Exhibit 1.1
KADANT INC.
1,300,000 Shares of Common Stock, $0.01 par value per share
PLACEMENT AGENCY AGREEMENT
June 14, 2002
J.P. Morgan Securities Inc.
270 Park Avenue, 17th Floor
New York, NY 10017
Dear Sir or Madam:
Kadant Inc., a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell 1,300,000 shares
(the "Shares") of common stock, par value $0.01 per share (the "Common Stock"),
to certain investors (collectively, the "Investors"). The Company desires to
engage you as its placement agent (the "Placement Agent") in connection with
such issuance and sale. The Shares are described more fully in the Registration
Statement (as hereinafter defined).
The Company hereby confirms as follows its agreements with the
Placement Agent.
1. Agreement to Act as Placement Agent. On the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement, the Placement Agent
agrees to act as the Company's exclusive placement agent in connection with the
issuance and sale, on a best efforts basis, by the Company of the Shares to the
Investors. The Shares will have attached thereto rights (the "Rights") that,
when exercisable, entitle the registered holder to purchase from the Company a
unit consisting of one ten-thousandth of a share of the Company's Series A
junior participating preferred stock. The Rights are to be issued pursuant to a
Rights Agreement (the "Rights Agreement") dated as of August 6, 2001 between the
Company and American Stock Transfer & Trust Company. Upon the occurrence of the
Closing (as hereinafter defined), the Company shall pay to the Placement Agent
5.0% of the proceeds received by the Company from the sale of the Shares as set
forth on the cover page of the Prospectus (as hereinafter defined).
2. Delivery and Payment. Concurrently with the execution and delivery
of this Agreement, the Company, the Placement Agent, and JPMorgan Chase Bank, as
escrow agent (the "Escrow Agent"), shall enter into an Escrow Agreement
substantially in the form of Exhibit A attached hereto (the "Escrow Agreement"),
pursuant to which an escrow account will be established, at the Company's
expense, for the benefit of the Company and the Investors (the "Escrow
Account"). Prior to the Closing Date (as hereinafter defined), (i) each of the
Investors will deposit in the Escrow Account an amount equal to the price per
Share as shown on the cover page of the Prospectus multiplied by the number of
Shares to be purchased by such Investor, and (ii) the Escrow Agent will notify
the Company and the Placement Agent in
writing whether the Investors have deposited in the Escrow Account funds in the
amount equal to the proceeds of the sale of all of the Shares offered hereby
(the "Requisite Funds"). At 10:00 a.m., New York City time, on June 19, 2002 or
at such other time on such other date as may be agreed upon by the Company and
the Placement Agent but in no event prior to the date on which the Escrow Agent
shall have received all of the Requisite Funds (such date is hereinafter
referred to as the "Closing Date"), the Escrow Agent will disburse the Requisite
Funds from the Escrow Account to the Company and the Placement Agent as provided
in the Escrow Agreement and the Company shall deliver the Shares to the
Investors, which delivery may be made through the facilities of the Depository
Trust Company. The closing of the sale of the Shares to the Investors (the
"Closing") shall take place at the office of Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, New York 10038. All actions taken at the Closing shall be
deemed to have occurred simultaneously.
Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the Placement
Agent shall request by written notice to the Company.
3. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent that:
(a) Registration Statement. The Company has filed with the Securities
and Exchange Commission (the "Commission") a "shelf" registration statement on
Form S-3 (Registration No. 333-88018), which has become effective, relating to
the Common Stock and certain other securities of the Company, under the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(collectively referred to as the "Rules and Regulations") of the Commission
promulgated thereunder. The registration statement, as amended at the time it
became effective, including the exhibits and information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A or 434(d) under the Act, is hereinafter referred to as the "Registration
Statement." No stop order suspending the effectiveness of the Registration
Statement has been issued and, to the Company's knowledge, no proceeding for
that purpose has been initiated or threatened by the Commission. The Company, if
required by the Rules and Regulations of the Commission, proposes to file the
Prospectus (as defined below) with the Commission pursuant to Rule 424(b) of the
Rules and Regulations. The Prospectus, in the form in which it is to be filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations, or, if
the Prospectus is not to be filed with the Commission pursuant to Rule 424(b),
the Prospectus in the form included as part of the Registration Statement at the
time the Registration Statement became effective, is hereinafter referred to as
the "Prospectus," except that if any revised prospectus or prospectus supplement
shall be provided to the Placement Agent by the Company for use in connection
with the offering and sale of the Shares which differs from the Prospectus
(whether or not such revised prospectus or prospectus supplement is required to
be filed by the Company pursuant to Rule 424(b) of the Rules and Regulations),
the term "Prospectus" shall refer to such revised prospectus or prospectus
supplement, as the case may be, from and after the time it is first provided to
the Placement Agent for such use. Any preliminary prospectus or prospectus
subject to completion included in the Registration Statement or filed with the
Commission pursuant to Rule 424 under the Act is hereafter called a "Preliminary
Prospectus." Any
2
reference herein to the Registration Statement, any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which were
filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
on or before the last to occur of the effective date of the Registration
Statement, the date of the Preliminary Prospectus, or the date of the
Prospectus, and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include (i) the
filing of any document under the Exchange Act after the effective date of the
Registration Statement, the date of such Preliminary Prospectus or the date of
the Prospectus, as the case may be, which is incorporated therein by reference
and (ii) any such document so filed.
(b) Registration Statement and Prospectus. When the Registration
Statement became effective, upon the filing or first delivery to the Investors
of the Prospectus, as of the date hereof, and at the Closing Date, the
Registration Statement (and any post-effective amendment thereto) and the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement to the Registration Statement or the
Prospectus) contained and will contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations,
complied and will comply in all material respects with the Act and the Rules and
Regulations, and did not and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein (in the light of the circumstances
under which they were made, in the case of the Prospectus) not misleading, each
Preliminary Prospectus, as of the date filed with the Commission, did not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
except that no representation or warranty is made in this Section 3(b) with
respect to statements or omissions made in reliance upon and in conformity with
written information furnished to the Company expressly for inclusion in any
Preliminary Prospectus, the Registration Statement, or the Prospectus, or any
amendment or supplement thereto, as stated in Section 7(b) hereof. The Company
has not distributed any offering material in connection with the offering and
sale of the Shares, other than the Registration Statement, the Preliminary
Prospectus and the Prospectus.
(c) Financial Statements. The consolidated financial statements and
the related notes thereto included or incorporated by reference in the
Registration Statement and the Prospectus comply in all material respects with
the applicable requirements of the Act and the Exchange Act, as applicable, and
present fairly, in all material respects, the consolidated financial position of
the Company and its subsidiaries as of the dates indicated and the results of
their operations and the changes in their consolidated cash flows for the
periods specified; such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby (except as otherwise stated therein and
subject, in the case of unaudited financial statements, to the absence of
footnotes and normal year end adjustments), and the supporting schedules
included or incorporated by reference in the Registration Statement present
fairly the information required to be stated therein; and the other financial
information included or incorporated by
3
reference in the Registration Statement and the Prospectus has been derived from
the accounting records of the Company and its subsidiaries and presents fairly
the information shown thereby.
(d) No Material Adverse Change. Except as set forth in or otherwise
contemplated by the Registration Statement (exclusive of any amendment thereof)
or the Prospectus (exclusive of any supplement thereto), since the date of the
most recent financial statements of the Company included or incorporated by
reference in the Registration Statement and the Prospectus and prior to Closing,
(i) there has not been and will not have been any change in the capital stock of
the Company (except for changes in the number of outstanding shares of Common
Stock of the Company due to the issuance of shares upon the exercise of stock
options or upon the grant of restricted stock to the Company's directors, the
issuance of shares pursuant to the Company's employee stock purchase plan or the
Company's deferred compensation plan for directors, or the issuance of shares
pursuant to the conversion of the Company's outstanding debentures) or long-term
debt of the Company or any of its Subsidiaries (other than changes resulting
from the repurchase by the Company of its outstanding debentures) or any
dividend or distribution of any kind declared, set aside for payment, paid or
made by the Company on any class of capital stock, or any material adverse
change, or any development that would reasonably be expected to result in a
material adverse change, in or affecting the business, properties, management,
consolidated financial position, stockholders' equity, or results of operations
of the Company and its Subsidiaries taken as a whole (a "Material Adverse
Change"); (ii) neither the Company nor any of its Subsidiaries has entered or
will enter into any transaction or agreement, not in the ordinary course of
business, that is material to the Company and its Subsidiaries taken as a whole
or incurred or will incur any liability or obligation, direct or contingent, not
in the ordinary course of business, that is material to the Company and its
Subsidiaries taken as a whole; and (iii) neither the Company nor any of its
Subsidiaries has sustained or will sustain any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor disturbance or dispute or any action,
order or decree of any court or arbitrator or governmental or regulatory
authority, except in each case as otherwise disclosed in the Registration
Statement and the Prospectus.
(e) Organization. The Company and each of its Subsidiaries are, and
at the Closing Date will be, duly organized, validly existing as a corporation
and in good standing under the laws of their respective jurisdictions of
organization. The Company and each of its Subsidiaries are, and will be at the
Closing Date, duly qualified as a foreign corporation for transaction of
business and in good standing under the laws of each other jurisdiction in which
their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have, and at the Closing
Date will have, all corporate power and authority necessary to own or hold their
respective properties and to conduct their respective businesses as described in
the Registration Statement and the Prospectus, except where the failure to be so
qualified or in good standing or have such power or authority would not,
individually or in the aggregate, have a material adverse effect or would
reasonably be expected to have a material adverse effect on or affecting the
business, properties, management, consolidated financial position, stockholders'
equity or results of operations of the Company and its Subsidiaries taken as a
whole (a "Material Adverse Effect"). The subsidiaries listed in
4
Schedule 1 to this Agreement (the "Subsidiaries") are the only significant
subsidiaries of the Company.
