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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 23, 1998
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Kevco, Inc.
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(Exact name of registrant as specified in its charter)
Texas 000-21621 75-2666013
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1300 S. University Drive, Suite 200, Fort Worth, Texas 76107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 332-2758
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ITEM 5. OTHER EVENTS.
On December 23, 1998, (i) Kevco, Inc., a Texas corporation (the
"Company"), entered into a Stock Purchase Agreement dated as of December 23,
1998 with Wingate Partners II, L.P., a Delaware limited partnership ("Wingate")
(the "Company Stock Purchase Agreement"), and (ii) Jerry E. Kimmel, the
Company's Chairman of the Board, President, Chief Executive Officer and
principal shareholder, entered into a Stock Purchase Agreement dated as of
December 23, 1998 with Wingate to which the Company was a party for certain
limited purposes (the "Shareholder Stock Purchase Agreement"). Pursuant to the
Company Stock Purchase Agreement and Shareholder Stock Purchase Agreement,
Wingate is to acquire stock and warrants on terms more fully described in the
press release presented below. Copies of the Company Stock Purchase Agreement
and the Shareholder Stock Purchase Agreement have been filed as exhibits to this
Form 8-K and are incorporated herein by reference.
The transactions contemplated by the Company Stock Purchase Agreement
and the Shareholders Stock Purchase Agreement were approved (i) by a Special
Committee to the Board of Directors, formed for the purpose of considering these
transactions and (ii) by the Board of Directors of the Company. In connection
with the consideration and approval of such transactions, the Special Committee
engaged Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, ("Dain
Rauscher") to issue a fairness opinion, which opinion was issued to the Board of
Directors of the Company on December 23, 1998.
On December 24, 1998, the Company issued the following press release:
FORTH WORTH, Texas (December 24, 1998) - Kevco, Inc. (Nasdaq/NM:KVCO)
today indicated that it expects to report a loss from operations for
the fourth quarter ending December 31, 1998, which is significantly
below analysts' estimates. In the fourth quarter of 1997, the Company
reported net income of $204,000, or $0.03 per share.
The Company also announced that Wingate Partners II, L.P. (Wingate) has
agreed to purchase a total of $40 million of common stock and warrants.
Of that amount, $32 million of common stock and a warrant will be
purchased from the Company and $8 million of common stock and a warrant
will be purchased from the Company's principal shareholder, Jerry E.
Kimmel. The total purchase includes both voting common shares and a new
class of non-voting common shares. Wingate is a Dallas-based private
equity group which provides both operations experience and financial
resources to the companies in which it is involved. The firm has been
involved actively in a number of distribution companies with revenues
from $400 million to over $3 billion. Wingate also has a strong
understanding of the manufactured housing industry through its previous
ownership of Redman Industries, now a part of Champion Enterprises, a
leading producer of manufactured homes.
The agreement with Wingate provides for the purchase of 4,413,793 newly
issued shares of Kevco common shares from the Company at $7.25 per
share and a warrant to purchase 882,759 additional newly issued common
shares at $10.25 per share. In addition, the
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agreement provides for the purchase of 1,103,448 of Kevco common shares
from Jerry E. Kimmel, chairman of the board, president and chief
executive officer, at $7.25 per share and a warrant to purchase 220,690
additional common shares from Mr. Kimmel at $10.25 per share. Kevco
currently has approximately 6.9 million shares of common stock
outstanding. Following these transactions, Wingate will own
approximately 40% of the outstanding shares of voting common stock,
will own shares of a new class of non-voting common stock and will own
warrants to acquire additional shares of voting and non-voting common
stock. Wingate's acquisition of voting common stock in the transaction
will not exceed 50% of the voting common stock. It is anticipated that
the first part of this transaction will close on or prior to February
15, 1999. The total transaction is conditional upon modifications of
Kevco's existing senior credit agreement on a basis satisfactory to
Wingate, and a portion of the transaction requires shareholders
approval of a new non-voting class of common stock.
Kevco indicated that the expected loss from operations for the fourth
quarter primarily reflects continued difficulties related to the
integration of Shelter Components Corporation, which the Company
acquired in December 1997. The Company also stated its results
continued to be affected by further losses related to two new wood
products facilities that were opened during the first quarter in
Arizona and North Carolina.
As a part of this purchase agreement, Fred Hegi of Wingate will become
chairman of the board, president and chief executive of Kevco. Jerry
Kimmel will assume the new position of vice chairman of the board and
will continue to own approximately 28% of Kevco's voting common shares.
Rusty Hardin, currently executive vice president of Kevco, will become
president of Kevco's Distribution Division.
Hegi remarked, "We are excited about this opportunity to make a
substantial investment in Kevco. One of every three new homes purchased
today in the United States was built under factory controlled
conditions. Through Jerry Kimmel's leadership, Kevco has become the
largest distributor of building products for the manufactured housing
industry with a customer base that includes all of the major producers.
We do not believe the current problems that the Company is experiencing
are indicative of Kevco's longer-term earnings growth potential.
Leveraging Wingate's experience in integrating distribution companies,
our focus will be to work with Kevco's operating management to complete
the Shelter integration, strengthen systems capabilities and improve
operating efficiency throughout the Company. Kevco has a solid and
dedicated group of employees, and we believe that together we can
realize Jerry Kimmel's vision for customer service and profitability."
Upon closing of the transaction, Kevco will have four directors, two of
whom will be current directors and two of whom will be selected by
Wingate.
Kevco, headquartered in Fort Worth, Texas, is the largest wholesale
distributor and manufacturer of building products to the manufactured
housing and recreational vehicle industries. Donaldson, Lufkin &
Jenrette has advised the Company in this transaction.
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Certain statements in this news release consist of forward-looking
statements that involve risks and uncertainties, including, but not
limited to, the Company's substantial leverage and its effects on the
Company's ability to obtain additional capital as needed, the Company's
ability to integrate its operations and successfully implement new
management information systems, the Company's success in addressing and
remediating Year 2000-related issues, the Company's ability to
profitably operate its new manufacturing facilities, customer demand
for manufactured housing and recreational vehicles, the effect of
economic conditions, the impact of raw materials prices, the Company's
ability to maintain profitability in the event of the loss of a
significant customer and other risks detailed from time to time in the
reports filed by the Company with the Securities and Exchange
Commission, including the Company's annual report on Form 10-K.
The expenses payable by the Company relating to the transactions are
estimated to be approximately $5,000,000. Such expenses include fees payable to
Donaldson, Lufkin & Jenrette Securities Corporation and Dain Rauscher, legal
expenses, a $1 million fee payable to Wingate and the reimbursement of up to $1
million of Wingate's expenses. Pursuant to the Shareholder Stock Purchase
Agreement, Mr. Kimmel is to reimburse the Company for a portion of the legal
expenses and a portion of such Wingate fee.
In connection with the closing of the transactions, the Company and an
affiliate of Wingate is to enter into a Monitoring and Oversight Agreement and a
Financial Advisory Agreement pursuant to which such affiliate is entitled to
certain fees and expenses as are more fully set forth in such agreements. A form
of the Monitoring and Oversight Agreement and the Financial Advisory Agreement
are attached as exhibits to the Company Stock Purchase Agreement filed herewith.
Also in connection with the transactions, Mr. Kimmel's current
employment agreement is to terminate and he is to enter into a Consulting
Agreement, which provides an annual base salary and other benefits. A form of
such Consulting Agreement is attached as an exhibit to the Shareholder Stock
Purchase Agreement filed herewith.
In connection with the closing of the transactions with Wingate, it is
anticipated that the members of the Special Committee (Ellis L. McKinley, Jr.,
Clyde A. Reed, Jr. and Richard S. Tucker) and one other director (Gregory G.
Kimmel) will resign from the Board of Directors, and will be replaced by two
directors selected by Wingate (Frederick B. Hegi and James Johnson). Wingate has
agreed to use its commercially reasonable efforts to add two independent
directors to the Board of Directors. Effective December 2, 1998, Martin C. Bowen
resigned from the Board.
Descriptions of agreements contained herein are summaries only and are
qualified in their entirety by reference to the terms of such agreements, which
agreements or forms of which agreements are filed as exhibits hereto and
incorporated herein by reference.
ITEM 7. EXHIBITS.
Exhibit Nos.
2.1 Stock Purchase Agreement dated as of December 23, 1998 between Wingate
and the Company. (1) (2)
2.2 Stock Purchase Agreement dated as of December 23, 1998 among Wingate,
Jerry E. Kimmel, and the Company. (1) (2)
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(1) Filed herewith.
