entitled, at law or in equity.
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IN WITNESS WHEREOF, Varlen, the Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers, thereunto duly authorized.
<TABLE>
<S> <C>
VARLEN CORPORATION BRENCO, INCORPORATED
By: ---------------------------- By: ----------------------------
Richard L. Wellek Needham B. Whitfield
President and Chairman of the Board and
Chief Executive Officer Chief Executive Officer
</TABLE>
BAS, INC.
By:
- ----------------------------
Richard L. Wellek
President
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ANNEX I
(TO ACQUISITION AGREEMENT)
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Acquisition Agreement or the
Offer, and except as expressly limited below, the Purchaser: shall not be
required to commence or continue the Offer; or accept for payment, purchase or
pay for any Shares tendered; may postpone the acceptance for payment, the
purchase of, and/or payment for, Shares; and/or may amend (subject to the
restrictions contained in Section 1.1 of the Acquisition Agreement, dated as of
June 15, 1996 among Varlen, the Purchaser and the Company (as the same may be
modified, amended, supplemented and/or restated from time to time, the
"Acquisition Agreement")) or terminate the Offer; if: (1) there shall not have
been validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which, together with the Shares beneficially owned by the
Purchaser and Varlen, represents two-thirds of the total voting power of all
shares of capital stock of the Company outstanding on a fully diluted basis, or
(2) any waiting period under the HSR Act applicable to the purchase of the
Shares pursuant to the Offer shall not have expired or been terminated, or (3)
at any time on or after June 1, 1996 and prior to the time of payment for any
such Shares (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer), any of the following events (each,
an "Event") shall have occurred (each of paragraphs (a) through (h) providing a
separate and independent condition to the Purchaser's obligations pursuant to
the Offer):
(a) the Company shall have authorized, recommended or proposed, or shall
have announced an intention to authorize, recommend or propose, or shall
have entered into an agreement or agreement in principle with respect to,
any merger, consolidation, other business combination, recapitalization,
liquidation or dissolution, or any purchase or other acquisition or sale or
other disposition of assets (other than in the ordinary course of business)
or shares of capital stock of the Company or any of its Subsidiaries, or any
similar transaction involving the Company or any Subsidiary or division of
the Company or any Subsidiary (other than the Merger and as Previously
Disclosed with respect to certain subsidiaries) (the foregoing being
collectively referred to as a "Business Combination"), any material change
in its capitalization, or any release or relinquishment of any material
contract or other rights not in the ordinary course of business; or
(b) (i) the Board of Directors of the Company shall have (x) modified or
amended in any respect its recommendation of the Offer, the Merger or any of
its other actions taken in accordance with Section 1.2(a) and/or 4.14 of the
Acquisition Agreement, or (y) adopted any resolution to do so, or (ii) the
opinion of Virginia counsel to the Company referred to in Section 4.14 of
the Acquisition Agreement shall have been disclaimed, disavowed, retracted
or revoked in any respect, or shall otherwise have been rendered inaccurate
or erroneous, or (iii) the Board of Directors of the Company shall have (x)
taken any of the actions referred to in Section 1.2(a) and/ or 4.14 of the
Acquisition Agreement for the benefit of any person, entity or group (as
defined in Section 13(d)(3) of the Exchange Act) (other than Varlen, the
Purchaser or any of their respective subsidiaries) or any Business
Combination (other than the Offer and the Merger), or (y) adopted any
resolution to do so; or
(c) it shall have been publicly disclosed, or Varlen, the Purchaser or
the Company shall have learned that: (i) any person, entity (including the
Company or any of its subsidiaries or affiliates) or group (as defined in
Section 13(d)(3) of the Exchange Act) (a "Person") shall have (x) acquired
or become the beneficial owner of more than 10% of the outstanding Shares
(other than those shareholders of the Company party to that certain
Shareholder Tender Agreement, dated as of June 15, 1996, between Varlen and
such shareholders (the "Permitted Shareholders")), or (y) been granted by
the Company any warrant, option or right, conditional or otherwise, to
acquire beneficial ownership of more than 10% of the outstanding Shares,
other than acquisitions by a Person who has publicly disclosed such
ownership in a Schedule 13D or 13G (or amendment thereto) on file with the
Commission prior to June 1, 1996, and other than for bona fide arbitrage
24
<PAGE>
purposes, or (ii) any such Person (other than, in the case of the following
clause (x), a Permitted Shareholder) who has publicly disclosed in such a
Schedule 13D or 13G any such ownership of more than 10% of the outstanding
Shares prior to such date shall have (x) acquired or become the beneficial
owner of, or proposed to acquire or become the beneficial owner of,
additional Shares, or (y) been granted by the Company any warrant, option or
right, conditional or otherwise, to acquire any Shares, or (iii) any new