(f) Capitalization. The issued and outstanding shares of capital
stock of the Company have been validly issued, are fully paid and nonassessable
and, other than as disclosed in or contemplated by the Registration Statement or
the Prospectus, are not subject to any preemptive or similar rights. The Company
has an authorized, issued and outstanding capitalization as set forth in the
Registration Statement and the Prospectus as of the dates referred to therein
(other than the grant of additional options under the Company's existing stock
option plans, or changes in the number of outstanding shares of Common Stock of
the Company due to the issuance of shares upon the exercise of stock options or
the grant of restricted stock to the Company's directors, the issuance of shares
pursuant to the Company's employee stock purchase plan or the Company's deferred
compensation plan for directors, changes resulting from the repurchase by the
Company of its outstanding debentures, or the issuance of shares pursuant to the
conversion of the Company's outstanding debentures) and such authorized capital
stock conforms in all material respects to the description thereof set forth in
the Registration Statement and the Prospectus. The description of the securities
of the Company in the Registration Statement and the Prospectus is, and at the
Closing Date will be, complete and accurate in all material respects. Except as
disclosed in or contemplated by the Registration Statement or the Prospectus, as
of the date referred to therein, the Company did not have outstanding any
options to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or exchangeable for, or any
contracts or commitments to issue or sell, any shares of capital stock or other
securities.
(g) Due Authorization and Enforceability. The Company has full legal
power and authority to enter into this Agreement and the Escrow Agreement
(together, the "Transaction Documents") and to consummate the transactions
contemplated hereby and thereby. The Transaction Documents have been duly
authorized, executed and delivered by the Company and constitute legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their respective terms except as rights to indemnity and
contribution thereunder may be limited by federal or state securities laws and
matters of public policy and except as such enforceability may be subject to the
effect of applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and equitable principles of general
applicability.
(h) The Shares. The Shares have been duly authorized by the Company
and, when issued and delivered and paid for as provided herein, will be validly
issued, fully paid and nonassessable and will conform in all material respects
to the descriptions thereof in the Prospectus; and the issuance of the Shares is
not subject to any preemptive or similar rights.
(i) No Violation or Default. Neither the Company nor any of its
Subsidiaries is (i) in violation of its charter or by-laws or similar
organizational documents; (ii) in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its
5
Subsidiaries is bound or to which any of the property or assets of the Company
or of any of its Subsidiaries is subject; or (iii) in violation of any law or
statute or any judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority, except, in the case of each of clauses
(ii) and (iii) above, for any such violation or default that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(j) No Conflicts. The execution, delivery and performance by the
Company of each of the Transaction Documents, the issuance and sale by the
Company of the Shares and the consummation by the Company of the transactions
contemplated by the Transaction Documents will not (i) conflict with or result
in a breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound or to
which any of the property or assets of the Company or any of its Subsidiaries is
subject; (ii) result in any violation of the provisions of the charter or
by-laws or similar organizational documents of the Company or any of its
Subsidiaries; or (iii) result in the violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority, except, in the case of each of clauses (i) and (iii)
above, for any such conflict, breach, violation, default, lien, charge or
encumbrance that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(k) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of each of the Transaction Documents, the issuance and sale by
the Company of the Shares and the consummation by the Company of the
transactions contemplated by the Transaction Documents, except for the
registration of the Shares under the Act and such consents, approvals,
authorizations, orders and registrations or qualifications as may be required
under applicable state securities laws or by the by-laws and rules of the
National Association of Securities Dealers, Inc. ("NASD") or the American Stock
Exchange (the "Exchange") in connection with the purchase and distribution of
the Shares by the Placement Agent.
(l) Legal Proceedings. Except as disclosed in or contemplated by the
Registration Statement or the Prospectus, there are no legal, governmental or
regulatory actions, suits or proceedings pending, nor, to the Company's
knowledge, any legal, governmental or regulatory investigations, to which the
Company or any of its Subsidiaries is a party or to which any property of the
Company or any of its Subsidiaries is the subject that, individually or in the
aggregate, if determined adversely to the Company or any of its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect or materially and
adversely affect the ability of the Company to perform its obligations under the
Transaction Documents; to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated by any governmental or regulatory
authority or threatened by others; and (i) to the Company's knowledge, there are
no current or pending legal, governmental or regulatory investigations, actions,
suits or proceedings that are required under the Act to be described in the
Prospectus
6
that are not so described; and (ii) there are no contracts or other documents
that are required under the Act to be filed as exhibits to the Registration
Statement that are not so filed.
(m) Independent Accountants. Arthur Andersen LLP, who have certified
certain financial statements of the Company and its Subsidiaries, are
independent public accountants (the "Accountants") with respect to the Company
and its subsidiaries as required by the Act.
(n) Title to Real and Personal Property. The Company and its
Subsidiaries have good and valid title in fee simple to all items of real
property and good and valid title to all personal property described in the
Registration Statement or the Prospectus as being owned by them that are
material to the businesses of the Company and its Subsidiaries taken as a whole,
in each case free and clear of all liens, encumbrances and claims except those
that (i) do not materially interfere with the use made and proposed to be made
of such property by the Company and its Subsidiaries or (ii) would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Any real property described in the Registration Statement or the
Prospectus as being leased by the Company and its Subsidiaries that is material
to the business of the Company and its Subsidiaries taken as a whole is held by
them under valid, existing and enforceable leases, except those that (A) do not
materially interfere with the use made or proposed to be made of such property
by the Company or its Subsidiaries or (B) would not be reasonably expected,
individually or in the aggregate, to have a Material Adverse Effect.
(o) Title to Intellectual Property. Except as disclosed in or
contemplated by the Registration Statement or the Prospectus, the Company and
its Subsidiaries own or possess adequate rights to use all material patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) (collectively, the
"Intellectual Property"), necessary for the conduct of their respective
businesses as conducted as of the date hereof, except to the extent that the
failure to own or possess adequate rights to use such Intellectual Property
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; and the Company and its Subsidiaries have not received
any written notice of any claim of infringement or conflict which asserted
Intellectual Property rights of others, which infringement or conflict, if the
subject of an unfavorable decision, would result in a Material Adverse Effect.
(p) No Undisclosed Relationships. No relationship, direct or
indirect, exists between or among the Company or any of its Subsidiaries, on the
one hand, and the directors, officers, stockholders, customers or suppliers of
the Company or any of its Subsidiaries, on the other, which is required by the
Act to be disclosed in the Registration Statement and the Prospectus and is not
so disclosed.
(q) Investment Company Act. The Company is not and, after giving
effect to the offering and sale of the Shares to be sold by the Company and the
application of the proceeds thereof as described in the Prospectus, will not be
an "investment company" or an entity "controlled" by an "investment company"
within the meaning of the Investment Company Act
7
of 1940, as amended, and the rules and regulations of the Commission promulgated
thereunder (collectively, "Investment Company Act").
(r) Taxes. The Company and its Subsidiaries have filed all material
federal, state, local and foreign tax returns which have been required to be
filed and paid all taxes shown thereon through the date hereof, to the extent
that such taxes have become due and are not being contested in good faith; and,
except as otherwise disclosed in or contemplated by the Registration Statement
or the Prospectus, no tax deficiency has been determined adversely to the
Company or any of its Subsidiaries which has had, or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(s) Licenses and Permits. The Company and its Subsidiaries possess or
have obtained all licenses, certificates, permits and other authorizations
issued by, and have made all declarations and filings with, the appropriate
federal, state, local or foreign governmental or regulatory authorities that are
necessary for the ownership or lease of their respective properties or the
conduct of their respective businesses as described in the Registration
Statement and the Prospectus (the "Permits"), except where the failure to
possess, obtain or make the same would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and except as
disclosed in or contemplated by the Registration Statement or the Prospectus,
neither the Company nor any of its Subsidiaries has received written notice of
any proceeding relating to revocation or modification of any such Permit or has
any reason to believe that such Permit will not be renewed in the ordinary
course, except where the failure to obtain any such renewal would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(t) No Labor Disputes. No labor disturbance by or dispute with
employees of the Company or any of its Subsidiaries exists or, to the knowledge
of the Company, is threatened which would reasonably be expected to result in a
Material Adverse Effect.
(u) Compliance With Environmental Laws. The Company and its
Subsidiaries (i) are in compliance with any and all applicable federal, state,
local and foreign laws, rules, regulations, decisions and orders relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, "Environmental
Laws"); (ii) have received and are in compliance with all material permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses as described in the Registration
Statement and the Prospectus; and (iii) have not received notice of any actual
or potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants,
except, in the case of any of clauses (i), (ii) or (iii) above, for any such
failure to comply or failure to receive required permits, licenses, other
approvals or liability as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(v) Compliance With ERISA. Each material employee benefit plan,
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), that is maintained, administered or
contributed to by the Company or any of its affiliates for employees or former
employees of the Company and its Subsidiaries has been
8
maintained in material compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not limited to
ERISA and the Internal Revenue Code of 1986, as amended (the "Code"); no
prohibited transaction, within the meaning of Section 406 of ERISA or Section
4975 of the Code, has occurred which would result in a material liability to the
Company with respect to any such plan excluding transactions effected pursuant
to a statutory or administrative exemption; and for each such plan that is
subject to the funding rules of Section 412 of the Code or Section 302 of ERISA,
no "accumulated funding deficiency" as defined in Section 412 of the Code has
been incurred, whether or not waived, and the fair market value of the assets of
each such plan (excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions.
(w) Accounting Controls. The Company and its Subsidiaries maintain systems
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) Insurance. The Company and its Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as the Company reasonably
believes are adequate for the conduct of its businesses as described in the
Registration Statement and the Prospectus and the value of its properties and as
is customary for companies engaged in similar businesses in similar industries.