(2) Schedules and similar attachments are omitted, but descriptions of such
omitted schedules or attachments are contained in such document. The
Company hereby undertakes to provide copies of such omitted schedules
or attachments to the staff of the Securities and Exchange Commission
upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Kevco, Inc.
Date: December 30, 1998 By: /s/ Jerry E. Kimmel
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Jerry E. Kimmel
Chairman of the Board,
President and Chief Executive
Officer
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Index To Exhibits
<TABLE>
<CAPTION>
EXHIBIT NOS. DESCRIPTION
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<S> <C>
2.1 Stock Purchase Agreement dated as of December 23, 1998 between Wingate
and the Company. (1) (2)
2.2 Stock Purchase Agreement dated as of December 23, 1998 among Wingate,
Jerry E. Kimmel, and the Company. (1) (2)
</TABLE>
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(1) Filed herewith.
(2) Schedules and similar attachments are omitted, but descriptions of such
omitted schedules or attachments are contained in such document. The
Company hereby undertakes to provide copies of such omitted schedules
or attachments to the staff of the Securities and Exchange Commission
upon request.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of December 23, 1998 (this
"Agreement"), is made by and between Wingate Partners II, L.P., a Delaware
limited partnership ("Purchaser"), and Kevco, Inc., a Texas corporation (the
"Company"). Unless otherwise indicated, capitalized terms used herein are used
as defined in Section 1.1.
W I T N E S S E T H
WHEREAS, the Company is engaged in the business of wholesale
distribution and manufacturing of building products to the manufactured housing
and recreational vehicle industries;
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Company desires to issue and sell 2,679,440 shares (the "Shares") of
the Company's voting common stock, par value $0.01 per share ("Stock"), to
Purchaser, and Purchaser desires to purchase and acquire from the Company the
Shares;
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Company desires to issue and sell 1,734,353 shares (the "Nonvoting
Shares") of the Company's common stock having identical rights and preferences
to the Stock except for the absence of voting rights and otherwise substantially
in the form of Exhibit A hereto (the "Nonvoting Stock") to Purchaser, and
Purchaser desires to purchase and acquire from the Company the Nonvoting Shares;
WHEREAS, the Company's Charter provides solely for the issuance of
Stock and does not provide for the issuance of Nonvoting Stock;
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Company will undertake to amend its Charter as provided for in the
TBCA and in Section 6.5 (the "Amendment") to create the Nonvoting Stock and upon
the effectiveness of such Amendment to issue and sell to Purchaser the Nonvoting
Shares as provided for herein;
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Company desires to grant a warrant in the form attached hereto as
Exhibit B (the "Nonvoting Warrant") to purchase 882,759 shares of Nonvoting
Stock (the "Nonvoting Warrant Shares") to Purchaser, and Purchaser desires to
purchase and acquire from the Company the Nonvoting Warrant; and
WHEREAS, Purchaser is unwilling to enter into this Agreement, unless
contemporaneously with the execution and delivery of this Agreement, each of the
Company and Jerry E. Kimmel ("Shareholder") enters into a stock purchase
agreement with Purchaser (the "Shareholder Agreement"), pursuant to which
Shareholder would, among other things, (i) sell certain shares of Stock to
Purchaser and (ii) grant a warrant to purchase certain shares of Stock to
Purchaser, all upon the terms and subject to the conditions set forth in the
Shareholder Agreement.
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NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, and agreements hereinafter set forth,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1. Definitions.
"Acquisition Proposal" has the meaning provided therefor in
Section 6.3.
"Affiliate" means, as to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" has the meaning provided therefor in the preamble
hereof.
"Amendment" has the meaning provided therefor in the recitals
hereto.
"Benefit Plans" has the meaning provided therefor in Section
4.7(a).
"Board of Directors" means the board of directors of the
Company.
"Business Combination" means any transaction constituting a
"business combination" for purposes of the TBCA Business Combination Provisions
or Article Nine of the Charter.
"Charter" means the Articles of Incorporation of the Company.
"Closing" has the meaning provided therefor in Section 3.1.
"Closing Date" has the meaning provided therefor in Section
3.1.
"COBRA" has the meaning provided therefor in Section 4.7(d).
"Code" has the meaning provided therefor in Section 4.7(a).
"Commission" means the U.S. Securities and Exchange
Commission.
"Commonly Controlled Entity" has the meaning provided therefor
in Section 4.7(b).
"Company" has the meaning provided therefor in the preamble
hereof.
"Company Proxy Statement" has the meaning provided therefor in
Section 6.5.
"Company Stock Options" has the meaning provided therefor in
Section 4.2.
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"Commission Documents" has the meaning provided therefor in
Section 4.4.
"Confidentiality Agreement" has the meaning provided therefor
in Section 7.1.
"Credit Agreement" has the meaning provided therefor in
Section 8.8.
"Dain Rauscher" has the meaning provided therefor in Section
4.13.
"Demand Registration" has the meaning provided therefor in
Section 11.1(b).
"Disclosure Schedule" has the meaning provided therefor in
Article IV.
"DLJ" has the meaning provided therefor in Section 4.13.
"Environmental Law" has the meaning provided therefor in
Section 4.12(e).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, or local, or any agency or instrumentality thereof, or any court or
arbitrator (public or private).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indenture" means that certain Indenture, dated December 1,
1997, by and among the Company and SCC Acquisition Corp., Kevco Delaware, Inc.,
Sunbelt Wood Components, Inc., Bowen Supply, Inc., Encore Industries, Inc., and
United States Trust Company of New York relating to the Company's $105,000,000
10 3/8% Senior Subordinated Notes due December 1, 2007.
"Indemnified Party" has the meaning provided therefor in
Section 10.2.
"Indemnifying Party" has the meaning provided therefor in
Section 10.2.
"Independent Directors" has the meaning provided therefor in
Section 7.5.
"Inspectors" has the meaning provided therefor in Section
11.4(a)(v).
"Law" means any federal, state, or local law (including common
law), statute, code, ordinance, rule, regulation, or other requirement.
"Legal Proceeding" means any judicial, administrative, or
arbitral action, suit, proceeding (public or private), claim, or governmental
proceeding.
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"Lien" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, or other real estate declaration, covenant, condition, restriction or
servitude, transfer restriction under any shareholder or similar agreement,
third party right or agreement to vote, encumbrance, or any other restriction or
limitation whatsoever.
"Losses" has the meaning provided therefor in Section 10.1(a).
"Managing Underwriter" has the meaning provided therefor in
Section 11.2(a).
"Material Adverse Effect" has the meaning provided therefor in
Section 4.12(a).
"NASD" means the National Association of Securities Dealers,
Inc.
"NASD Confirmation" means confirmation by the NASD that the
issuance of the Shares may be undertaken without the prior approval of the
Company's shareholders under the NASD rules.
"Nonvoting Share Purchase Price" has the meaning provided
therefor in Section 2.2.
"Nonvoting Shares" has the meaning provided therefor in the
recitals hereto.
"Nonvoting Stock" has the meaning provided therefor in the
recitals hereto.
"Nonvoting Warrant" has the meaning provided therefor in the
recitals hereto.
"Nonvoting Warrant Shares" has the meaning provided therefor
in the recitals hereto.
"Pension Plan" has the meaning provided therefor in Section
4.7(a).
"Permits" has the meaning provided therefor in Section 4.11.
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body, or other entity.
"Public Equity Offering" means an underwritten public offering
of shares of Stock or Nonvoting Stock pursuant to an effective registration
statement under the Securities Act or comparable Law of any other jurisdiction.
"Purchase Price" has the meaning provided therefor in Section
2.2.
"Purchaser" has the meaning provided therefor in the preamble
hereof.
"Purchaser Documents" has the meaning provided therefor in
Section 5.2(a).
"Records" has the meaning provided therefor in Section
11.4(a)(v).
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"Registrable Shares" means shares of Stock or Nonvoting Stock
acquired by Purchaser or its Affiliates pursuant to this Agreement (including by
exercise of the Nonvoting Warrant) and all other shares of Stock and Nonvoting
Stock acquired from time to time by Purchaser or its Affiliates and any
securities issued or issuable with respect to any such shares of Stock or
Nonvoting Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, share exchange, merger, consolidation,
reorganization, Business Combination, or otherwise. As to any particular
Registrable Shares, such securities shall cease to be Registrable Shares when
(i) a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act (or under the applicable Laws of
the relevant jurisdiction) and such securities shall have been disposed of in
accordance with the plan of distribution set forth in such registration
statement, (ii) such securities shall have been distributed in accordance with
Rule 144 of the Securities Act, or (iii) such securities shall have been
otherwise transferred, new certificates therefor not bearing a legend
restricting further transfer shall have been delivered in exchange therefor by
the Company and subsequent disposition of such shares shall not require
registration or qualification under the Securities Act or any other applicable
Law.