group shall have been formed which beneficially owns more than 10% of the
Shares, or (iv) any Person shall have commenced, or publicly proposed to
commence, a tender offer for outstanding Shares, or publicly proposed any
Business Combination, or (v) any Person shall have commenced any
solicitation of proxies with respect to the Shares in opposition to the
Merger, or (vi) any Person shall have acquired or become the beneficial
owner of more than 50% of the outstanding Shares; or
(d) there shall be pending any action or proceeding before any court,
government or governmental authority or agency: (i) challenging or seeking
to make illegal, or to delay or otherwise directly or indirectly to restrain
or prohibit the making of the Offer, the acceptance for payment of, payment
for, or the purchase of, some or all of the Shares by Varlen, the Purchaser
or any other subsidiary or affiliate of Varlen or the consummation of the
Merger, or seeking to obtain material damages in connection with the Offer
or the Merger, or (ii) seeking to prohibit ownership or operation by Varlen,
the Purchaser or any other subsidiary or affiliate of Varlen of all or a
material portion of the business or assets of Varlen, the Company or any of
their respective subsidiaries or affiliates or to compel Varlen, the
Purchaser or any other subsidiary or affiliate of Varlen to dispose of or to
hold separately all or a material portion of the business or assets of
Varlen, the Company or any of their respective subsidiaries or affiliates,
as a result of the Offer or the Merger, or (iii) seeking to impose or
confirm limitations on the ability of Varlen, the Purchaser or any other
subsidiary or affiliate of Varlen effectively to exercise full rights of
ownership and control of any Shares (or any shares of capital stock of any
subsidiary of the Company) (including, without limitation, the right to vote
any such Shares (or shares of a subsidiary)) acquired pursuant to the Offer
or otherwise (directly or indirectly), on all matters properly presented to
the Company's shareholders (or any such subsidiary's shareholders), or (iv)
seeking to require divestiture by Varlen, the Purchaser or any other
subsidiary or affiliate of Varlen of any Shares, or (v) invalidating or
rendering unenforceable any material provision of the Acquisition Agreement,
or (vi) which otherwise might materially adversely affect Varlen, the
Company or any of their respective subsidiaries or affiliates; or
(e) there shall be any action taken, or any statute, rule, regulation,
judgment, order or injunction proposed, enacted, entered, enforced,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency (other than the
application of the waiting period provisions of the HSR Act to the Offer or
to the Merger) which may, directly or indirectly, result in any of the
consequences referred to in paragraph (d) above; or
(f) there shall have occurred: (i) any general suspension of, or
limitation on prices for, trading in securities on any national securities
exchange or in the over-the-counter market, or (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, or (iii) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which, in the sole judgment of
Varlen, might affect the extension of credit by banks or other lending
institutions in the United States, or (iv) any material change in the United
States or any other currency exchange rates or any suspension of, or
limitation on, the markets therefor, or (v) any extraordinary adverse change
in the financial markets or the market price of the Shares, or (vi) any
change in the general political, market, economic or financial conditions in
the United States or abroad that could, in the sole judgment of Varlen, have
a material adverse effect upon the business or operations of the Company or
any of its subsidiaries or affiliates or the trading of the Shares, or (vii)
a commencement of war, armed hostilities or
25
<PAGE>
other international or national calamity directly or indirectly involving
the United States, or (viii) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(g) the representations and warranties of the Company in the Acquisition
Agreement shall not be true and correct in all material respects, or the
Company shall not have performed in all material respects each covenant and
complied with each agreement to be performed and complied with by the
Company under the Acquisition Agreement; or
(h) the Company and Varlen shall have agreed to terminate the Offer or
the Acquisition Agreement, or the Acquisition Agreement shall otherwise have
been terminated in accordance with it terms;
which, in the sole judgment of the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by the
Purchaser and Varlen) giving rise to any such condition, make it inadvisable to
proceed with acceptance for payment or purchase of or payment for any Shares
tendered or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Varlen and the
Purchaser and may be asserted by Varlen and the Purchaser regardless of the
circumstances giving rise to such condition, including (without limitation) any
action or inaction by Varlen or the Purchaser, or may be waived by Varlen or the
Purchaser in whole at any time or in part from time to time in their sole
discretion. The failure by Varlen or the Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right and may be asserted at any time and
from time to time. Any determination by Varlen or the Purchaser concerning any
Event shall be final and binding upon all parties.