(y) No Unlawful Payments. Neither the Company nor any of its Subsidiaries
has at anytime during the last five years (i) used any corporate funds for any
unlawful contribution to any candidate for public office; or (ii) made any
payment to any federal or state government officer or official or other person
charged with similar public duties, other than payments required or permitted by
the laws of the United States or any jurisdiction thereof.
(z) No Broker's Fees. Neither the Company nor any of its Subsidiaries is a
party to any contract, agreement or understanding with any person (other than
this Agreement and that certain Agreement between the Company and Barrington
Research Associates, Inc. dated June 3, 2002) that would give rise to a valid
claim against the Company or any of its Subsidiaries or the Placement Agent for
a brokerage commission, finder's fee or like payment in connection with the
offering and sale of the Shares.
(aa) No Registration Rights. No person has the right to require the Company
or any of its Subsidiaries to register any securities for sale under the Act by
reason of the filing of the Registration Statement with the Commission or by
reason of the issuance and sale of the Shares, except for rights which have been
waived.
9
(bb) No Stabilization. The Company has not taken, directly or indirectly,
any action designed to or that could reasonably be expected to cause or result
in any stabilization or manipulation of the price of the Shares.
(cc) Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) (a "Forward Looking Statement") contained in the Registration Statement and
the Prospectus has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith. The Forward Looking Statements
incorporated by reference in the Registration Statement and the Prospectus from
the Company's Annual Report on Form 10-K for the year ended December 29, 2001
and Quarterly Report on Form 10-Q for the period ending on March 30, 2002 (in
each case under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Industry and Business Outlook" and
"--Liquidity and Capital Resources") (i) are within the coverage of the safe
harbor for forward looking statements set forth in Section 27A of the Act, Rule
175(b) under the Act or Rule 3b-6 under the Exchange Act, as applicable, (ii)
were made by the Company with a reasonable basis and in good faith and reflect
the Company's good faith reasonable best estimate of the matters described
therein, and (iii) have been prepared in accordance with Item 10 of Regulation
S-K under the Act.
(dd) Contracts. All such contracts to which the Company is a party have
been duly authorized, executed and delivered by the Company, constitute valid
and binding agreements of the Company, and are enforceable against the Company
in accordance with the terms thereof, subject to the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
equitable principles of general applicability.
(ee) Certificates. No statement, representation or warranty made in the
certificate to be delivered to the Placement Agent pursuant to Section 6(h)
below will be, when made, inaccurate, untrue or incorrect in any material
respect.
4. Further Agreements of the Company. The Company covenants and agrees
with the Placement Agent that:
(a) Effectiveness. The Registration Statement has become effective and if
Rule 430A is used or the filing of the Prospectus is otherwise required under
Rule 424(b), the Company will file the Prospectus (properly completed if Rule
430A has been used) pursuant to Rule 424(b) within the prescribed time period
and will provide a copy of such filing to the Placement Agent promptly following
such filing.
(b) Amendments or Supplements. The Company will not, during such period as
the Prospectus would be required by law to be delivered in connection with sales
of the Shares by an underwriter or dealer in connection with the offering
contemplated by this Agreement, file any amendment or supplement to the
Registration Statement or the Prospectus, except as required by law, unless a
copy thereof shall first have been submitted to the Placement Agent within a
reasonable period of time prior to the filing thereof and the Placement Agent
shall not have reasonably objected thereto in good faith.
10
(c) Notice to Placement Agent. The Company will notify the Placement Agent
promptly, and will, if requested, confirm such notification in writing, (1) when
any post-effective amendment to the Registration Statement becomes effective,
but only during the period mentioned in Section 4(b); (2) of any request by the
Commission for any amendments to the Registration Statement or any amendment or
supplements to the Prospectus or for additional information, but only during the
period mentioned in Section 4(b); (3) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose or the threat thereof, but only
during the period mentioned in Section 4(b); (4) of becoming aware of the
occurrence of any event during the period mentioned in Section 4(b) that in the
judgment of the Company makes any statement made in the Registration Statement
or the Prospectus untrue in any material respect or that requires the making of
any changes in the Registration Statement or the Prospectus in order to make the
statements therein, in light of the circumstances in which they are made, not
misleading; and (5) of receipt by the Company of any notification with respect
to any suspension of the qualification of the Shares for offer and sale in any
jurisdiction. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement in connection with the offering
contemplated hereby, the Company will make every reasonable effort to obtain the
withdrawal of any such order at the earliest possible moment. If the Company has
omitted any information from the Registration Statement, pursuant to Rule 430A,
it will use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to said Rule 430A and to notify
the Placement Agent promptly of all such filings.
(d) Ongoing Compliance of the Prospectus. If, at any time when a
Prospectus relating to the Shares is required to be delivered under the Act, the
Company becomes aware of the occurrence of any event as a result of which the
Prospectus, as then amended or supplemented, would, in the reasonable judgment
of counsel to the Company or counsel to the Placement Agent, include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or the Registration Statement, as then amended
or supplemented, would, in the reasonable judgment of counsel to the Company or
counsel to the Placement Agent, include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein not
misleading, or if for any other reason it is necessary, in the reasonable
judgment of counsel to the Company or counsel to the Placement Agent, at any
time to amend or supplement the Prospectus or the Registration Statement to
comply with the Act or the Rules and Regulations, the Company will promptly
notify the Placement Agent and, subject to Section 4(b) hereof, will promptly
prepare and file with the Commission, at the Company's expense, an amendment to
the Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance and will deliver
to the Placement Agent, without charge, such number of copies thereof as the
Placement Agent may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the Placement Agent, and
the Placement Agent agrees to provide to each Investor, prior to the Closing, a
copy of the Prospectus and any amendments or supplements thereto.
11
(e) Delivery of Copies. The Company will furnish to the Placement Agent and
its counsel, without charge in New York City (i) one copy of the Registration
Statement, including financial statements and schedules, and all exhibits
thereto and (ii) so long as a prospectus relating to the Shares is required to
be delivered under the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto as the Placement Agent may
reasonably request.
(f) Compliance with Undertakings. The Company will comply with all the
undertakings contained in the Registration Statement.
(g) Blue Sky Compliance. Prior to the sale of the Shares to the Investors,
the Company will cooperate with the Placement Agent and its counsel in
connection with the registration or qualification of the Shares for offer and
sale under the state securities or Blue Sky laws of such jurisdictions as the
Placement Agent may reasonably request; provided, that in no event shall the
Company be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to general
service of process in any jurisdiction where it is not now so subject.
(h) Use of Proceeds. The Company will apply the net proceeds from the
offering and sale of the Shares in the manner set forth in the Prospectus under
the caption "Use of Proceeds."
(i) Exchange Listing. The Company will use its best efforts to ensure that
the Shares are listed on the Exchange at the time of the Closing.
(j) Reports. For a period of three years from the Closing Date, the Company
will furnish to the Placement Agent, as soon as they are available, copies of
all reports or other communications (financial or other) furnished to holders of
the Shares, other than any such reports or communications filed with the
Commission pursuant to the Commission's EDGAR system.
(k) Clear Market. For a period of 90 days after the date hereof, the
Company will not (1) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock;
or (2) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise, without
the prior written consent of the Placement Agent, other than (i) the Shares to
be sold hereunder, (ii) securities issued pursuant to stock option plans,
deferred compensation plans, restricted stock plans and employee stock purchase
plans existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement; (iii) the
issuance by the Company of any shares of Common Stock as consideration for
mergers, acquisitions, other business combinations, or strategic alliances,
occurring after the date of this Agreement, provided that each recipient of
shares pursuant to this clause (iii) agrees that all such shares remain subject
to restrictions
12
substantially similar to those contained in this subsection; or (iv) the offer,
issuance or sale of any securities of the Company in exchange for any
"underwater" options of the Company.
5. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay
all costs and expenses incident to the performance of the obligations of the
Company under this Agreement, including but not limited to costs and expenses of
or relating to (1) the preparation, printing and filing of the Registration
Statement (including each pre- and post-effective amendment thereto) and
exhibits thereto, each Preliminary Prospectus, the Prospectus and any amendment
or supplement to the Prospectus, (2) the preparation and delivery of
certificates representing the Shares, (3) furnishing (including costs of
shipping and mailing) such copies of the Registration Statement (including all
pre- and post-effective amendments thereto), the Prospectus and any Preliminary
Prospectus, and all amendments and supplements to the Prospectus, as may be
requested for use in connection with the direct placement of the Shares, (4) the
listing of the Common Stock on the Exchange, (5) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of such jurisdictions designated pursuant to Section 4(g), including the
reasonable fees, disbursements and other charges of counsel to the Placement
Agent in connection therewith and the preparation and printing of preliminary,
supplemental and final Blue Sky memoranda, (6) fees, disbursements and other
charges of counsel to the Company, (7) fees and disbursements of the Accountants
incurred in delivering the letter(s) described in 6(g) of this Agreement and (8)
the fees of the Escrow Agent. The Company shall reimburse the Placement Agent,
upon request for all reasonable out-of-pocket costs and expenses; provided,
however that the Company shall not be obligated to reimburse the Placement Agent
for any costs and expenses to the extent that the aggregate amount of such costs
and expenses exceeds $50,000 without the Company's prior written consent. It is
understood, however, that, except as provided in this Section and Sections 7 and
8(c) hereof, the Placement Agent will pay all of its own costs and expenses,
including the fees of its counsel and any advertising expenses connected with
any offers it may make hereunder. The Company shall not in any event be liable
to the Placement Agent for loss of anticipated profits from the transactions
contemplated by this Agreement.
6. Conditions of the Obligations of the Placement Agent. The obligations
of the Placement Agent hereunder are subject to the following conditions:
(a) (i) No stop order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Shares under the
securities or Blue Sky laws of any jurisdiction shall be in effect and no
proceedings for that purpose shall be pending or threatened by any securities or
other governmental authority (including, without limitation, the Commission),
(ii) any request for additional information on the part of the staff of any
securities or other governmental authority (including, without limitation, the
Commission) shall have been complied with to the satisfaction of the staff of
the Commission or such authorities and (iii) after the date hereof no amendment
or supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Placement Agent and the
Placement Agent did not reasonably object thereto in good faith.