"Second Closing" has the meaning provided therefor in Section
3.1.
"Second Closing Date" has the meaning provided therefor in
Section 3.1.
"Securities" means the Shares, the Nonvoting Shares, and the
Nonvoting Warrants (including any Nonvoting Shares issuable upon the exercise of
the Nonvoting Warrants).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller Documents" has the meaning provided therefor in
Section 4.3.
"Share Purchase Price" has the meaning provided therefor in
Section 2.2.
"Shareholder" has the meaning provided therefor in the
recitals hereto.
"Shareholder Agreement" has the meaning provided therefor in
the recitals hereto.
"Shareholders Meeting" has the meaning provided therefor in
Section 6.5.
"Shares" has the meaning provided therefor in the recitals
hereto.
"Significant Subsidiary" means any subsidiary of the Company
that would constitute a Significant Subsidiary within the meaning of Rule 1-02
of Regulation S-X of the Commission.
"Stock" has the meaning provided therefor in the recitals
hereto.
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"Subsidiary" means any Person of which the Company owns,
directly or indirectly, greater than 50% of the voting securities generally
entitled to vote to elect the board of directors (or any equivalent body).
"Superior Proposal" has the meaning provided therefor in
Section 6.3.
"taxes" has the meaning provided therefor in Section 4.8(c).
"TBCA" means the Texas Business Corporation Act, as the same
may be amended from time to time.
"TBCA Business Combination Provisions" means Part Thirteen,
Articles 13.01 through 13.08, inclusive, of the TBCA.
"Welfare Plan" has the meaning provided therefor in Section
4.7(a).
ARTICLE II
SALE AND PURCHASE OF THE SHARES AND NONVOTING WARRANT
2.1. Sale and Purchase of the Shares. In reliance upon the
representations, warranties, covenants, and agreements contained herein and upon
the terms and subject to the conditions hereinafter set forth, (i) at the
Closing the Company shall issue and sell to Purchaser, and Purchaser shall
purchase and acquire from the Company, the Shares and (ii) at the Second Closing
the Company shall issue and sell to Purchaser, and Purchaser shall purchase and
acquire from the Company, the Nonvoting Shares and the Company shall grant to
Purchaser, and Purchaser shall purchase and acquire from the Company, the
Nonvoting Warrant.
2.2. Amount and Form of Consideration. The consideration to be paid by
Purchaser to the Company in consideration of (i) the Shares shall be an
aggregate amount in cash equal to U.S. $19,425,940 (the "Share Purchase Price")
and (ii) the Nonvoting Shares and the Nonvoting Warrant shall be an aggregate
amount of cash equal to U.S. $12,574,060 (the "Nonvoting Share Purchase Price"
and, together with the Share Purchase Price, the "Purchase Price").
ARTICLE III
THE CLOSINGS
3.1. Closing Dates. Except as hereinafter provided, the closing of the
sale of Shares (the "Closing") shall take place at the offices of Weil, Gotshal
& Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas 75201, on the first
business day following the date on which all of the conditions contained in
Articles VIII and IX have been satisfied or waived, as applicable, or at such
other place and at such other time and date as may be mutually agreed upon by
Purchaser and the Company. The closing of the sale of the Nonvoting Shares and
the Nonvoting Warrant (the "Second Closing") shall take place at the offices of
Weil, Gotshal & Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas 75201,
on the first business day following the date on which the Amendment has become
effective, or at such other place and at such other time and date as may be
mutually agreed upon by Purchaser and the Company. The date of the Closing is
referred to herein as the "Closing Date" and the date of the Second Closing is
referred to herein as the "Second Closing Date."
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3.2. Proceedings at Closings. All proceedings to be taken and all
documents to be executed and delivered by the Company in connection with the
consummation of the transactions contemplated at the Closing and the Second
Closing shall be reasonably satisfactory in form and substance to Purchaser and
its counsel, and all proceedings to be taken and all documents to be executed
and delivered by Purchaser in connection with the consummation of the
transactions contemplated at the Closing and the Second Closing shall be
reasonably satisfactory in form and substance to the Company and its counsel.
All proceedings to be taken and all documents to be executed and delivered by
all parties at the Closing and the Second Closing, as the case may be, shall be
deemed to have been taken and executed simultaneously, and no proceedings shall
be deemed taken nor any documents executed or delivered until all have been
taken, executed, and delivered.
3.3. Deliveries by the Company to Purchaser. At the Closing, the
Company shall deliver, or shall cause to be delivered, to Purchaser certificates
representing the Shares to be purchased by Purchaser, duly executed. At the
Second Closing, the Company shall deliver, or shall cause to be delivered, to
Purchaser certificates representing the Nonvoting Shares to be purchased by
Purchaser, duly executed, and the Nonvoting Warrant, duly executed.
3.4. Deliveries by Purchaser to the Company. At the Closing, Purchaser
shall deliver to the Company a confirmation of the wire transfer of immediately
available funds in an amount equal to the Share Purchase Price to an account or
accounts specified by the Company to Purchaser prior to the Closing. At the
Second Closing, Purchaser shall deliver to the Company a confirmation of the
wire transfer of immediately available funds in an amount equal to the Nonvoting
Share Purchase Price to an account or accounts specified by the Company to
Purchaser prior to the Second Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth under the heading "General Matters" in the
Disclosure Schedule, dated the date hereof and delivered concurrently herewith
(the "Disclosure Schedule"), the Company hereby represents and warrants to
Purchaser as of the date hereof as follows:
4.1. Organization, Standing and Corporate Power. Each of the Company
and each Significant Subsidiary is an entity duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which it is organized
and has the requisite power and authority to carry on its business as now being
conducted. Each of the Company and each Significant Subsidiary is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary except as would not, individually or
in the aggregate, have a Material Adverse Effect. The Company has delivered or
made available to Purchaser complete and correct copies of its Charter, By-laws,
as amended to the date of this Agreement and stock register. In all material
respects, the minute books of the Company and each Significant Subsidiary
contain accurate records of all meetings and accurately reflect all other
actions taken by the shareholders, partners, the boards of directors (or other
governing bodies), and all committees of the boards of directors (or other
governing bodies) of the Company and such Significant Subsidiaries. Complete and
accurate copies of the minute books, bylaws, and of the stock register of the
Company and each Significant Subsidiary have been made available by the Company
to Purchaser.
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4.2. Capital Structure. (a) The authorized capital stock of the Company
consists of 100,000,000 shares of Stock. At the close of business on December
21, 1998, 6,852,889 shares of Stock were issued and outstanding, and 401,902
shares of Stock were reserved for issuance pursuant to outstanding options or
warrants to purchase shares of Stock which have been granted to directors,
officers, or employees of the Company or others ("Company Stock Options").
Except as set forth above, at the close of business on December 21, 1998, no
shares of capital stock or other equity securities of the Company were issued,
reserved for issuance, or outstanding. All outstanding shares of capital stock
of the Company are, and all shares which may be issued pursuant to any
outstanding Company Stock Options will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as set forth in Section 4.2 of the Disclosure Schedule, no bonds,
debentures, notes, or other indebtedness of the Company or any Subsidiary having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which the shareholders of the Company or
any Subsidiary may vote are issued or outstanding. Except as disclosed in
Section 4.2 of the Disclosure Schedule, all the outstanding shares of capital
stock of each Subsidiary have been validly issued and are fully paid and
nonassessable and are owned by the Company, by one or more Subsidiaries, or by
the Company and one or more such Subsidiaries, free and clear of all Liens.
Except as set forth above or in Section 4.2 of the Disclosure Schedule, neither
the Company nor any Subsidiary has any outstanding option, warrant,
subscription, or other right, agreement, or commitment which (i) obligates the
Company or any Subsidiary to issue, sell or transfer, repurchase, redeem, or
otherwise acquire or vote any shares of the capital stock of the Company or any
Subsidiary, (ii) restricts the transfer of shares of stock of the Company or any
Subsidiary, or (iii) grants the right to participate in any equity appreciation
of the Company or any Subsidiary.
(b) When issued in accordance with the terms of this Agreement, and
if applicable the Nonvoting Warrant, the Shares, and the Nonvoting Shares will
be duly authorized, validly issued, fully paid, and non-assessable, will not be
issued in violation of any preemptive rights and will be free and clear of any
and all taxes or Liens.