26
<PAGE>
ANNEX II
(TO ACQUISITION AGREEMENT)
COMPANY BOARD RESOLUTIONS
RESOLVED, that the execution and delivery by any one or more of the officers
of the Company, in the name and on behalf of the Company, of the Acquisition
Agreement dated as of June 15, 1996 between (1) Varlen Corporation, a Delaware
corporation ("Parent"), (2) BAS, Inc., a Virginia corporation ("Purchaser"), and
(3) the Company, in the form of the draft presented to the Board, with such
changes, modifications, amendments, supplements and/or restatements thereto or
thereof as the signing officer of Corporation (upon the advice of counsel)
approves (collectively, "the Acquisition Agreement"), such approval to be
conclusively evidenced by his signature to such agreement, and the consummation
of the tender offer, merger and other transactions contemplated by the
Acquisition Agreement, are hereby authorized and approved in all respects; and
further
RESOLVED, that the Board hereby determines that the terms of the tender
offer, the merger and the Acquisition Agreement are fair to and in the best
interests of the shareholders of the Company and recommends that the
shareholders of the Company (1) accept the tender offer and tender their shares
pursuant to the tender offer and (2) approve the merger (if such approval is
required by Virginia law); and further
RESOLVED, that the execution and delivery by any one or more of the officers
of the Company, in the name and on behalf of the Company, of all documents,
agreements and instruments which are referenced in, or contemplated by, the
Acquisition Agreement, each in such form as the signing officers of the Company
shall (upon the advice of counsel) deem to be necessary or advisable in order to
carry into effect the tender offer, merger and other transactions contemplated
by the Acquisition Agreement, the approval of each such signing officer to be
conclusively evidenced by his signature to such documents, agreements and
instruments, are hereby authorized and approved in all respects; and further
RESOLVED, that, for the declared purpose of exempting Parent, Purchaser and
their respective direct and indirect subsidiaries (each, a "Parent Person") and
the tender offer, the merger and the other transactions contemplated by the
Acquisition Agreement from (1) the restrictions and other provisions of Article
14, 13.1-725- 728 (Affiliated Transactions) of the Code of Virginia ("Article
14") and (2) the provisions of 13.1-730 of Article 15 (Dissenter's Rights) of
the Code of Virginia, the following are hereby authorized and approved in all
respects: (1) the Company engaging with any Parent Person in any transaction
pursuant to the Acquisition Agreement which would constitute an "affiliated
transaction" (within the meaning of Article 14), (2) the tender offer and plan
of merger set forth in the Acquisition Agreement and (3) consummation of the
tender offer, merger and other transactions contemplated by the Acquisition
Agreement; and further
RESOLVED, that, for the declared purpose of qualifying the transactions
contemplated by the Acquisition Agreement as an "excepted acquisition", as that
term is defined and used in Va. Code 13.1-728.1, the plan of merger set forth in
the Acquisition Agreement and the tender offer, merger and other transactions
contemplated by the Acquisition Agreement are hereby authorized and approved in
all respects; and further
RESOLVED, that, for the declared purpose of exempting each Parent Person and
the tender offer, the merger and the other transactions contemplated by the
Acquisition Agreement from the supermajority shareholder vote requirement set
forth in Article I of the Articles of Incorporation, as amended, of the Company
("Article I"), any "business combination" within the meaning of Article I
provided for in the Acquisition Agreement with any Parent Person is hereby
authorized and approved in all respects; and further
RESOLVED, that the officers of the Company are hereby severally authorized
to do and to perform, or to cause to be done and performed, such other acts, and
to execute and deliver, or to cause
27
<PAGE>
to be executed and delivered, such other documents, agreements and instruments
(in each case in the name of the Company, on its behalf) as they, or any of
them, shall (upon the advice of counsel) deem to be necessary or advisable in
order to carry into effect the transactions contemplated by the foregoing
resolutions, including but not limited to such acts, executions and deliveries
to discharge obligations under, and to carry out and comply with, the terms and
conditions set forth in, or contemplated by, all of the documents, agreements
and instruments named in the foregoing resolutions.