13
(b) Since the respective dates as of which information is given in the
Registration Statement (exclusive of any amendment thereof) and the Prospectus
(exclusive of any supplement thereto), (i) there shall not have been a Material
Adverse Change whether or not arising from transactions in the ordinary course
of business, in each case other than as set forth in or contemplated by the
Registration Statement (exclusive of any amendment thereof) or the Prospectus
(exclusive of any supplement thereto), and (ii) the Company shall not have
sustained any material loss or interference with its business or properties from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Registration Statement
(exclusive of any amendment thereof) or the Prospectus (exclusive of any
supplement thereto), if in the judgment of the Placement Agent any such
development makes it impracticable or inadvisable to consummate the sale and
delivery of the Shares to Investors at the public offering price.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of its officers or
directors in their capacities as such, before or by any Federal, state or local
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, which litigation or proceeding is reasonably expected
by management to have a Material Adverse Effect.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct in all material respects at the Closing Date,
as if made on such date, and all covenants and agreements herein contained to be
performed on the part of the Company and all conditions herein contained to be
fulfilled or complied with by the Company at or prior to the Closing Date shall
have been duly performed, fulfilled or complied with in all material respects.
(e) The Placement Agent shall have received an opinion, dated the
Closing Date, of Sandra L. Lambert, General Counsel to the Company, in form and
substance reasonably satisfactory to the Placement Agent, with respect to the
matters set forth in Exhibit C hereto.
(f) The Placement Agent shall have received an opinion, dated the
Closing Date, of Hale and Dorr LLP, outside counsel to the Company, in form and
substance reasonably satisfactory to the Placement Agent, with respect to the
matters set forth in Exhibit D hereto.
(g) Concurrently with the execution and delivery of this Agreement, or,
if the Company elects to rely on Rule 430A, on the date of the Prospectus, the
Accountants shall have furnished to the Placement Agent a letter, dated the date
of its delivery (the "Original Letter"), addressed to the Placement Agent and in
form and substance reasonably satisfactory to the Placement Agent, containing
statements and information of the type customarily included in accountants'
"comfort letters" to underwriters. At the Closing Date, the Accountants shall
have furnished to the Placement Agent a letter, dated the date of its delivery,
which shall confirm, on the basis of a review in accordance with the procedures
set forth in the Original Letter, that nothing has come to their attention
during the period from the date of the Original Letter referred to in the prior
sentence to a date (specified in the letter) not more than five days prior
14
to the Closing Date which would require any change in the Original Letter if
it were required to be dated and delivered at the Closing Date.
(h) At the Closing Date, there shall be furnished to the Placement Agent a
certificate, dated the date of its delivery, signed by each of the Chief
Executive Officer and the Chief Financial Officer of the Company, each in his
capacity as such, in form and substance reasonably satisfactory to the Placement
Agent to the effect that each signer has carefully examined the Registration
Statement and the Prospectus and that to each of such person's knowledge:
(i) (A) As of the date of such certificate, (x) the Registration
Statement does not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and (y) the Prospectus
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading and (B) no event has occurred as a result of which it
is necessary to amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading in any material respect.
(ii) Each of the representations and warranties of the Company
contained in this Agreement are true and correct in all material respects
as if such representations and warranties were made on the Closing Date.
(iii) Each of the covenants and agreements required in this Agreement
to be performed by the Company on or prior to the Closing Date and each
condition required herein to be fulfilled or complied with by the Company
on or prior to the Closing Date has been duly performed, fulfilled or
complied with in all material respects.
(iv) No stop order suspending the effectiveness of the Registration
Statement or of any part thereof has been issued and no proceedings for
that purpose have been instituted or are contemplated by the Commission.
(v) Subsequent to the date of the most recent financial statements
in the Prospectus, there has been no material adverse change in the
financial position or results of operations of the Company, except as set
forth in or contemplated by the Prospectus.
(i) The Shares shall be qualified for sale in such states as the Placement
Agent may reasonably request and each such qualification shall be in effect and
not subject to any stop order or other proceeding on the Closing Date; provided
that in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to taxation or general service of process in any jurisdiction where
it is not now so subject.
(j) The Company shall have furnished or caused to be furnished to the
Placement Agent such certificates, in addition to those specifically mentioned
herein, as the Placement Agent may have reasonably requested as to the accuracy
and completeness, in all material
15
respects, at the Closing Date of any statement in the Registration Statement or
the Prospectus, as to the accuracy, in all material respects, at the Closing
Date of the representations and warranties of the Company, as to the performance
by the Company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to the obligations hereunder of the
Placement Agent.
(k) The Placement Agent shall have received executed "lock-up" agreements,
each substantially in the form of Exhibit B hereto, from the executive officers
and directors of the Company relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, and such lock-up agreements
shall be full force and effect on the Closing Date.
7. Indemnification and Contribution.
(a) Indemnification of the Placement Agent. The Company agrees to
indemnify and hold harmless the Placement Agent, its affiliates, directors,
officers, employees, agents and each person, if any, who controls such Placement
Agent within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities, joint
or several (including, without limitation, reasonable fees of outside legal
counsel and other expenses reasonably incurred in connection with any suit,
action or proceeding or any claim asserted, as such fees and expenses are
incurred) that arise out of, or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (or any amendment or supplement thereto) or any Preliminary
Prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities arise out of, or are based upon, any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with any information furnished to the Company in writing by the Placement Agent
expressly for use therein, it being understood and agreed that the only such
information furnished by the Placement Agent consists of the information
described as such in subsection (b) below; provided, that with respect to any
such untrue statement in or omission from any Preliminary Prospectus, the
indemnity agreement contained in this paragraph (a) shall not inure to the
benefit of the Placement Agent to the extent that the sale to the person
asserting any such loss, claim, damage or liability was an initial sale by the
Placement Agent and any such loss, claim, damage or liability of or with respect
to such Placement Agent results from the fact that both (i) to the extent
required by applicable law, a copy of the Prospectus was not sent or given to
such person at or prior to the written confirmation of the sale of such Shares
to such person and (ii) the untrue statement in or omission from such
Preliminary Prospectus was corrected in the Prospectus unless, in either case,
such failure to deliver the Prospectus was a result of non-compliance by the
Company with the provisions of Section 4 hereof.
(b) Indemnification of the Company. The Placement Agent agrees to
indemnify and hold harmless the Company, its affiliates, directors and officers
who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act to the same extent as the indemnity set forth in paragraph (a)
above, but only with respect to(b) any losses, claims, damages or liabilities
that arise
16
out of, or are based upon, any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with any
information furnished to the Company in writing by the Placement Agent expressly
for use in the Registration Statement or the Prospectus (or any amendment or
supplement thereto) or any Preliminary Prospectus, it being understood and
agreed upon that the only such information furnished by the Placement Agent
consists of the following: the statements set forth (i) under the heading "Plan
of Distribution," (ii) on the cover page and (iii) on the back cover in any
Preliminary Prospectus and the Prospectus.
(c) Notice and Procedures. If any suit, action, proceeding (including
any governmental or regulatory investigation), claim or demand shall be brought,
threatened or asserted against any person in respect of which indemnification
may be sought pursuant to either paragraph (a) or (b) above, such person (the
"Indemnified Person") shall promptly notify the person against whom such
indemnification may be sought (the "Indemnifying Person") in writing; provided
that the failure to notify the Indemnifying Person shall not relieve it from any
liability that it may have under this Section 7 except to the extent that it has
been prejudiced thereby; and provided, further, that the failure to notify the
Indemnifying Person shall not relieve it from any liability that it may have to
an Indemnified Person otherwise than under this Section 7. If any such
proceeding shall be brought, threatened or asserted against an Indemnified
Person and it shall have notified the Indemnifying Person thereof, the
Indemnifying Person shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others entitled
to indemnification pursuant to this Section 7 that the Indemnifying Person may
designate in such proceeding and shall pay the fees and expenses of such counsel
related to such proceeding, as incurred. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person unless (i)
the Indemnifying Person and the Indemnified Person shall have mutually agreed to
the contrary; (ii) the Indemnifying Person has failed within a reasonable time
to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it that are different from or in addition to those
available to the Indemnifying Person; or (iv) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood and agreed that the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be paid or reimbursed as they are incurred. Any
such separate firm for the Placement Agent, its affiliates, directors, officers,
employees and agents and any control persons of the Placement Agent shall be
designated in writing by J.P. Morgan Securities Inc. and any such separate firm
for the Company, its directors, its officers who signed the Registration
Statement and any control persons of the Company shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding with respect to which indemnification is available hereunder
effected without its written consent, but if any such proceeding is settled with
such consent or if there be a final judgment in any such proceeding for the
plaintiff, the Indemnifying Person agrees to indemnify each Indemnified
17
Person from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested that an Indemnifying Person reimburse the
Indemnified Person for fees and expenses of counsel in connection with any such
proceeding as contemplated by this paragraph, the Indemnifying Person shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by the
Indemnifying Person of such request and (ii) the Indemnifying Person shall not
have reimbursed the Indemnified Person in accordance with such request prior to
the date of such settlement. No Indemnifying Person shall, without the written
consent of the Indemnified Person (which consent shall not be unreasonably
withheld, conditioned or delayed), effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnification could have been sought hereunder by such
Indemnified Person, unless such settlement (x) includes an unconditional release
of such Indemnified Person, in form and substance reasonably satisfactory to
such Indemnified Person, from all liability on claims that are the subject
matter of such proceeding and (y) does not include any statement as to or any
admission of fault, culpability or a failure to act by or on behalf of any
Indemnified Person.