4.3. Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and each other
agreement, document, instrument, or certificate contemplated by this Agreement
to be executed by the Company in connection with the consummation of the
transactions contemplated hereby and thereby (all such agreements, documents,
instruments, and certificates required to be executed by the Company being
hereinafter referred to, collectively, as the "Seller Documents") and, subject
to the approval of its shareholders as set forth in Section 6.5 with respect to
the Amendment, to consummate the transactions contemplated by this Agreement and
the Seller Documents. The execution and delivery of this Agreement and the
Seller Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been (or at the time of
execution will be) duly authorized by all necessary corporate action on the part
of the Company, subject, in the case of the Amendment, to the approval of its
shareholders as set forth in Section 6.5. This Agreement has been (and the
Seller Documents will be) duly executed and delivered by the Company and,
assuming this Agreement and the Seller Documents to be executed by the parties
hereto other than the Company constitute the valid and binding
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<PAGE> 9
agreements of such other parties, each constitutes the legal, valid, and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except that the enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium, or similar Laws now or hereafter in
effect relating to creditor's rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). Except as disclosed in Section 4.3 of the Disclosure
Schedule, the execution and delivery of this Agreement does not (and the Seller
Documents will not), and the consummation of the transactions contemplated by
this Agreement and the Seller Documents and compliance with the provisions
hereof and thereof will not, (i) conflict with any of the provisions of the
Charter or By-laws of the Company or the comparable documents of any Subsidiary,
(ii) subject to the governmental filings and other matters referred to in the
following sentence, conflict with, result in a breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation, or acceleration of any obligation or loss of a
material benefit under, or require the consent of any Person under, any
indenture or other agreement, permit, concession, franchise, license, or similar
instrument or undertaking to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their assets
is bound or affected except as would not, individually or in the aggregate, have
a Material Adverse Effect, or (iii) subject to the governmental filings and
other matters referred to in the following sentence, contravene any Law of any
state or of the United States or any political subdivision thereof or therein,
or any order, writ, judgment, injunction, decree, determination, or award
currently in effect. Except as disclosed in Section 4.3 of the Disclosure
Schedule, no consent, approval, or authorization of, or declaration or filing
with, or notice to, any Person which has not been received or made, is required
by or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement and the Seller Documents by the
Company or the consummation by the Company of the transactions contemplated
hereby and thereby, except for (i) the filing of premerger notification and
report forms under the HSR Act, (ii) the filing with the Commission of (x) the
Company Proxy Statement relating to the approval by the shareholders of the
Company of the Amendment and (y) such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (iii) the filing of an amended Charter with the Texas Secretary
of State and appropriate documents, if any, with the relevant authorities of
other states in which the Company is qualified to do business, (iv) filings that
if not made would not, individually or in the aggregate, have a Material Adverse
Effect or prevent the transactions contemplated hereby, and (v) the NASD
Confirmation.
4.4. Commission Documents. (a) The Company has filed all required
reports, schedules, forms, statements, and other documents with the Commission
since January 1, 1997 (such reports, schedules, forms, statements, and other
documents are hereinafter referred to as the "Commission Documents"); (b) as of
their respective dates, the Commission Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the Commission promulgated
thereunder applicable to such Commission Documents, and none of the Commission
Documents as of such dates contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; and (c) the consolidated financial statements of
the Company included in the Commission Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and
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regulations of the Commission with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Rule 10-01 of
Regulation S-X) and fairly present, in all material respects, the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
4.5. Absence of Certain Changes or Events. Except as disclosed in the
Commission Documents filed and publicly available prior to the date of this
Agreement or in Section 4.5 of the Disclosure Schedule and except for the
transactions contemplated by this Agreement, since the date of the most recent
audited financial statements included in the Commission Documents, the Company
and its Subsidiaries have conducted their business only in the ordinary course,
and there has not been (a) any declaration, setting aside, or payment of any
dividend or other distribution (whether in cash, stock, or property) with
respect to any of the Company's outstanding capital stock, (b) any split,
combination, or reclassification of any of its outstanding capital stock or any
issuance or the authorization of any issuance of any capital stock or other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, (c) (x) any granting by the Company or any of its
Subsidiaries to any executive officer or other employee of the Company or any of
its Subsidiaries of any material increase in compensation, except in the
ordinary course of business consistent with prior practice or as was required
under employment agreements in effect as of the date of the most recent audited
financial statements included in the Commission Documents, (y) any granting by
the Company or any of its Subsidiaries to any such executive officer or other
employee of any material increase in severance or termination pay, except in the
ordinary course of business consistent with prior practice or as was required
under any employment, severance, or termination agreements in effect as of the
date of the most recent audited financial statements included in the Commission
Documents or (z) any entry by the Company or any of its Subsidiaries into any
material employment, severance, or termination agreement with any such executive
officer or other employee, or (d) any change in accounting methods, principles
or practices by the Company or any of its Subsidiaries materially affecting its
assets, liabilities, or businesses, except insofar as may have been required by
a change in generally accepted accounting principles.
4.6. Absence of Changes in Benefit Plans. Except as disclosed in the
Commission Documents or in Section 4.6 of the Disclosure Schedule, since the
date of the most recent audited financial statements included in the Commission
Documents, there has not been any adoption or amendment in any material respect
by the Company or any of its Subsidiaries of any collective bargaining agreement
or any Benefit Plan or waiver of any significant right in respect thereof.
Except as disclosed in the Commission Documents or in Section 4.6 of the
Disclosure Schedule, there exist no material employment, consulting, severance,
termination or indemnification agreements, arrangements, or understandings
between the Company or any of its Subsidiaries and any current or former
employee, officer or director of the Company or any of its Subsidiaries.
4.7. Benefit Plans.
(a) Each "employee pension benefit plan" (as defined in Section 3(2)
of ERISA) (hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section
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3(1) of ERISA) (hereinafter a "Welfare Plan"), and each other plan,
arrangement, or policy (written or oral) relating to stock options, stock
purchases, compensation, deferred compensation, severance, fringe benefits, or
other employee benefits, in each case maintained or contributed to, or required
to be maintained or contributed to, by the Company and its Subsidiaries for the
benefit of any present or former officers, employees, agents, directors or
independent contractors of the Company or any of its Subsidiaries (all the
foregoing being herein called "Benefit Plans") has been administered in
accordance with its terms. The Company, its Subsidiaries and all the Benefit
Plans are in material compliance with the applicable provisions of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code"), all other applicable
Laws and all applicable collective bargaining agreements.
(b) Except as disclosed in Section 4.7(b) of the Disclosure
Schedule, none of the Company or any other Person that together with the Company
is treated as a single employer under Section 414(b), (c), (m), or (o) of the
Code (each a "Commonly Controlled Entity") has incurred any liability to a
Pension Plan covered by Title IV of ERISA (other than for contributions not yet
due) or to the Pension Benefit Guaranty Corporation (other than for the payment
of premiums not yet due) which liability has not been fully paid as of the date
hereof.
(c) Except as disclosed in Section 4.7(c) of the Disclosure
Schedule, no Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid.
(d) Except as set forth in Section 4.7(d) of the Disclosure
Schedule, none of the Benefit Plans provide for post-employment life or health
insurance, benefits, or coverage for any participant or any beneficiary of a
participant, except as may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and at the expense of the
participant or the participant's beneficiary.
(e) Except as set forth in Section 4.7(e) of the Disclosure
Schedule, neither the execution and delivery of this Agreement or the
Shareholder Agreement nor the consummation of the transactions contemplated
hereby or thereby will (i) result in any payment becoming due to any employee
(current, former, or retired) of the Company or any Subsidiary, (ii) increase
any benefits otherwise payable under any Benefit Plan or employment, consulting,
severance, or termination agreements, arrangements, or understandings between
the Company or any Subsidiary and any of their current or former employees,
officers, or directors, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits under any such plan, agreement,
arrangement, or understanding.