28
<PAGE>
EXHIBIT D
SHAREHOLDER TENDER AGREEMENT
SHAREHOLDER TENDER AGREEMENT (as the same may be modified, amended,
supplemented and/or restated from time to time, this "Agreement"), dated as of
June 15, 1996, by and among (1) Varlen Corporation, a Delaware corporation
("Varlen"), and (2) each of the parties listed on the signature pages hereof
(each, a "Shareholder").
RECITALS
Varlen, BAS, Inc., a Virginia corporation wholly-owned by Varlen (the
"Purchaser"), and Brenco, Incorporated, a Virginia corporation (the "Company"),
have entered into an Acquisition Agreement, of even date herewith (as the same
may be modified, amended, supplemented and/or restated from time to time, the
"Acquisition Agreement"), which provides, upon the terms and subject to the
conditions thereof, for the acquisition by Purchaser of all of the Company's
outstanding Common Stock, par value $1.00 per share ("Common Stock"), through:
(A) a tender offer (as the same may be amended from time to time in accordance
with the Acquisition Agreement, the "Offer") for any and all outstanding shares
of Common Stock for $16.125 per share, net to the seller in cash and without
interest thereon (as such price may be increased from time to time pursuant to
the terms of any amended Offer, the "Offer Price"), and (B) a second step merger
pursuant to which the Purchaser will merge with and into the Company (the
"Merger") and all shares of Common Stock (other than shares held by Varlen, the
Purchaser or the Company or any direct or indirect subsidiary of Varlen, the
Purchaser or the Company, and shares held by any holder who properly exercises
and does not waive or withdraw dissenter's rights with respect to its shares
under the Virginia Stock Corporation Act (the "Virginia Act")) will be converted
into the right to receive the Offer Price in cash.
As of the date hereof, each Shareholder is the record and beneficial owner
of the number of shares of Common Stock set forth under such Shareholder's name
on the signature page hereto (the "Existing Shares"; and any shares of Common
Stock hereafter acquired by a Shareholder prior to the termination of this
Agreement being referred to herein as the "After-Acquired Shares"; and the
Existing Shares and After-Acquired Shares being collectively referred to herein
as the "Shares").
As a condition to the willingness of Varlen and the Purchaser to enter into
the Acquisition Agreement, Varlen has required that each Shareholder agree, and,
in order to induce Varlen and the Purchaser to enter into the Acquisition
Agreement, each Shareholder has agreed, severally and not jointly, to tender all
of such Shareholder's Shares pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein and in the Acquisition Agreement contained, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Varlen and each Shareholder hereby agree as follows:
<PAGE>
ARTICLE 1: TENDER OF SHARES
SECTION 1.1 TENDER OF SHARES. Each Shareholder shall validly tender all
such Shareholder's Shares pursuant to the Offer before the expiration date
thereof and agrees not to withdraw any Shares so tendered without Varlen's prior
written consent; PROVIDED, HOWEVER, that each Shareholder may: (i) refrain from
so tendering its Shares, and may withdraw any Shares previously so tendered, if
and for so long as there shall have been commenced and not terminated a Superior
Offer (as defined in Section 1.3); and (ii) may tender its Shares pursuant to
such Superior Offer; AND PROVIDED FURTHER, HOWEVER, that in the event that (x)
any such Superior Offer shall have expired or been terminated without purchase
of such Shareholder's Shares, and (y) the Offer shall then be in effect, then
Shareholder shall again be subject to the provisions of this sentence.
SECTION 1.2 CHARITABLE CONTRIBUTIONS. Notwithstanding anything to the
contrary set forth in this Agreement, up to 50,000 Shares in the aggregate
(among all Shareholders) may be contributed by one or more Shareholders to one
or more charitable organizations and, if and to the extent so contributed, shall
not be required to be tendered pursuant to the Offer hereunder.
SECTION 1.3 SUPERIOR OFFER. For purposes of this Agreement, the term
"Superior Offer" shall mean a cash tender offer commenced (within the meaning of
Rule 14d-2 under the Exchange Act) by any corporation, partnership, person,
other entity or group (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (other than Varlen or the
Purchaser or any of their respective subsidiaries or affiliates) for any and all
shares of Common Stock at a price in excess of the then Offer Price.