(d) Contribution. If the indemnification provided for in paragraphs (a)
and (b) above is unavailable to an Indemnified Person or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Placement Agent on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of the Company on the one hand and the Placement
Agent on the other in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other shall be deemed to be in the same
respective proportions as the net proceeds (before deducting expenses) received
by the Company from the sale of the Shares and the total fee received by the
Placement Agent in connection therewith, in each case as set forth in the table
on the cover of the Prospectus, bear to the aggregate offering price of the
Shares. The relative fault of the Company on the one hand and the Placement
Agent on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Placement Agent and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) Limitation on Liability. The Company and the Placement Agent agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages and liabilities referred to in
18
paragraph (d) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Person in
connection with any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall the Placement Agent be required to contribute any
amount in excess of the fee received by it with respect to the offering of the
Shares exceeds the amount of any damages that the Placement Agent has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Non-Exclusive Remedies. The remedies provided for in this Section 7
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any Indemnified Person at law or in equity.
8. Termination.
(a) The obligations of the Placement Agent under this Agreement may be
terminated, in the absolute discretion of the Placement Agent, at any time prior
to the Closing Date, by notice to the Company from the Placement Agent, without
liability on the part of the Placement Agent to the Company if, prior to
delivery and payment for the Shares, (i) trading generally shall have been
suspended or materially limited on or by any of the New York Stock Exchange, the
American Stock Exchange, the National Association of Securities Dealers, Inc.,
the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade; (ii) trading of any securities issued or guaranteed by
the Company shall have been suspended on any exchange or in any over-the-counter
market; (iii) a general moratorium on commercial banking activities shall have
been declared by federal or New York State authorities; or (iv) there shall have
occurred any outbreak or escalation of hostilities within or outside the United
States, that, in the judgment of the Placement Agent, is material and adverse
and makes it impracticable or inadvisable to proceed with the offering, sale or
delivery of the Shares on the Closing Date on the terms and in the manner
contemplated by this Agreement and Prospectus.
(b) The obligations of the parties under this Agreement shall be
automatically terminated in the event that notice is given by the Placement
Agent to the Escrow Agent prior to the close of business on the date scheduled
for receipt of the Requisite Funds, that the Requisite Funds have not been
deposited by the Investors into the Escrow Account by the close of business on
the Closing Date.
(c) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to Section 8(b) and other than a
termination of the Placement Agent's Engagement pursuant to Section 8(a)), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Placement Agent set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by the Placement Agent, reimburse you for all
reasonable out-of-pocket expenses incurred in connection herewith; provided,
however, that the Company shall not be obligated to reimburse the Placement
Agent for any such costs and expenses to the extent that the aggregate
19
amount of such costs and expenses exceed $50,000 without the Company's prior
written consent.
9. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Company, at the office of the Company, One Acton
Place, Suite 202, Acton, MA 01720 Attention: Sandra L. Lambert, Esq. (facsimile:
(978) 635-1593), with copy to Hale and Dorr LLP, 60 State Street, Boston, MA
02109, Attention: Hal J. Leibowitz, Esq. (facsimile: (617) 526-5000, or (b) if
to the Placement Agent, at the office of J.P. Morgan Securities Inc., 270 Park
Avenue, 17th Floor, New York, NY 10017 Attention: Robert Vincent, Esq.
(facsimile: (212) 270-7487). Any such notice shall be effective only upon
receipt. Any notice under Section 7 may be made by facsimile or telephone, but
if so made shall be subsequently confirmed in writing.
10. Conditions of Obligations of the Company. The obligation of the
Company hereunder is subject to the receipt by the Company of an opinion, dated
the Closing Date, of Stroock & Stroock & Lavan LLP, outside counsel to the
Placement Agent, addressed to the Company in form and substance reasonably
acceptable to the Company and its counsel to the effect that this best efforts
offering constitutes a "public offering" under the securities laws.
11. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company and the Placement
Agent set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement shall remain in full force and effect, regardless of
(i) any investigation made by or on behalf of the Company, any of its officers
or directors, the Placement Agent or any controlling person referred to in
Section 7 hereof and (ii) delivery of and payment for the Shares. The respective
agreements, covenants, indemnities and other statements set forth in Sections 5,
7 and 8 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
12. Successors. This Agreement shall inure to the benefit of and shall
be binding upon the Placement Agent, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
indemnification and contribution contained in Sections 7(a) and (d) of this
Agreement shall also be for the benefit of the directors, officers, employees
and agents of the Placement Agent and any person or persons who control the
Placement Agent within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnification and contribution contained in Sections
7(b) and (d) of this Agreement shall also be for the benefit of the directors of
the Company, the officers of the Company who have signed the Registration
Statement and any person or persons who control the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of
Shares shall be deemed to be a successor Investor by reason merely of such
purchase.
20
13. APPLICABLE LAW. THE VALIDITY AND INTERPRETATIONS OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto as to the matters covered hereby and supersedes all
prior understandings, written or oral, relating to such subject matter
(including without limitation that certain engagement letter between the
Placement Agent and the Company dated May 28, 2002).
21
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Placement Agent.
Very truly yours,
KADANT INC.
By: /s/ William A. Rainville
------------------------------------
Name: William A. Rainville
Title: Chairman and Chief
Executive Officer
Confirmed as of the date first
above mentioned:
J.P. MORGAN SECURITIES INC.
By: /s/ Philip C. Marchal
--------------------------------
Name: Philip C. Marchal
Title: Vice President
22
EXHIBIT A
EXECUTION COPY
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of June 14, 2002, by and among Kadant Inc.,
a Delaware corporation (the "Company"), J.P. Morgan Securities Inc. (the
"Placement Agent") and JPMorgan Chase Bank, a national banking institution
incorporated under the laws of the United States of America (the "Escrow
Agent").
WHEREAS, the Company and the Placement Agent have entered into a
Placement Agency Agreement dated as of the date hereof by and between the
Company and the Placement Agent, pursuant to which the Company proposes to issue
and sell 1,300,000 shares (the "Shares") of its common stock, par value $0.01
per share to certain investors (the "Investors");
WHEREAS, the Company has filed with the Securities and Exchange
Commission a "shelf" registration statement on Form S-3 (Registration No.
333-88018) (which, together with all amendments or supplements thereto, is
referred to herein as the "Registration Statement");
WHEREAS, the Placement Agent proposes to offer the Shares to the
Investors on behalf of the Company and to receive subscriptions from such
Investors for the total number of Shares being offered;
WHEREAS, with respect to all subscription payments received from
subscribers (the "Subscription Payments"), the parties propose to establish an
escrow account with the Escrow Agent at the office of its Escrow Administration,
JP Morgan Chase Bank, Institutional Trust Services, 450 West 33rd Street, New
York, New York 10001, Attention: Saverio Lunetta;
WHEREAS, the offering of the Shares will terminate on June __, 2002
(the "Closing Date") and, if Subscription Payments for the total number of
Shares have not been received by the Company on or before the Closing Date, no
Shares will be sold and all Subscripton Payments made by subscribers will be
refunded by the Escrow Agent, with interest earned thereon, if any; and
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which the escrow account will be established and
maintained.
NOW THEREFORE, it is agreed as follows:
1. Establishment of Escrow. The Escrow Agent hereby agrees to establish
a trust account (paying 30-day LIBOR minus 100 basis points) pursuant to Rule
15c2-4 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended (the "Escrow Account"), for the
deposit with the Escrow Agent of the Subscription Payments and to receive and
disburse the proceeds from such Subscription Payments and any interest earned
thereon in accordance with the terms and conditions of this Escrow Agreement.
2. Deposit of Escrowed Property. The Placement Agent, on behalf of the
subscribers for the Shares, shall from time to time, but in no event later than
12:00 p.m., Eastern Daylight Time, on the first business day ("business day" is
defined for purposes of this Escrow Agreement as any day which is not a
Saturday, Sunday or a day on which banks or trust companies in the City and
State of New York are authorized or obligated by law, regulation or executive
order to remain closed) following the date of receipt by the Placement Agent,
cause to be wired to or deposited with, or, cause the subscribers for the Shares
to wire or deposit with, the Escrow Agent funds or checks evidencing the
Subscription Payments of the subscribers delivered in payment for the Shares
(the "Escrowed Property"). Any checks delivered to the Escrow Agent pursuant to
the terms hereof shall be made payable to or endorsed to the order of the Escrow
Agent. The Escrow Agent upon receipt of such checks shall present such checks
for payment to the drawee-bank under such checks. Any checks not honored by the
drawee-bank thereunder after the first presentment for payment shall be returned
to the Placement Agent, on behalf of such subscriber, in the same manner notices
are delivered pursuant to Section 6 hereof. Upon receipt of funds or checks from
the Placement Agent, the Escrow Agent shall credit such funds and the amount of
such checks to the Escrow Account. If following the credit of the amount of any
check to the Escrow Account such check is dishonored, the Escrow Agent, if such
dishonored check amount shall have been invested pursuant to Section 3 hereof,
shall liquidate to the extent of such dishonored check amount such investments
and debit the Escrow Account for the amount of such dishonored check, plus, if
any, the amount of interest and other income earned with respect to any
investment of such dishonored check amount.
3. Investment of Escrowed Property. The Escrow Agent on or before 12:00
p.m., Eastern Daylight Time, on the second business day succeeding (unless such
deposit is made in federal or other immediately available or "same day" funds,
in which case, by 12:00 p.m., Eastern Daylight Time, on the business day next
succeeding) the credit of any Subscription Payments to the Escrow Account
pursuant to Section 2 hereof and until release of such proceeds in accordance
with the terms hereof, shall deposit such Subscription Payments in the Escrow
Account. The Escrow Agent shall in no event be liable for any investment loss,
resulting from any change in interest rates applicable to proceeds invested
pursuant to this Section. Interest on proceeds invested pursuant to this Section
3 shall accrue from the date of investment of such proceeds until the
termination of such investment pursuant to the terms hereof and shall be paid as
set forth in Section 5 hereof.