4.8. Taxes. Except as disclosed in Section 4.8 of the Disclosure
Schedule,
(a) Each of the Company and its Subsidiaries has filed all tax
returns and reports required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have not
expired, except to the extent that such failures to file or to have extensions
granted that remain in effect individually and in the aggregate would not have a
material adverse effect on the business, financial condition, or results of
operations of the Company and its Subsidiaries taken as a whole. All tax returns
filed by the Company and each
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of its Subsidiaries are complete and accurate except to the extent that such
failure to be complete and accurate would not have a material adverse effect on
the business, financial condition, or results of operations of the Company and
its Subsidiaries taken as a whole. The Company and each of its Subsidiaries has
paid (or the Company has paid on the Subsidiaries' behalf) all taxes shown as
due on such returns, and the most recent financial statements contained in the
Commission Documents reflect an adequate reserve for all taxes payable by the
Company and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(b) No deficiencies for any taxes have been proposed, asserted, or
assessed against the Company or any of its Subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on the business, financial condition,
or results of operations of the Company and its Subsidiaries taken as a whole,
and, except as set forth on Section 4.8 of the Disclosure Schedule, no requests
for waivers of the time to assess any such taxes have been granted or are
pending. The federal income tax returns of the Company and each of its
Subsidiaries consolidated in such returns have been examined by and settled with
the United States Internal Revenue Service, or the statute of limitations on
assessment or collection of any federal income taxes due from the Company or any
of its Subsidiaries has expired, through such taxable years as are set forth in
Section 4.8 of the Disclosure Schedule.
(c) As used in this Agreement, "taxes" shall include all federal,
state, local and foreign income, property, premium, sales, excise, employment,
payroll, withholding, and other taxes, tariffs, or governmental charges of any
nature whatsoever and any interest, penalties, and additions to taxes relating
thereto.
4.9. No Excess Parachute Payments; Section 162(m) of the Code.
(a) Except as disclosed in Section 4.9 of the Disclosure Schedule,
any amount that could be received (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this Agreement
or the Shareholder Agreement by any employee, officer, or director of the
Company or any of its Affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance, or termination agreement, other compensation arrangement,
or Benefit Plan currently in effect would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
(b) Except as disclosed in Section 4.9 of the Disclosure Schedule,
the disallowance of a deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amount paid or payable by the Company or any
Subsidiary under any contract, Benefit Plan, program, arrangement, or
understanding currently in effect.
4.10. Voting Requirements. The affirmative vote of a majority of the
outstanding shares of Stock entitled to vote thereon at a shareholders meeting
with respect to the approval of the Amendment is the only vote of the holders of
any class or series of the Company's capital stock necessary to approve the
Amendment.
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4.11. Compliance with Applicable Laws. Except as disclosed in Section
4.11 of the Disclosure Schedule, each of the Company and its Subsidiaries has in
effect all federal, state, local, and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits,
and rights ("Permits") necessary for it to own, lease, or operate its properties
and assets and to carry on its business as now conducted except where the
failure would not, individually or in the aggregate, have a Material Adverse
Effect, and there has occurred no material default under any such Permit. Except
as disclosed in the Commission Documents or in Section 4.11 of the Disclosure
Schedule, the Company and its Subsidiaries are in compliance with all applicable
Laws of any Governmental Body applicable to the business except where such
noncompliance would not, individually or in the aggregate, have a Material
Adverse Effect. Except as disclosed in the Commission Documents, as of the date
of this Agreement, to the knowledge of the Company, no investigation by any
Governmental Body with respect to the Company or any of its Subsidiaries is
pending or threatened.
4.12. Environmental Matters.
(a) Except as set forth in the Commission Documents or in Schedule
4.12 of the Disclosure Schedule, since January 1, 1997 (i) the Company has not
received any written notice from any Person stating that the Company or its
Subsidiaries may be a potentially responsible party under Environmental Law with
respect to any actual or alleged environmental contamination; (ii) neither the
Company nor its Subsidiaries nor, to the Company's knowledge, any Governmental
Body is conducting or has conducted any environmental remediation or
environmental investigation which could reasonably be expected to result in
liability for the Company or its Subsidiaries under Environmental Law; and (iii)
the Company and its Subsidiaries have not received any request for information
under Environmental Law from any Governmental Body with respect to any actual or
alleged environmental contamination, except, in each case, for notices,
environmental remediation, and investigations and requests for information which
would not, individually or in the aggregate, have a material adverse effect on
the assets, financial condition, or operations of the Company and its
Subsidiaries taken as a whole ("Material Adverse Effect"); and
(b) Except as set forth in the Commission Documents or in Schedule
4.12 of the Disclosure Schedule since January 1, 1998, the Company and its
Subsidiaries have not received any written notice from any Person stating or
alleging that the Company or its Subsidiaries may have violated any
Environmental Law, or that the Company or its Subsidiaries has caused or
contributed to any environmental contamination that is reasonably likely to
require investigation or remediation or that has caused personal injury under
Environmental Law, except, in each case, for statements and allegations of
violations and statements and allegations of responsibility for remediation and
personal injury which would not, individually or in the aggregate, have a
Material Adverse Effect.
(c) The Company has not knowingly withheld from Purchaser any
material environmental investigation, study, audit, test, review, or other
analysis in the possession of the Company or its Subsidiaries conducted in
relation to the business of the Company or any Subsidiary or any property or
facility now or previously owned, operated, or leased by the Company or any
Subsidiary; and the Company has not knowingly withheld from Purchaser any
consent decree, consent order, or similar document issued by a Governmental Body
pursuant to Environmental Laws, which is in force and to which it is a party
relating to any property currently owned, leased, or operated by the Company or
its Subsidiaries.
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(d) The transactions contemplated by this Agreement do not trigger
any obligation or duty on the part of the Company or any Subsidiary to file any
notice with or obtain any approval from any Governmental Body having
jurisdiction over environmental or health and safety matters.
(e) "Environmental Law" means all applicable Laws, judgments,
decrees, and orders relating to pollution, the preservation of the environment,
and the release of material into the environment.
4.13. Brokers. Except with respect to Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ") and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated ("Dain Rauscher"), all negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the Company
directly with Purchaser, without the intervention of any Person on behalf of the
Company in such manner as to give rise to any valid claim by any Person against
Purchaser, the Company or any Subsidiary for a finder's fee, brokerage
commission, or similar payment. The Company has provided Purchaser with true and
complete copies of the agreements between the Company and DLJ, and the Company
has no other agreements or understandings (written or oral) with respect to such
services.
4.14. Disclaimer. Except for the representations and warranties set
forth in this Article IV, the Company makes no other representations or
warranties of any kind or character, expressed, implied, or statutory, in
respect of the Company. All such other representations and warranties are
disclaimed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as of the date
hereof as follows:
5.1. Organization and Good Standing. Purchaser is a limited
partnership, duly organized, validly existing, and in good standing under the
laws of its state of organization.
5.2. Authorization; Enforceability.
(a) Purchaser has the power to execute and deliver this Agreement
and each other agreement, document, instrument, or certificate contemplated by
this Agreement or to be executed by Purchaser in connection with the
consummation of the transactions contemplated hereby and thereby (all of such
agreements, documents, instruments, and certificates required to be executed by
Purchaser being hereinafter referred to, collectively, as the "Purchaser
Documents"), and to perform fully its obligations hereunder and thereunder.
(b) The execution, delivery and performance by Purchaser of this
Agreement and each of the Purchaser Documents has been duly authorized by all
necessary partnership or other action on the part of Purchaser.
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(c) This Agreement has been, and each of the Purchaser Documents
will be, on or prior to the Closing Date, duly executed and delivered by
Purchaser and (assuming the due authorization, execution, and delivery by the
other parties hereto) this Agreement constitutes, and each of the Purchaser
Documents when so executed and delivered will constitute, the legal, valid, and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, and similar Laws affecting creditors' rights generally
and to general principles of equity (whether considered in a proceeding in
equity or at law).
5.3. Consents of Third Parties. No consent, waiver, approval, or
authorization of, or declaration or filing with, or notification to, any Person
is required on the part of Purchaser in connection with the execution and
delivery of this Agreement or the Purchaser Documents, the consummation by
Purchaser of the transactions contemplated hereby and thereby, or the compliance
by Purchaser with any of the provisions hereof or thereof, except as may be
required by Purchaser in connection with any confidentiality agreement by which
it is bound and except for compliance with the applicable requirements of the
Exchange Act and the HSR Act. The execution and delivery by Purchaser of this
Agreement and Purchaser Documents, the consummation by Purchaser of the
transactions contemplated hereby and thereby, and the compliance by Purchaser
with any of the provisions hereof or thereof will not conflict with, or result
in the breach of, any provision of the certificate of limited partnership or
limited partnership agreement or other organizational documents of Purchaser.
5.4. Litigation. There is no Legal Proceeding pending, or to the
knowledge of Purchaser, threatened against Purchaser that questions the validity
of this Agreement or any action to be taken by Purchaser in connection with this
Agreement.