ARTICLE 2: REPRESENTATIONS
AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder (as to itself only) hereby represents and warrants to, and
agrees with, Varlen as follows:
TITLE TO SHARES; NO OTHER SHARES. Such Shareholder is the record or
beneficial owner of the number of Existing Shares set forth below such
Shareholder's name on the signature page hereof (which are evidenced by the
Common Stock certificate(s) identified below such Shareholder's name on the
signature page hereof (the "Certificate")), free and clear of any pledge, lien,
security interest, charge, claim, equity, option, proxy, voting restriction,
right of first refusal or other limitation on disposition or encumbrance of any
kind, other than pursuant to this Agreement. The number of Existing Shares and
the Certificate set forth below such Shareholder's name on the signature page
hereof represent the only Shares and Certificate owned of record or beneficially
by such Shareholder as of the date hereof. Such Shareholder has full right,
power and authority to sell, pledge, transfer and deliver its Existing Shares
and Certificate pursuant to this Agreement, and upon any acquisition of any
After-Acquired Shares will have full right, power and authority to sell, pledge,
transfer and deliver such After-Acquired Shares (and the Common Stock
certificate(s) evidencing the same) pursuant to this Agreement. There are no
outstanding proxies with respect to Shares owned of record or beneficially by
such Shareholder.
-2-
<PAGE>
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF VARLEN
Varlen hereby makes the same representations and warranties to each
Shareholder as Varlen has made to the Company in Article 3 of the Acquisition
Agreement with the same effect as though such representations and warranties
were herein set forth in full.
ARTICLE 4: TRANSFER OF SHARES; NO SOLICITATION
SECTION 4.1 TRANSFER OF SHARES. During the term of this Agreement, and
except as otherwise provided herein or with the prior written consent of Varlen,
each Shareholder shall not: (i) sell, pledge or otherwise dispose of any of its
Shares, (ii) deposit its Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares, or
(iv) enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect sale, assignment, transfer or other
disposition of any Shares.
SECTION 4.2 APPOINTMENT OF ATTORNEY-IN-FACT. In the event that any
Shareholder shall be in default of its obligations hereunder, such Shareholder
irrevocably appoints Varlen as such Shareholder's attorney-in-fact, with an
irrevocable instruction to Varlen (if and to the extent that such Shareholder is
required by the terms of this Agreement to do so): (i) validly to tender such
Shareholder's Shares pursuant to the Offer, and (ii) to execute any instrument
of transfer and/or other documents and do all such other acts and things as may
in the opinion of Varlen be necessary or expedient for the purpose of, or in
connection with, tendering such Shares pursuant to the Offer.
SECTION 4.3 NO SOLICITATION. Each Shareholder agrees to abide by the
terms of Section 5.5 of the Acquisition Agreement.
ARTICLE 5: TERMINATION
This Agreement shall terminate upon the earlier to occur of: (i) the
termination of the Acquisition Agreement, and (ii) the Effective Time (as
defined in the Acquisition Agreement) of the Merger. Upon such termination,
this Agreement shall have no further force or effect (other than Section 6.4,
which shall continue to apply to any case, action or proceeding relating to the
enforcement of this Agreement).
ARTICLE 6: GENERAL PROVISIONS
SECTION 6.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by guaranteed overnight service or telecopier to the parties
at the following addresses) or at such other addresses as shall be specified by
the parties by like notice):
-3-
<PAGE>
If to Varlen:
Varlen Corporation
55 Shuman Boulevard, Suite 500
Naperville, Illinois 60566-7089
ATTENTION: Richard L. Wellek
President & Chief Executive Officer
Telecopier No. (708) 420-7123
Telephone No. (708) 420-0400
with a copy to:
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022
ATTENTION: Claude A. Baum, Esq.
Telecopier No. (212) 308-2041
Telephone No. (212) 326-3500
If to a Shareholder, to the address set forth below such Shareholder's name
on the signature pages hereof.
Section 6.2 INTERPRETATION. The headings contained in this Agreement
are for convenience of reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Article and Section references
in this Agreement are to the referenced Articles and Sections of this Agreement,
unless the context otherwise requires.