4. List of Subscribers. The Placement Agent shall furnish or cause to
be furnished to the Escrow Agent and the Company, at the time of each deposit of
funds or checks pursuant to Section 2 hereof, a list, substantially in the form
of Exhibit A hereto, containing the name of, the address of, the number of
Shares subscribed for by, the Subscription Payment delivered to the Escrow Agent
on behalf of, and the social security or certified taxpayer identification
number, if applicable, of each subscriber whose funds are being deposited, and
to which is attached a completed Form W-9 (or, in the case of any subscriber who
is not a United States citizen or resident, a Form W-8) for each listed
subscriber (the "Subscriber List"). The Escrow Agent shall notify the Placement
Agent and the Company of any discrepancy between the amount of the Subscription
Payment set forth on the Subscriber List delivered pursuant to this Section 4
and the amount of any Subscription Payment received by the Escrow Agent. The
-2-
Escrow Agent is authorized to revise the Subscriber List to reflect the actual
amount of Subscription Payment received and the release of any Subscription
Payment pursuant to Section 5 hereof. The Placement Agent agrees to inform the
subscribers that, in the event the tax identification numbers of the subscribers
are not certified to the Escrow Agent, the Internal Revenue Code, as amended
from time to time, may require withholding of a portion of any interest or other
income earned on the investment of the Escrowed Property.
5. Withdrawal of Subscription Amounts. (a) If the Escrow Agent shall
receive a (i) written notice, substantially in the form of Exhibit B hereto (an
"Offering Termination Notice"), from the Company; or (ii) a final and
non-appealable order of a court of competent jurisdiction, a copy of which is
delivered to the Escrow Agent by either the Company or the Placement Agent, that
instructs the Escrow Agent as to the disbursement of the Escrowed Property, the
Escrow Agent shall (i) promptly after receipt of such Offering Termination
Notice or court order, and in no event more than five business days thereafter,
and the clearance of all checks received by the Escrow Agent as Escrowed
Property liquidate any investments that shall have been made pursuant to Section
3 hereof and send to each subscriber listed on the Subscriber List held by the
Escrow Agent pursuant to Section 4 hereof whose total subscription amount shall
not have been released pursuant to paragraph (b) or (c) of this Section 5, in
the manner set forth in paragraph (e) of this Section 5, a check to the order of
such subscriber in the amount attributable to such subscriber of the remaining
Subscription Payment held by the Escrow Agent as set forth on such Subscriber
List held by the Escrow Agent, and (ii) promptly after the fourth business day
of the month immediately following the month in which the investments made
pursuant to Section 3 hereof were terminated pursuant to this paragraph, send,
in the manner set forth in paragraph (e) of this Section 5, a check to the order
of each such subscriber in the amount of interest and other income earned and
not yet paid with respect to any investment of such subscriber's funds. The
Escrow Agent shall notify the Company and the Placement Agent of the
distribution of such funds to the subscribers.
(b) In the event that (i) the Shares have been subscribed for and
funds in respect thereof shall have been deposited with the Escrow Agent on or
before the Closing Date and (ii) no Offering Termination Notice or final and
non-appealable court order as set forth in paragraph (a) above shall have been
delivered to the Escrow Agent, the Company and the Placement Agent, shall
deliver to the Escrow Agent a joint notice, substantially in the form of Exhibit
C hereto (a "Closing Notice"), designating the date on which Shares are to be
sold and delivered to the subscribers thereof as the "Closing Date", which date
shall not be earlier than the clearance of any checks received by the Escrow
Agent as Escrowed Property, the proceeds of which are to be distributed on such
Closing Date, and identifying the subscribers and the number of Shares to be
sold to each thereof on such Closing Date. Such Closing Notice, unless one of
the parties objects, shall be delivered not less than one nor more than three
business days prior to such Closing Date. The Escrow Agent, after receipt of
such Closing Notice and the clearance of such checks:
(i) on or prior to the Closing Date identified in such
Closing Notice, shall liquidate any investments that shall have been made
pursuant to Section 3 to
-3-
the extent of the Subscription Payments to be distributed pursuant to the
immediately succeeding clause (ii);
(ii) on such Closing Date, pay to the Company and the
Placement Agent, in federal or other immediately available funds and
otherwise in the manner and amount specified by the Company and the
Placement Agent in such Closing Notice, an amount equal to the aggregate of
the Subscription Payments paid by the subscribers identified in such
Closing Notice for the Shares to be sold on such Closing Date as set forth
on the list held by the Escrow Agent pursuant to Section 4 hereof; and
(iii) promptly after the fourth business day of the month
immediately following the month in which the investments made pursuant to
Section 3 hereof were terminated pursuant to such Closing Notice, shall
send, in the manner set forth in paragraph (e) of this Section 5, a check
to the order of each subscriber identified in such Closing Notice in the
amount of interest and other income earned and not yet paid with respect to
any investment of each such subscriber's funds distributed on such Closing
Date. At the time of such transfer, the Escrow Agent shall identify in
writing to the Company and the Placement Agent the amount of the interest
earned for the account of each subscriber and the date such subscription
was received.
(c) If at any time and from time to time prior to the release of
any subscriber's total subscription amount pursuant to paragraph (a) or (b) of
this Section 5 from escrow, the Company shall deliver to the Escrow Agent a
notice, substantially in the form of Exhibit D hereto (a "Subscription
Termination Notice"), to the effect that any or all of the subscriptions of such
subscriber have been rejected by the Company (a "Rejected Subscription"), the
Escrow Agent (i) promptly after receipt of such Subscription Termination Notice
and, if such subscriber delivered a check in payment of its Rejected
Subscription, after the clearance of such check, shall liquidate, to the extent
of the sum of such subscriber's Rejected Subscription amount as set forth in the
Subscription Termination Notice, any investments that shall have been made
pursuant to Section 3 hereof and send to such subscriber, in the manner set
forth in paragraph (e) of this Section 5, a check to the order of such
subscriber in the amount of such Rejected Subscription amount, and (ii) promptly
after the fourth business day of the month immediately following the month in
which the investments made pursuant to Section 3 were terminated pursuant to
this paragraph, shall send to such subscriber, in the manner set forth in
paragraph (e) of this Section 5, a check to the order of such subscriber in the
amount of interest and other income earned and not yet paid with respect to any
investment of such subscriber's Rejected Subscription amount. At the time of
such transfer, the Escrow Agent shall identify in writing to the Company and the
Placement Agent the amount of the interest earned for the account of each
subscriber and the date such subscription was received.
(d) On a date following the transfer of any interest earned for
the account of each subscriber pursuant to Section 5(a), (b) or (c), but not
later than January 31, 2003, the Escrow Agent shall provide each subscriber with
tax Form 1099 setting forth the amount of such interest.
-4-
(e) For the purposes of this Section 5, any check that the Escrow
Agent shall be required to send to any subscriber shall be sent to such
subscriber by first class mail, postage prepaid, at such subscriber's address
furnished to the Escrow Agent pursuant to Section 4 hereof.
6. Notices. Any notice, instruction or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed
delivered (a) when delivered by hand, (b) one business day after it is sent for
next business day delivery via a reputable nationwide overnight courier service,
or (c) four business days after it is sent by mail, registered or certified,
with proper postage prepaid, return receipt requested and in the case of each of
clauses (a), (b) and (c) of this Section 6 when addressed as follows:
If to the Company, to:
Kadant Inc.
One Acton Place, Suite 202
Acton, MA 01720
Attention: General Counsel
Facsimile: 978-635-1593
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Hal J. Leibowitz, Esq.
Facsimile: 617-526-5000
if to the Placement Agent, to:
J.P. Morgan Securities Inc.
270 Park Avenue
New York, NY 10017
Attention: Philip Marchal
Facsimile: 212-270-0504
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Attention: Anna T. Pinedo, Esq.
Facsimile: (212) 806-6006
-5-
if to the Escrow Agent, to:
JPMorgan Chase Bank
450 West 33rd Stree
15th Floor
New York, NY 10001
Attention: Saverio Lunetta
Facsimile: (212) 946-3935
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Any party may
give any notice, instruction or other communication hereunder using any other
means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice,
instruction or other communication shall be deemed to have been duly given
unless and until it actually is received by the party to whom it is intended.
7. Concerning the Escrow Agent. To induce the Escrow Agent to act
---------------------------
hereunder, it is further agreed by the Company and Placement Agent that:
(a) The Escrow Agent shall not be required to invest any funds
held hereunder except as directed in this Escrow Agreement. Uninvested funds
held hereunder shall not earn or accrue interest.
(b) This Escrow Agreement expressly sets forth all the duties
of the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Escrow Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement.
(c) The Escrow Agent shall not be liable under this Escrow
Agreement, except for its own gross negligence or willful misconduct, and,
except with respect to claims based upon such gross negligence or willful
misconduct that are successfully asserted against the Escrow Agent, the other
parties hereto shall jointly and severally indemnify and hold harmless the
Escrow Agent (and any successor Escrow Agent) from and against any and all
losses, liabilities, claims, actions, damages and expenses, including reasonable
attorneys' fees and disbursements, arising out of and in connection with this
Escrow Agreement. Without limiting the foregoing, the Escrow Agent shall in no
event be liable in connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the terms hereof,
including without limitation any liability for any delays (not resulting from
gross negligence or willful misconduct) in the investment or reinvestment of the
Escrowed Property, or any loss of interest incident to any such delays.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder by
-6-
the Company or the Placement Agent without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity of the service thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it in good faith to be genuine and may
assume, if in good faith, that any person purporting to give notice or receipt
or advice or make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(f) The Escrow Agent does not have, for tax reporting purposes, any
interest in the Escrowed Property deposited hereunder but is serving as escrow
holder only. The parties hereto agree that, for tax reporting purposes, all
interest or other income earned from the investment of the Escrowed Property or
any portion thereof in any tax year (i) to the extent such interest or other
income is distributed by the Escrow Agent to any person or entity pursuant to
the terms of this Escrow Agreement during such tax year, shall be reported as
allocated to such person or entity, and (ii) otherwise shall be reported as
allocated to the subscribers, in proportion to their respective Subscription
Payment as set forth on Exhibit A hereto.