5.5. Brokers. Except for such Persons who will be paid a finder's fee,
brokerage commission, or similar payment at the Closing, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by Purchaser directly with the Company, without the intervention of
any Person on behalf of Purchaser or its Affiliates in such manner as to give
rise to any valid claim by any Person against Purchaser, the Company, any
Subsidiary, the Shareholder, or any of their Affiliates for a finder's fee,
brokerage commission, or similar payment.
5.6. Securities Matters.
(a) Purchaser understands and acknowledges that the Securities have
not been registered under the Securities Act, or the securities laws of any
state or foreign jurisdiction and, unless so registered, may not be offered,
sold, transferred, or otherwise disposed of except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act and any applicable securities laws of any state or foreign
jurisdiction.
(b) Purchaser is an "accredited investor" (as defined in Rule 501(a)
of Regulation D under the Securities Act).
(c) Purchaser (i) has knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
purchasing the Securities, (ii) is able to bear the economic risk of an
investment in the Securities for an indefinite period of
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time, including the risk of a complete loss of any such investment, and (iii)
acknowledges that the information publicly disclosed by the Company or contained
in any written material furnished to Purchaser indicates that the expected
earnings of the Company for the fourth calendar quarter of 1998 will be
substantially below estimates previously made by the Company.
(d) Purchaser is acquiring the Securities for its own account for
investment purposes and not with a view to, or for offer or sale for the Company
in connection with, the distribution or resale thereof.
(e) Purchaser understands and agrees that the Securities are being
sold in a transaction not involving any public offering within the meaning of
the Securities Act, and that the Securities may not be offered, sold, or
otherwise transferred to, or for the account or benefit of, any Person except as
permitted in the following sentence. Purchaser agrees, on its own behalf and on
behalf of any accounts for which Purchaser is acting, that if Purchaser should
sell or otherwise transfer any Securities, it will do so only (i) pursuant to an
exemption from the registration requirements of the Securities Act (if
available) or if the Securities Act does not apply or (ii) pursuant to an
effective registration statement under the Securities Act, and Purchaser further
agrees to provide to any Person purchasing any of the Securities from it a
notice advising such purchaser that resales of the Securities are restricted as
stated herein.
(f) The Purchaser understands that the Securities purchased pursuant
to this Agreement will be in unregistered form only and that any certificates
delivered to it in respect of the Securities will bear a legend substantially to
the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN PURCHASED
PURSUANT TO A STOCK PURCHASE AGREEMENT DATED AS OF DECEMBER 23, 1998,
BETWEEN THE COMPANY AND WINGATE PARTNERS II, L.P. SUCH SECURITIES HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
5.7. Financing. Purchaser has available to it, and on the Closing Date
and the Second Closing Date will have, all funds necessary to consummate the
transactions contemplated by this Agreement, including, without limitation, the
payment of the Purchase Price to the Company.
5.8. HSR Act. The consummation of the transactions contemplated by this
Agreement and the Shareholder Agreement do not require any filings to be made
pursuant to the HSR Act.
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ARTICLE VI
COVENANTS OF THE COMPANY
6.1. Public Statements. From and after the date hereof and until the
Second Closing, the Company hereby covenants and agrees that before the Company
shall release any information concerning this Agreement or the transactions
contemplated hereby and which is intended for or may result in public
dissemination thereof, the Company shall so advise and cooperate with Purchaser
and shall not release such information without Purchaser's consent (which
consent shall not be unreasonably withheld or delayed), unless such information
is otherwise publicly available or the release thereof is required by Law.
6.2. Consents and Conditions. From and after the date hereof and until
the Second Closing, the Company hereby covenants and agrees that the Company
will use its best commercially reasonable efforts (a) to obtain any required
governmental consents to the transactions contemplated hereby required to be so
obtained by it, (b) to cause each of the conditions precedent set forth in
Article VIII or IX to be satisfied, and (c) to comply with the requirements, if
applicable, of Rule 14f-1 under the Exchange Act.
6.3. No Shop Provision. Except as provided for in this Agreement from
and after the date hereof until the earlier of the Closing Date or the date on
which this Agreement shall have been terminated in accordance with the
provisions of Article XII, neither the Company nor any officer, director, agent,
or representative of the Company will, nor will they authorize or permit any
investment banker, attorney, accountant, or other representative retained by any
of the foregoing in any manner, directly or indirectly, to, (a) effect or seek,
or offer (including by way of providing information) or propose (whether
publicly or otherwise) to effect, (i) any issuance or sale of any shares of the
Company's capital stock or securities convertible into or exercisable for
capital stock other than issuances pursuant to the exercise of options
outstanding on the date hereof and disclosed in Section 4.2 of the Disclosure
Schedule; (ii) any tender or exchange offer or merger or other business
combination involving the Company or any Subsidiary; (iii) any recapitalization,
restructuring, liquidation, dissolution, or other extraordinary transaction with
respect to the Company or any Subsidiary; or (iv) any solicitation of proxies
(as such terms are used in the proxy rules of the Commission) or consents to
vote any shares of the Company's capital stock (except as required by Section
6.5) (each, an "Acquisition Proposal") or (b) enter into any discussions or
arrangements with any third party (or provide any information to any third
party) with respect to any Acquisition Proposal; provided, however, that if the
Board of Directors determines in good faith, after consultation with outside
legal counsel to the Company, that the failure to perform any of the foregoing
acts would be inconsistent with the Board of Directors' fiduciary duties under
applicable Law, the Company may in response to such Acquisition Proposal (which
must be a Superior Proposal), furnish information in respect of the Company and
its Subsidiaries pursuant to a confidentiality agreement and participate in
negotiations and enter into agreements regarding such Acquisition Proposal. The
Company will promptly inform Purchaser as to the fact that information is to be
provided and the identity of the third-party purchaser after receipt of any
Acquisition Proposal and will keep Purchaser informed of the status and details
of any such Acquisition Proposal. The term "Superior Proposal" means any bona
fide Acquisition Proposal, which proposal was not solicited by the Company or
nor any officer, director, agent, or representative of the Company or any
investment banker, attorney, accountant, or other representative retained by any
of the foregoing after the date of this Agreement, made by a third party on
terms that the Board of Directors determines in good faith
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to be more favorable to the Company and its shareholders than the transactions
contemplated by this Agreement (based on advice of the Company's financial
advisor that the value of the consideration provided for in such proposal is
superior to the value of the consideration provided for herein). Furthermore,
nothing contained in this Section 6.3 shall prohibit the Company or its Board of
Directors from disclosing to the Company's shareholders a position in respect of
a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such disclosure to the
Company's shareholders as may be required by applicable Law.
6.4. Further Actions. From time to time after the Closing Date, the
Company agrees to execute and deliver such instruments and take such other
actions as may reasonably be required to carry out the intent of this Agreement
and to consummate the transactions contemplated hereby. In the event that at any
time on or after the date hereof the acquisition by Purchaser or its Affiliates
of the Shares hereunder, together with any shares of Stock to be acquired by
Purchaser or its Affiliates under the Shareholder Agreement (or under the
Nonvoting Warrant contemplated herein), would result in a Change of Control (as
defined in the Indenture), the Company agrees that without any action by either
the Company or Purchaser the number of Shares owned by Purchaser and its
Affiliates shall automatically be reduced by exchange of such number of Shares
for Nonvoting Shares or if such Nonvoting Shares have not been issued, the right
to receive Nonvoting Shares as provided for herein to the extent, and only to
the extent, necessary to avoid such occurrence.
6.5. Charter Amendment. The Company will promptly prepare, and as soon
as practicable after the Closing Date, file with the Commission a proxy
statement and all other proxy materials (the "Company Proxy Statement") and
commence such other actions necessary in accordance with applicable Law and its
Charter and By-laws to convene a meeting of its shareholders to consider and
vote upon the approval of the Amendment (the "Shareholders Meeting").
Concurrently herewith, the Company has, through its Board of Directors,
recommended to its shareholders approval of the Amendment. In connection with
the Shareholders Meeting, the Company (i) will use its commercially reasonable
best efforts to have cleared by the Commission and will thereafter mail to its
shareholders as promptly as practicable the Company Proxy Statement, (ii) will
use its commercially reasonable best efforts to obtain the necessary approvals
by its shareholders of the Amendment, and (iii) will otherwise comply in all
material respects with all legal requirements applicable to such Shareholders
Meeting. Purchaser shall vote all shares of Stock acquired by it pursuant to
this Agreement or the Shareholder Agreement then held by it, and shall cause any
assignee of any such shares of Stock to vote any shares of Stock then held by
any such assignee, in favor of the Amendment. In the event that either of the
following sets of conditions has been satisfied: (A) the Shareholders Meeting
shall not have been held within 180 days after the filing of the Company Proxy
Statement (plus any period of time during which there shall have been in effect
any Law or injunction or other order of any Governmental Body restraining or
preventing the Company from holding the Shareholders Meeting) or (B) (i) at the
Shareholders Meeting all of the shares of Stock acquired by Purchaser pursuant
to this Agreement and the Shareholder Agreement shall have been voted in favor
of approval of the Amendment, (ii) there shall not have been in effect as of the
date of such meeting any Law or injunction or other order of any Governmental
Body restraining or preventing the Shareholder from voting any shares of Stock
as to which he possessed the power to vote in favor of approval of the
Amendment, and (iii) the Amendment shall not have been
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approved in accordance with applicable Law and the Charter and By-laws of the
Company, then the Company shall pay to Purchaser as liquidated damages for such
failure and not as a penalty an aggregate of $1 million.