Section 6.3 MISCELLANEOUS. This Agreement: (i) constitutes the entire
agreement, and supersedes all other prior agreements and undertakings (both
written and oral), among the parties hereto, or any of them, with respect to the
subject matter hereof; (ii) is not intended to confer upon any other person any
rights or remedies hereunder; (iii) shall not be assigned or delegated by any
party hereto, except that Varlen may assign all or any portion of its rights and
obligations hereunder to one or more direct or indirect wholly-owned
subsidiaries of Varlen which in a written instrument shall make all the
representations and warranties of Varlen set forth herein and shall agree to
assume all of Varlen's obligations hereunder and be bound by all of the terms
and conditions of this Agreement (PROVIDED, HOWEVER, that no such assignment or
delegation shall relieve Varlen of its obligations hereunder); and (iv) shall be
governed in all respects, including validity, interpretation and effect, by the
internal laws of the Commonwealth of Virginia, without giving effect to the
principles of conflict of laws thereof. This Agreement may be executed in two
or more counterparts, which together shall constitute a single agreement.
Section 6.4 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other parties hereto would be irreparably
damaged in the event any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached.
Accordingly, each of the parties hereto agrees that they each shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state
-4-
<PAGE>
thereof having subject matter jurisdiction, in addition to any other remedy to
which such party may be entitled, at law or in equity.
IN WITNESS WHEREOF, Varlen and the Shareholders have caused this Agreement
to be executed as of the date first written above.
VARLEN CORPORATION
By:
---------------------------
Richard L. Wellek
President and
Chief Executive Officer
SHAREHOLDERS:
Name: Needham Bryan Whitfield
Number of Existing Shares: 91,917
Certificate No(s). See Annex III
Record Owner: Needham Bryan Whitfield
Address: One Park West Circle
Suite 201
Midlothian, Virginia 23113
ATTENTION: Needham Bryan Whitfield
Telecopier No. (804) 379-4668
Telephone No. (804) 379-2900
Name: Anne Whitfield Kenny
Number of Existing Shares: 443,800
Certificate No(s). See Annex IV
Record Owner: Anne Whitfield Kenny
Address: 206 Gun Club Road
Richmond, Virginia 23221
ATTENTION: Anne Whitfield Kenny
Telecopier No. N/A
Telephone No. (804) 359-5863
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<PAGE>
- ------------------------------------------
Needham B. Whitfield, individually and in
the various capacities set forth on the
attached Schedule I on behalf of the
various record and/or beneficial holders
of shares of Brenco Common Stock set
forth thereon.
- ------------------------------------------
Anne Whitfield Kenny, individually and in
the various capacities set forth on the
attached Schedule II on behalf of the
various record and/or beneficial holders
of the shares of Brenco Common Stock set
forth thereon.
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<PAGE>
Schedule I
NAME OF ACCOUNT (HOLDER) CAPACITY NUMBER OF SHARES*
- ------------------------ -------- -----------------
Needham B. Whitfield Direct 3,650
(Shares Held by Wheat First
Butcher Singer in Account
8349-8150)
Needham B. Whitfield Direct 200,000
(Shares Held by Wheat First
Butcher Singer in Account
8349-7975)
Trust F/B/O Theodore Co-Trustee (1) 38,472
Hatch Whitfield (u/a (Shares Held in
George Hendry Whitfield) NationsBank Trust Account
40-05-500-6500862)
Trust F/B/O Julia Co-Trustee (1) 38,472
Fatheree Whitfield (u/a (Shares Held in
George Hendry Whitfield) NationsBank Trust Account
40-05-500-6500870)
Trust F/B/O Sophia Co-Trustee (1) 57,708
Nazlee Whitfield (u/a (Shares Held in
George Hendry Whitfield) NationsBank Trust Account
40-05-500-6500888)
Trust F/B/O Alexander Co-Trustee (1) 57,708
Amr Whitfield (u/a (Shares Held in
George Hendry Whitfield) NationsBank Trust Account
40-05-500-6500896)
Rieman & Co. General Partner 15,082
Paka & Co. Trust General Partner 15,082
Sophia N. Whitfield Co-Trustee(2) 31,041
Irrevocable Trust
Sophia Whitfield & Co. General Partner 2,000
Sophia Whitfield & Co. General Partner 25,000
(Shares Held by Wheat First
Butcher Singer in Account
7389-4169)
<PAGE>
Schedule I
NAME OF ACCOUNT (HOLDER) CAPACITY NUMBER OF SHARES*
- ------------------------ -------- -----------------
Alexander Whitfield & Co. General Partner 25,000
(Shares Held by Wheat First
Butcher Singer in Account
1078-2326)
Alexander A. Whitfield Co-Trustee (2) 33,041
Irrevocable Trust
Theodore Hatch Whitfield Co-Trustee (3) 48,900
Trust u/w Mildred F. (Shares Held by Wheat First
Whitfield Butcher Singer in Account
8349-7756)
Julia Fatheree Whitfield Co-Trustee (3) 48,900
Trust u/w Mildred F. (Shares Held by Wheat First
Whitfield Butcher Singer in Account
8349-7734)
Custodian (under UGMA) Custodian 1,000
for Christopher D. Harper (Shares Held by Advest, Inc.