(g) Any payments of income from the Escrow Account shall be subject to
withholding regulations then in force with respect to United States taxes. The
parties hereto will provide the Escrow Agent with appropriate W-9 forms for tax
I.D., number certification, or non-resident alien certifications.
(h) This paragraph (h) and paragraph (c) of this Section 7 shall
survive notwithstanding any termination of this Escrow Agreement or the
resignation of the Escrow Agent.
(i) The Escrow Agent makes no representation as to the validity, value,
genuineness or the collectibility of any security or other document or
instrument held by or delivered to it.
(j) The Escrow Agent shall not be called upon to advise any party as to
the wisdom of selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
(k) The Escrow Agent (and any successor escrow agent) at any time may
be discharged from its duties and obligations hereunder by the delivery to it of
written notice of termination signed by both the Company and the Placement Agent
or at any time may resign by giving written notice to such effect to the Company
and the Placement Agent not less than 60 days' prior to the date when such
resignation shall take effect. Upon the effectiveness of any such termination or
resignation, the Escrow Agent shall promptly deliver the Escrowed Property to
any successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon the Escrow Agent shall be discharged of and from
any and all further obligations
-7-
arising in connection with this Escrow Agreement except to the extent resulting
from its gross negligence or willful misconduct. The termination or resignation
of the Escrow Agent shall take effect on the earlier of (i) the appointment of a
successor (including a court of competent jurisdiction) or (ii) the day that is:
(A) 30 days after the date of delivery to the Escrow Agent of the other parties'
notice of termination or (B) 60 days after the date of delivery to the other
parties hereto of the Escrow Agent's written notice of resignation. If at the
time of any termination or resignation the Escrow Agent has not received a
designation of a successor escrow agent, the Escrow Agent may apply to a court
of competent jurisdiction for appointment of a successor Escrow Agent and shall,
until such time as a successor Escrow Agent is appointed, maintain the Escrowed
Property pursuant to the terms and conditions of this Escrow Agreement.
(l) In the event of any disagreement among or between the other parties
hereto and/or the subscribers of the Shares resulting in adverse claims or
demands being made in connection with the Escrowed Property, or in the event
that the Escrow Agent in good faith is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the Escrowed Property
until the Escrow Agent shall have received (i) a final and non-appealable order
of a court of competent jurisdiction directing delivery of the Escrowed Property
or (ii) a written agreement executed by the other parties hereto and consented
to by the affected subscribers, if any, directing delivery of the Escrowed
Property, in which event the Escrow Agent shall disburse the Escrowed Property
in accordance with such order or agreement.
(m) As consideration for the performance by the Escrow Agent of its
duties herein described, the Company agrees to pay the Escrow Agent fees
determined in accordance with the terms set forth on Exhibit E hereto (made a
part of this Escrow Agreement as if herein set forth). In addition, the Company
agrees to reimburse the Escrow Agent for all reasonable expenses of third
parties, incurred by the Escrow Agent in performance of its duties hereunder
(including reasonable fees and expenses of its outside counsel).
(n) The other parties hereto irrevocably (i) submit to the jurisdiction
of any New York State or federal court sitting in New York City in any action or
proceeding arising out of or relating to this Escrow Agreement, (ii) agree that
all claims with respect to such action or proceeding shall be heard and
determined in such New York State or federal court and (iii) waive, to the
fullest extent possible, the defense of an inconvenient forum. Each party agrees
to accept service of any summons, complaint or other initial pleading made in
the manner provided for the giving of notices in Section 6 hereof, provided that
nothing in this Section 7(n) shall affect the right of any party to serve such
summons, complaint or other initial pleading in any other manner permitted by
law.
(o) No printed or other matter in any language (including, without
limitation, the Registration Statement, notices, reports and promotional
material) which mentions the Escrow Agent's name or the rights, powers, or
duties of the Escrow Agent shall be issued by the other parties hereto or on
such parties' behalf unless the Escrow Agent shall first have given its specific
written consent thereto (which consent shall not be unreasonably withheld,
conditioned or delayed). The Escrow Agent hereby consents to the use of its name
and the
-8-
reference to the escrow arrangement in the Registration Statement and the
Placement Agency Agreement.
(p) Anything in this Escrow Agreement to the contrary, notwithstanding,
in no event shall the Escrow Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits) even if the Escrow Agent has been advised of the likelihood of
such loss or damage or regardless of the form of action.
(q) In the event funds transfer instructions are given (other than in
writing at the time of execution of this Escrow Agreement), whether in writing,
by telecopy or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
Schedule II hereto, and the Escrow Agent may rely upon the confirmation of
anyone purporting to be the person or persons so designated. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The Escrow Agent and the
beneficiary's bank in any funds transfer may rely solely upon any account
numbers or similar identifying numbers provided by the Placement Agent or the
Company to identify (i) the beneficiary, (ii) the beneficiary's bank, or (iii)
an intermediary bank. The Escrow Agent may apply any of the escrowed funds for
any payment order it executes using any such identifying number, even where its
use may result in a person other than the beneficiary being paid, or the
transfer of funds to a bank other than the beneficiary's bank or an intermediary
bank designated. The parties to this Escrow Agreement acknowledge that these
security procedures are commercially reasonable.
8. Miscellaneous.
-------------
(a) This Escrow Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their respective successors and assigns,
heirs, administrators and representatives, and the subscribers of the Shares and
shall not be enforceable by or inure to the benefit of any other third party
except as provided in paragraph (i) of Section 7 hereof with respect to the
termination of, or resignation by, the Escrow Agent. No party may assign any of
its rights or obligations under this Escrow Agreement without the written
consent of the other parties.
(b) THIS ESCROW AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS
RULES AS TO CONFLICTS OF LAW).
(c) This Escrow Agreement may only be modified by a writing signed by
all of the parties hereto and consented to by the subscribers of the Shares, if
any, adversely affected by such modifications. No waiver hereunder shall be
effective unless in a writing signed by the party to be charged.
(d) This Escrow Agreement shall terminate upon the payment pursuant to
Section 5 of all amounts held in the Escrow Account.
-9-
(e) The section headings herein are for convenience only and shall not
affect the construction thereof. Unless otherwise indicated, references to
Sections are to Sections contained herein.
(f) This Escrow Agreement may be executed in one or more counterparts
but all such separate counterparts shall constitute but one and the same
instrument; provided that, although executed in counterparts, the executed
signature pages of each such counterpart may be affixed to a single copy of this
Agreement which shall constitute an original.
[Remainder of page intentionally left blank]
--------------------------------------------
-10-
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
KADANT INC.
By: ____________________________________________
Name:
Title:
J.P. MORGAN SECURITIES INC.
By: ____________________________________________
Name:
Title:
JPMORGAN CHASE BANK
By: ____________________________________________
Name:
Title:
-11-
EXHIBIT A
SUMMARY OF CASH RECEIVED
NEW PARTICIPANT DEPOSIT
Date:
Deposit Date: List Number:
Investment Date: Page __ of
Batch Number: Approved By:
JOB#:
For Bank use only
TITLE:
- ------------------------------------------------------------------------------------------------------------------
* * AMOUNT OF * TAX ID NO./ | | FOR BANK
NAME * DEPOSIT * SHARES * ADDRESS | SOC.SEC. NO. * USE ONLY
- ------------------------------- -------------- ---------------- ---------------------------------- ---------------
* * * * * TAX CODE
* * * * * * EXEMPT(Y/N)
* * * * * * W-9(YR) NRA
* * * * * * 1008(87)
* * * * * *
- ---------------------------------------------------------------------------------------------------------------------
Broker Misc. * * * * Misc. II * Misc. III | TAX CODE
* * * * * * EXEMPT(Y/N)
* * * * * * W-2(YR) NRS
* * * * * * W-8(YR)
* * * * * * 1008(87)
* * * * * *
- ---------------------------------------------------------------------------------------------------------------------
Broker Misc. * * * * Misc. II * Misc. III | TAX CODE
* * * * * * EXEMPT(Y/N)
* * * * * * W-2(YR) NRS
* * * * * * W-8(YR)
* * * * * * 1008(87)
* * * * * *
- ---------------------------------------------------------------------------------------------------------------------
Broker Misc. * * * * Misc. II * Misc. III | TAX CODE
* * * * * * EXEMPT(Y/N)
* * * * * * W-2(YR) NRS
* * * * * * W-8(YR)
* * * * * * 1000(87)
* * * * * *
- ---------------------------------------------------------------------------------------------------------------------
Broker Misc. * * * * Misc. II * Misc. III |
* * * * * *
A-1
EXHIBIT B
[Form of Offering Termination Notice]
______ __, 2002
JPMorgan Chase Bank
450 West 33rd Street
15th Floor New York, NY 10001
Attention:
Dear [ ]:
Pursuant to Section 5(a) of the Escrow Agreement dated as of June __,
2002 (the "Escrow Agreement") among Kadant Inc. (the "Company"), J.P. Morgan
Securities Inc. and you, the Company hereby notifies you of the termination of
the offering of the Shares (as that term is defined in the Escrow Agreement) and
directs you to make payments to subscribers as provided for in Section 5(a) of
the Escrow Agreement.
Very truly yours,
KADANT INC.
By:
-------------------------------
Name:
Title:
B-1
EXHIBIT C
[Form of Closing Notice]
_________ __, 2002
JPMorgan Chase Bank
450 West 33rd Street
15th Floor New York, NY 10001
Attention:
Dear [ ]:
Pursuant to Section 5(b) of the Escrow Agreement dated as of June __,
2002, (the "Escrow Agreement") among Kadant Inc. (the "Company"), J.P. Morgan
Securities Inc. and you, the Company hereby certifies that, subject to its
receipt of the Subscription Payments for the Shares (as that term is defined in
the Escrow Agreement), the Company will sell and deliver Shares to the
subscribers thereof at a closing to be held on June __, 2002 (the "Closing
Date"). The names of the subscribers concerned, the number of Shares subscribed
for by each of such subscribers and the related subscription amounts are set
forth on Schedule I annexed hereto.