6.6. Reservation of Stock Issuable Upon Exercise of Nonvoting Warrants.
From and after the effectiveness of the Amendment the Company shall take all
action necessary to at all times have authorized and reserved for the purpose of
issuance, the number of shares of Nonvoting Stock needed to provide for the
issuance of the Nonvoting Shares upon the exercise of Nonvoting Warrants.
6.7. Conduct of the Company. From the date hereof until the Closing
Date, the Company and its Subsidiaries shall conduct their business in the
ordinary course, consistent with past practices, and shall use their
commercially reasonable efforts to preserve intact their business organizations
and relationships with third parties and to keep available the services of their
present officers, employees, and business associates. Without limiting the
generality of the foregoing, other than in the ordinary course of business,
consistent with past practices, or as set forth on Section 6.7 of the Disclosure
Schedule, as specifically contemplated by this Agreement or with the written
consent of Purchaser (which such consent shall not be unreasonably withheld),
from the date hereof until the Closing Date, the Company will not, and will not
permit any of its Subsidiaries to:
(a) declare, set aside, or pay any dividend (other than regular
quarterly dividends) or other distribution with respect to any shares of capital
stock of the Company, or enter into any agreement or understanding with respect
to any repurchase, redemption, or other acquisition by the Company or any
Subsidiary of any outstanding shares of capital stock or other securities of, or
other ownership interests in, the Company or any Subsidiary;
(b) amend the Articles of Incorporation or Bylaws or other governing
documents or any outstanding security of the Company or any Subsidiary;
(c) incur, assume, or guarantee by the Company or any Subsidiary of
any indebtedness for borrowed money;
(d) create or assume by the Company or any Subsidiary any Lien on
any assets other than Liens which, individually or in the aggregate, do not have
and could not reasonably be expected to have a Material Adverse Effect;
(e) make any loan, advance, or capital contribution to or invest in
any Person;
(f) cause or willfully permit any damage, destruction, or other
casualty loss (whether or not covered by insurance) affecting the business or
assets of the Company or any Subsidiary which, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect;
(g) other than in the ordinary course of business consistent with
past practice, enter into any transaction, commitment, contract, or agreement by
the Company or any Subsidiary relating to their assets or businesses (including
the acquisition or disposition of any assets) or relinquish any contract or
other right, in either case, that, individually or in the aggregate, have had or
could reasonably be expected to have a Material Adverse Effect;
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(h) pay, discharge, or satisfy any material claims, liabilities, or
other obligations (whether absolute, accrued, asserted or unasserted,
contingent, or otherwise) other than the payment, discharge, or satisfaction in
the ordinary course of business, consistent with past practices of liabilities
reflected or reserved against in the consolidated financial statements of the
Company or incurred since the most recent date in the ordinary course of
business, consistent with past practices;
(i) change any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change required by reason of a
concurrent change in generally accepted accounting principles in the United
States, consistently applied;
(j) (A) grant any severance or termination pay to any director,
officer, or employee of the Company or any Subsidiary, (B) enter into any
employment, deferred compensation, or other similar agreement (or any amendment
to any such existing agreement) with any director, officer, or employee of the
Company or any Subsidiary, (C) increase the benefits payable under any existing
severance or termination pay policies or employment agreements or (D) increase
the compensation, bonus, or other benefits payable to any director, officer, or
employee of the Company or any Subsidiary; or
(k) authorize any of, or commit or agree to take any of, the
foregoing actions except as otherwise permitted by this Agreement.
6.8. Shareholder Litigation. From the date hereof and until the earlier
of the Closing or the termination of this Agreement, the Company agrees that in
connection with any litigation which may be brought against the Company or its
directors relating to the transactions contemplated hereby, the Company will
keep Purchaser, and any counsel which Purchaser may retain, informed of the
course of such litigation, to the extent Purchaser is not otherwise a party
thereto, and the Company agrees that it will consult with Purchaser prior to
entering into any settlement or compromise of any such shareholder litigation.
6.9. Directors. (a) Subject to Section 6.9(b), concurrently with the
Closing, (i) Purchaser shall be entitled to designate two directors to the Board
of Directors, and (ii) the Shareholder shall be entitled to designate two
directors to the Board of Directors. The Company shall take all action necessary
to cause Purchaser's designees to be elected or appointed to the Board of
Directors, including, without limitation, seeking and accepting resignations of
incumbent directors. The Company will use its commercially reasonable efforts to
cause individuals designated by Purchaser to constitute the same percentage as
such individuals represent on the Board of Directors of each committee of the
Board of Directors, each board of directors of any Subsidiary, and each
committee of each such board, except as may be otherwise required by any
applicable Law or the rules of any exchange or quotation system on which shares
of the Company's capital stock are listed or quoted.
(b) If at the time of the Closing or any time thereafter, an
Independent Director (as defined in Section 7.5 hereof) is appointed to the
Company's Board of Directors, the Purchaser shall be entitled to designate one
(1) additional director beyond those provided for in
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Section 6.9(a), to the Board of Directors and the Company shall take all actions
necessary to cause this designee to be appointed concurrently with such
Independent Director; provided that the foregoing right shall be exercised by
the Purchaser on only one (1) occasion.
(c) The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1, if applicable, in order to fulfill its
obligations under this Section 6.9.
ARTICLE VII
COVENANTS OF PURCHASER
7.1. Confidentiality. Except as otherwise permitted by the Board of
Directors (or any committee thereof) or as contemplated hereby, from and after
the date hereof and until the Closing, Purchaser hereby covenants and agrees
that it will treat as confidential, keep secret, and not use in the course of
its business any Evaluation Material (as defined in the letter agreement dated
July 1998 by and between Purchaser and DLJ, on behalf of the Company (the
"Confidentiality Agreement")), and that the Evaluation Material shall be held in
the strictest confidence by Purchaser in accordance with, and pursuant to, the
Confidentiality Agreement and, in the event that the transactions contemplated
hereby are not consummated, shall be returned or destroyed in accordance with,
and pursuant to, the Confidentiality Agreement. The Company hereby waives
compliance by Purchaser and its Affiliates with, and releases Purchaser and its
Affiliates from, the standstill and other provisions of the third full paragraph
on page 3 of the Confidentiality Agreement to the extent necessary to permit the
consummation of the transactions contemplated by this Agreement and the
Shareholder Agreement.
7.2. Public Statements. From and after the date hereof and until the
Second Closing, Purchaser hereby covenants and agrees that before it shall
release any information concerning this Agreement or the transactions
contemplated hereby and which is intended for public dissemination thereof,
Purchaser shall so advise and cooperate with the Company and shall not release
such information without the Company's consent (which consent shall not be
unreasonably withheld or delayed), unless such information is otherwise publicly
available or the release thereof is required by Law.
7.3. Consents and Conditions. From and after the date hereof and until
the Closing, Purchaser hereby covenants and agrees that Purchaser will (a)
cooperate in all respects with the Company (including, without limitation, by
providing all necessary information concerning Purchaser for disclosure) in
connection with any filing by the Company pursuant to the requirements, if
applicable, of Rule 14f-1 under the Exchange Act and (b) use its commercially
reasonable efforts (i) to obtain any required governmental consents to the
transactions contemplated hereby required to be obtained by it and (ii) to cause
each of the conditions precedent set forth in Article VIII or IX to be
satisfied.