in Account 258-01599)
Custodian (under UGMA) Custodian 1,000
for Jonathan D. Harper (Shares Held by Advest, Inc.
in Account 258-01601)
The Micawber Foundation President 10,000
(Shares Held by Wheat First
Butcher Singer in Account
7757-6187)
Whitfield Foundation President 90,000
(Shares Held by Wheat First
Butcher Singer in Account
8350-3049)
Estate of Mildred F. Co-Executor (4) 250,000
Whitfield (Shares Held by Wheat First (Also reported by
Butcher Singer in Account Anne Whitfield
8350-2962) Kenny, as
Co-Executor)
<PAGE>
Footnotes:
(1) Needham B. Whitfield is co-trustee with NationsBank of Virginia, N.A.
Needham B. Whitfield has sole voting and dispositive powers with respect to
Brenco stock held in trust.
(2) Needham B. Whitfield is co-trustee with his wife, Maha S. Whitfield. Either
co-trustee may vote or sell Brenco shares held by trust.
(3) Needham B. Whitfield is co-trustee with William J. Newman, Jr. Needham B.
Whitfield has sole voting and dispositive powers with respect to Brenco
stock held in trust.
(4) Needham B. Whitfield is co-trustee with his sister Anne Whitfield Kenny.
Both co-executors must consent to sale of Brenco shares held by the estate.
* Shares for which no account information is given hereon are represented by
certificates set forth on Annex III.
<PAGE>
Schedule II
NAME OF ACCOUNT (HOLDER) CAPACITY NUMBER OF SHARES
------------------------ -------- ----------------
Anne Whitfield Kenny Direct 200,000(1)
Estate of Mildred F. Whitfield Co-Executor(2) 250,000(2)
Trust F/B/O of Anne Blackmon Co-Trustee(3) 76,944
Kenny (u/a George H. Whitfield)
Trust F/B/O Katherine Bryan Co-Trustee(3) 115,416
Kenny (u/a George H. Whitfield)
Anne Blackmon Kenny Trust Co-Trustee(4) 47,814(6)
(u/w/ Mildred F. Whitfield)
Kathryn Bryan Kenny Trust Co-Trustee(5) 47,811(6)
(u/w/ Mildred F. Whitfield)
Fatherree Foundation President 92,585(6)
- ---------------
(1) Held in an account at Wheat First Butcher Singer.
(2) Co-executor is Needham B. Whitfield and these shares are also included in
Schedule I for Needham B. Whitfield.
(3) Co-trustee is NationsBank of Virginia, N.A. Anne Whitfield Kenny has sole
voting and dispositive power with respect to Brenco Stock held in the
Trust; shares held in an account at NationsBank.
(4) Co-trustee is William J. Newman, Jr.; Anne Whitfield Kenny has sole voting
and dispositive power with respect to Brenco Stock held in the Trust.
(5) Co-trustee is William J. Newman, Jr.; Anne Whitfield Kenny has sole voting
and dispositive power with respect to Brenco Stock held in the Trust.
(6) Shares held in an account at Davenport & Company of Virginia, Inc..
<PAGE>
[MAYS & VALENTINE LETTERHEAD]
(804) 697-1200 01900.001
June 15, 1996
Varlen Corporation
55 Shuman Boulevard, Suite 500
Naperville, Illinois 60566
ACQUISITION AGREEMENT DATED AS OF JUNE 15, 1996
Gentlemen:
This firm represents Brenco, Incorporated, a Virginia corporation
("Company") in connection with the Acquisition Agreement, dated as of June 15,
1996, as the same may be modified, amended, supplemented and/or restated from
time to time (the "Acquisition Agreement"), by and among Varlen Corporation, a
Delaware corporation ("Parent"), BAS, Inc., a Virginia corporation ("Purchaser")
and the Company. This opinion is furnished to you at the request of the Company
pursuant to Section 4.14 of the Acquisition Agreement. Capitalized terms not
otherwise defined in this opinion have the meanings ascribed in the Acquisition
Agreement.