We hereby request that the aggregate subscription amount be paid to the
Placement Agent and us as follows:
1. To the Company, $_________;
2. To J.P. Morgan Securities Inc., $_________; and
3. To the Escrow Agent, $_________.
C-1
These instructions may be executed in two counterparts, each of which
shall be deemed to be an original, but both of which together shall constitute
one and the same instrument.
Very truly yours,
KADANT INC.
By:
---------------------------------
Name:
Title:
J.P. MORGAN SECURITIES INC.
By:
---------------------------------
Name:
Title:
C-2
SCHEDULE I
----------
Name of Number of Subscription
Subscriber Shares Amount
- ---------- ------ ------
SCHEDULE II
-----------
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
-----------------------------------------------------------
If to Placement Agent:
Name Telephone Number
---- ----------------
1. Phlip Marchal (212) 270-1620
2. Julie W. Lim (212) 270-0347
If to Company:
Name Telephone Number
---- ----------------
1. Sandra Lambert (978) 776-2013
2. Thomas M. O'Brien (978) 776-2012
Telephone call-backs shall be made to each Placement Agent and Company if joint
instructions are required pursuant to this Escrow Agreement.
EXHIBIT D
[Form of Subscription Termination Notice]
_______ __, 2002
JPMorgan Chase Bank 450
West 33rd Street
15th Floor New York, NY 10001
Attention:
Dear [ ]:
Pursuant to Section 5(c) of the Escrow Agreement dated as of June __,
2002 (the "Escrow Agreement") among Kadant Inc. (the "Company"), J.P. Morgan
Securities Inc. and you, the Company hereby notifies you that the following
subscription(s) have been rejected:
Amount of Dollar
Subscribed Amount of
Name of Shares Rejected
Subscriber Rejected Subscription
- ---------- -------- ------------
Very truly yours,
KADANT INC.
By: _____________________________________
Name:
Title:
D-1
EXHIBIT E
Fee to JPMorgan Chase Bank: $15,000
E-1
EXHIBIT B
LOCK UP LETTERS
June __, 2002
J.P. Morgan Securities Inc.
270 Park Avenue, 17th Floor
New York, NY 10017
Ladies and Gentlemen:
The undersigned understands that you, as Placement Agent, propose to enter
into a Placement Agency Agreement (the "Placement Agency Agreement") with Kadant
Inc., a Delaware corporation (the "Company"), providing for the offering (the
"Offering") of 1,300,000 shares of Common Stock (with associated preferred stock
purchase rights) of the Company (the "Securities"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the
Placement Agency Agreement.
In consideration of the foregoing, and in order to induce you to act as
Placement Agent in the offering, and for other good and valuable consideration
receipt of which is hereby acknowledged, the undersigned hereby agrees that,
without the prior written consent of J.P. Morgan Securities Inc., the
undersigned will not, during the period beginning on the date of the final
prospectus supplement relating to the Offering of the Securities and ending on
the date 90 days after the date of such final prospectus supplement, (1) offer,
pledge, announce the intention to sell, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (including without
limitation, Common Stock which may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations of the Securities and
Exchange Commission and securities which may be issued upon exercise of a stock
option or warrant), or (2) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. In addition, the undersigned agrees that, without the prior
written consent of J.P. Morgan Securities Inc., it will not, during the period
ending 90 days after the date of the Prospectus, make any demand for or exercise
any right with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock.
Notwithstanding the foregoing, the restrictions set forth in clause (1) and
(2) above shall not apply to (a) transfers (i) as a bona fide gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein, (ii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees to be bound in writing by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value, (iii) with the prior written consent of J.P. Morgan
Securities Inc., or (iv) effected pursuant to any
exchange of "underwater" options with the Company or (b) the acquisition or
exercise of any stock option issued pursuant to the Company's existing stock
option plan, including any exercise effected by the delivery of Securities of
the Company held by the undersigned. For purposes of this Letter Agreement,
"immediate family" shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin. None of the restrictions set forth in this
Letter Agreement shall apply to Common Stock acquired in open market
transactions.
In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Letter Agreement.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Letter Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Placement Agency Agreement
does not become effective, or if the Placement Agency Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Securities to be sold thereunder, the
undersigned shall be released form all obligations under this Letter Agreement.
This lock-up agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflict of laws
principles thereof.
Very truly yours,
[NAME OF OFFICER OR
DIRECTOR]
By: __________________________________
Title:
Accepted as of the date
first set forth above:
J.P. MORGAN SECURITIES INC.
By: ________________________________
Name:
Title:
2
EXHIBIT C
Matters to be Covered in the General Counsel Legal Opinion
Customary qualifying language to be included in actual opinion
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to conduct its business as it is described in
the Prospectus, to enter into and perform its obligations under the
Placement Agency Agreement, and to carry out the transactions contemplated
by the Placement Agency Agreement. The Company is duly qualified to do
business and is in corporate good standing in the Commonwealth of
Massachusetts.
2. Each of Kadant Black Clawson Inc. and Kadant Web Systems Inc. has been duly
organized, in validly existing and is in good standing under the laws of
its jurisdiction of organization.
3. The authorized capitalization stock of the Company as of March 30, 2002, is
as set forth under the caption "Capitalization" in the Prospectus. The
currently outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable.
4. The issuance and sale by the Company of the Shares, and the consummation by
the Company of the transactions contemplated by the Placement Agency
Agreement, do not (a) violate any judgment, decree, order or award of any
court, governmental body or arbitrator specifically naming the Company or
any of its Subsidiaries of which such counsel is aware or (b) with or
without notice and/or the passage of time, conflict with or result in the
breach or termination of any term or provision of, or constitute a default
under, or cause any acceleration under, or cause the creation of any lien,
charge or encumbrance upon the properties or assets of the Company or any
of its Subsidiaries pursuant to, any agreement to which the Company or any
of its Subsidiaries is a party and which is filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended December 29,
2001, as amended, or to any subsequent periodic reports of the Company
under the Securities Exchange Act of 1934, as amended.
5. To such counsel's knowledge and other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which the Company
or any of its Subsidiaries is a party or of which any property of the
Company or any of its Subsidiaries is the subject which are required by the
Act or the Rules and Regulations thereunder to be described in the
Registration Statement or the Prospectus that are not so described.
In addition, such counsel shall state that she has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public or certified public accountants for
the Company, at which conferences such counsel made inquiries of such persons
and others and discussed the contents of the Registration Statement and the
Prospectus and any supplements or amendments thereto. Such counsel shall also
state that while the limitations inherent in the independent verification of
factual matters and the character of determinations involved in the registration
process are such that such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, or any supplements or
amendments thereto, subject to the foregoing and on the basis of such
participation, inquiries and discussions, no facts have come to the attention of
such counsel which have caused her to believe that either the Registration
Statement or any amendments thereto, at the time the Registration Statement or
any such amendments became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus, as of the Closing, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements, including the notes and schedules thereto, or any
other financial or accounting information, or the information regarding the
Placement Agent or the method of distribution of the Shares included in the
Registration Statement or the Prospectus or any such amendments or supplements
thereto).
2
EXHIBIT D
Matters to be Covered in the Hale and Dorr LLP Legal Opinion
Customary qualifying language to be included in actual opinion.
1. The Shares have been duly authorized and, when issued, sold and delivered
to the Investors against payment therefore in accordance with the
provisions of the Placement Agency Agreement, will be validly issued, fully
paid and non-assessable and will conform as to legal matters in all
material respects to the description of the Shares contained in the
Prospectus under the caption "Description of Capital Stock."
2. The execution and delivery by the Company of the Placement Agency
Agreement, and the consummation by the Company of the transactions
contemplated thereby, have been duly authorized by all necessary corporate
action on the part of the Company, and the Placement Agency Agreement has
been duly executed and delivered by the Company.
3. The issuance and sale by the Company of the Shares, and the consummation by
the Company of the transactions contemplated by the Placement Agency
Agreement, do not (a) violate the provisions of any U.S. federal or
Massachusetts state law, rule or regulation applicable to the Company or
the Delaware General Corporation Law statute; (b) violate the provisions of
the Company's Certificate of Incorporation or By-laws, each as amended to
date; or (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator specifically naming the Company or any of
its Subsidiaries of which such counsel is aware.
4. No consent, approval, authorization, order, registration or qualification
of or with any U.S. federal or Massachusetts state court or government
agency or under the Delaware General Corporation Law Statute is required
for the issuance and sale of the Shares by the Company by the consummation
of the Company of the transactions contemplated by the Placement Agency
Agreement, except for (a) the registration under the Act of the Shares, and
(b) such consents, approvals, authorization, orders, registrations or
qualifications as may be required under (x) state securities or blue sky
laws or (y) the rules and regulations of the National Association of
Securities Dealers, Inc.
5. The Registration Statement and the Prospectus as amended or supplemented
(other than the financial statements, including the notes and schedules
thereto, other financial and accounting data and information about the
Placement Agent, contained therein, as to which such counsel need express
no opinion) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations thereunder.
6. The statements in the Prospectus under the headings "Description of Capital
Stock" and "Plan of Distribution," insofar as they constitute summaries of
matters of law or regulation or legal conclusions, have been reviewed by
such counsel and are accurate in all material respects.
SCHEDULE 1
List of Subsidiaries
- ----------------------------------
Fiberprep Inc.
Kadant AES Canada Inc.
Kadant AES Mexico, S.A. de C.V.
Kadant Black Clawson Inc.
Kadant Composites Inc.
Kadant Grantek Inc.
Kadant Lmort
Kadant U.K. Limited
Kadant Web Systems Inc.
- ----------------------------------