In rendering this opinion, we have examined either originals, certi-
fied copies, or copies identified to our satisfaction of the following:
A. The Acquisition Agreement as executed by the Company, Parent and
Purchaser on the date hereof;
B. Articles of Incorporation and By-Laws (each as amended) of the
Company; and
C. Resolutions adopted at a Special Meeting of the Board of Direc-
tors of the Company on June 15, 1996.
In addition, we have made such inquiries of law and fact, including
examination of originals, or copies certified or otherwise identified to our
satisfaction as true copies, of such certificates of public officials and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinions expressed below. We have assumed, without
<PAGE>
Varlen Corporation
6/19/96
Page 2
independent investigation or verification, the due authorization, execution and
delivery of the documents, instruments and agreements by all parties thereto
other than the Company. Because we have made no independent verification of the
accuracy or completeness of the facts set forth in any of such documents and
instruments referred to herein, our opinion is based upon and subject to the
stated facts as reflected in such documents and instruments.
For purposes of this opinion, we have assumed, and have relied on your
representation, that neither Parent, Purchaser nor any of their respective
affiliates, individually or collectively, as of June 15, 1996 or the date of
this opinion, was or is a beneficial owner of ten percent (10%) or more of any
class of outstanding voting shares of the Company.
On the basis of the foregoing and in reliance thereon, and subject to
the qualifications, limitations and assumptions set forth herein, it is our
opinion that, as of the date hereof:
1. The Board of Directors of the Company has adopted the resolutions
set forth in Annex II to the Acquisition Agreement which resolutions are in full
force and effect in accordance with their terms.
2. Each of the members of the Board of Directors as of this date and
as of the time of the Special Meeting of the Board of the Company held on June
15, is, with respect to the Parent and the Purchaser and their respective direct
and indirect subsidiaries, in the context of the transactions contemplated by
the Acquisition Agreement, a "disinterested director" as that term is defined in
Va. Code Section 13.1-725.
3. The Offer, Merger and other transactions contemplated by the
Acquisition Agreement have been approved by a majority of the disinterested
directors of the Company.
4. Neither the Offer, the Merger, nor any of the other transactions
contemplated by the Acquisition Agreement are, or after the date hereof will be,
subject to any of the restrictions or other provisions of the Affiliated
Transactions statute set forth in Article 14, Title 13.1, Chapter 9 of the Code
of Virginia (Sections 13.1-725 et seq.).
5. Neither the Offer, the Merger, nor any of the other transactions
contemplated by the Acquisition Agreement are, or after the date hereof will be,
subject to the supermajority shareholder vote requirement set forth in Article I
of the Company's Articles of Incorporation, as amended, and in order for the
Merger to be authorized and approved by the shareholders of the Company under
Title 13.1, Chapter 9 of the Code of Virginia, the affirmative vote of the
holders of two-thirds of the Shares (and no other corporate authorization) is
required.
6. The acquisition of shares of common stock of the Company pursuant
to the Acquisition Agreement qualifies, and after the date hereof will qualify,
as an "excepted
<PAGE>
Varlen Corporation
6/19/96
Page 3
acquisition" as that term is defined in Va. Code Section 13.1-728.1. Therefore,
the acquisition of such shares pursuant to the Offer, the Merger and the other
transactions contemplated by the Acquisition Agreement are not, and after the
date hereof will not be, subject to any of the restrictions or other provisions
of the Control Share Acquisition statute, Article 14.1, Title 13.1, Chapter 9 of
the Code of Virginia (Sections 13.1-728.1 et seq.).
This opinion speaks only as of the date hereof, and the opinions and
statements expressed hereinabove shall not be deemed to relate to any facts or
conditions prevailing, or any law, statute, rule or regulation in effect, at any
time after the date hereof.
This opinion is limited solely to the effect of the laws of the
Commonwealth of Virginia on the subject transaction, and we assume no responsi-
bility as to the applicability thereto, or effect thereon, of the laws of any
other jurisdiction. This opinion is rendered solely for the benefit of, and may
be relied upon by, Parent and Purchaser, but (except as otherwise required by
law) may not be used, disseminated, circulated, quoted, referred to, or relied
upon by any other person or for any other purpose without, in each case, our
express prior written consent.
Very truly yours,
Mays & Valentine