7.4. Further Actions. From time to time after the Closing Date,
Purchaser agrees to execute and deliver such instruments and take such other
actions as may reasonably be required to carry out the intent of this Agreement
and to consummate the transactions contemplated hereby. In the event that at any
time on or after the date hereof the acquisition by Purchaser or its Affiliates
of the Shares hereunder, together with any shares of Stock to be acquired by
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Purchaser or its Affiliates under the Shareholder Agreement would result in a
Change of Control (as defined in the Indenture), Purchaser agrees that without
any action by either the Company or Purchaser the number of Shares owned by
Purchaser and its Affiliates shall automatically be reduced by exchange of such
number of Shares for Nonvoting Shares or if such Nonvoting Shares have not been
issued, the right to receive Nonvoting Shares as provided for herein to the
extent, and only to the extent, necessary to avoid such occurrence.
7.5. Independent Directors. For a period of five years following the
Closing Date, Purchaser shall, and shall cause its Affiliates to, use their
respective commercially reasonable efforts (including, without limitation, by
nominating and voting all shares of Stock then beneficially owned by them) to
ensure that at least two individuals not affiliated with Purchaser, its assigns
or the Shareholder and who do not have any other relationship that would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director (such individuals, the "Independent Directors")
are nominated and elected to the Board of Directors. In the event of the death,
disability, resignation, or removal of an Independent Director, Purchaser shall,
and shall cause its Affiliates to, use their respective commercially reasonable
efforts to cause a replacement Independent Director to be nominated and elected
to the Board of Directors.
7.6. Matters Requiring Approval of the Independent Directors. For a
period of five years following the Closing Date, none of Purchaser nor any of
its Affiliates shall cause or permit the Company, directly or indirectly, to
enter into or engage in a Business Combination with respect to which Purchaser
or any of its Affiliates would (i) have been considered an "affiliated
shareholder" for purposes of Article Nine of the Charter or the TBCA Business
Combination Provisions (without giving effect to the approval, if any, by the
Board of Directors of the purchase by Purchaser or Affiliate of any shares of
Stock for purposes of Article Nine of the Charter or the TBCA Business
Combination Provisions) or (ii) any other transaction with the Purchaser or any
of its Affiliates that would result in a change in the exercise price or number
of shares purchasable under the Nonvoting Warrant pursuant to Section 6(c)
thereof, unless (a) such Business Combination or other transaction shall have
been approved, in addition to any vote required by the Charter or Law, by a
committee of the Independent Directors (and such committee shall have been
advised if it deems appropriate by independent counsel and financial advisors)
and (b) such committee shall have received an opinion in writing from a
nationally recognized investment banking firm stating that the transaction is
fair, from a financial perspective, to the shareholders of the Company not
affiliated with Purchaser.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the purchase of the Shares
from the Company as contemplated hereby on the Closing Date and the Nonvoting
Shares from the Company as contemplated hereby on the Second Closing date is
subject to the satisfaction or waiver on each such date by Purchaser of the
following conditions:
8.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of the Company contained herein shall be true and
correct on and as of the Closing Date with the same force and effect as though
the same had been made on and as of the Closing Date other than such
representations and warranties made as of another date.
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8.2. Performance of Covenants. The Company shall have performed and
complied, in all material respects, with the covenants and provisions of this
Agreement required to be performed or complied with by it between the date
hereof and the Closing Date.
8.3. Hart-Scott-Rodino. All applicable waiting periods, if any, in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
8.4. Litigation; Other Events.
(a) No preliminary or permanent injunction or other order of any
court restraining or prohibiting the consummation of the transactions
contemplated hereby shall be in effect.
(b) Except with respect to these items listed in Section 8.4(b) of
the Disclosure Schedule as the same exist on the date hereof and without giving
effect to adverse developments in such matters between the date hereof and the
Closing Date, there shall not be pending, nor shall there have been threatened,
any inquiry by any Governmental Body or Legal Proceeding which, individually or
in the aggregate could reasonably be expected to have a Material Adverse Effect.
(c) There shall not be pending, nor shall there have been
threatened, any inquiry by any Governmental Body or Legal Proceeding that seeks,
nor any Law that would have the effect, to:
(i) challenge, restrain, prohibit or delay the sale or purchase
of the Shares, the Nonvoting Shares, or the Nonvoting Warrant Shares
pursuant to this Agreement or any of the transactions contemplated
hereby or obtain damages as a result thereof;
(ii) make the sale or purchase of the Shares, the Nonvoting
Shares, or the Nonvoting Warrant Shares pursuant to this Agreement
illegal or in violation of any duty;
(iii) impose or result in material limitations on the ability of
Purchaser or any of its Affiliates to exercise full rights of ownership
of the Shares, the Nonvoting Shares, or the Nonvoting Warrant Shares
purchased by it hereunder, including, without limitation, the right to
vote the Shares purchased by it hereunder on all matters properly
presented to the shareholders of the Company; or
(iv) impose upon Purchaser or the Company, directly or
indirectly, the restraints or conditions set forth in the TBCA Business
Combinations Provisions or in Article Nine of the Charter or similar
restraints or conditions.
8.5. Board Approval. The purchase of each of the Shares and the
Nonvoting Warrant Shares by Purchaser shall have been approved (which approval
shall not have been withdrawn or modified) by the Board of Directors (or a
special committee thereof) for purposes of Article Nine of the Charter and the
TBCA Business Combination Provisions, and resolutions to such effect certified
by an authorized officer of the Company shall have been delivered to Purchaser.
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8.6. Shareholder Agreement. In the case of the Closing Date only, the
Closing (as defined in the Shareholder Agreement) shall have occurred
concurrently with the Closing.
8.7. Directors. In the case of the Closing Date only, (i) the
individuals designated by Purchaser shall have been duly nominated and elected
to the Board of Directors as provided for in Section 6.9 and (ii) Purchaser
shall have received the written resignation of those directors of the Company
designated by Purchaser as necessary to fulfill the requirements of Section 6.9
hereof.
8.8. Senior Debt. In the case of the Closing Date only, the Company and
its lenders under that certain Second Amended and Restated Credit Agreement,
dated as of December 1, 1997, (the "Credit Agreement") shall have amended the
Credit Agreement on terms reasonably satisfactory to Purchaser.
8.9. Shareholders Meeting. In the case of the Second Closing only, the
Company shall have duly called, given notice of, convened, and held the
Shareholders Meeting for the purpose of approving the Amendment in accordance
applicable provisions of the TBCA.
8.10. Nonvoting Warrant. In the case of the Second Closing only, the
Company shall have delivered to Purchaser a duly executed copy of the Nonvoting
Warrant in the form attached hereto as Exhibit B.
8.11. Monitoring and Oversight Agreement; Financial Advisory Agreement.
In the case of the Closing Date only, the Company and Wingate Management
Limited, L.L.C. shall have entered into each of the Monitoring and Oversight
Agreement and the Financial Advisory Agreement, in the forms attached hereto as
Exhibit C and Exhibit D, respectively.
8.12. Confirmation by NASD. The Company shall have received the NASD
Confirmation.
ARTICLE IX
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to consummate the issuance and sale of
the Shares to Purchaser contemplated hereby on the Closing Date and the
Nonvoting Shares and Nonvoting Warrant to Purchaser as contemplated hereby on
the Second Closing Date is subject to the satisfaction or waiver by the Company
of the following conditions:
9.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of Purchaser contained herein shall be true and
correct as of the Closing Date (or the Second Closing Date, as the case may be)
with the same force and effect as though the same had been made on and as of the
Closing Date (or the Second Closing Date, as the case may be).
9.2. Performance of Covenants. Purchaser shall have performed and
complied, in all material respects, with the covenants and provisions in this
Agreement required herein to be performed or complied with by it between the
date hereof and the Closing Date (or the Second Closing Date, as the case may
be).
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9.3. Hart-Scott-Rodino. All applicable waiting periods, if any, in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated. 9.4. Litigation; Other Events.
(a) No preliminary or permanent injunction or other order of any
court restraining or prohibiting the consummation of the transactions
contemplated hereby shall be in effect.
(b) There shall not be pending, nor shall there have been
threatened, any inquiry or Legal Proceeding that seeks, nor any Law that would
have the effect, to:
(i) challenge, restrain, prohibit or delay the sale and purchase
of the Shares, the Nonvoting Shares, or the Nonvoting Warrant Shares
pursuant to this Agreement or any of the transactions contemplated
hereby or obtain damages as a result thereof;
(ii) make the sale or purchase of the Shares, the Nonvoting
Shares, or the Nonvoting Warrant Shares pursuant to this Agreement
illegal or in violation of any duty;
(iii) impose or result in material limitations on the ability of
Purchaser or any of its Affiliates to exercise full rights of ownership
of the portion of the Shares, the Nonvoting Shares, or the Nonvoting
Warrant Shares purchased by it hereunder, including, without
limitation, the right to vote the Shares purchased by it hereunder on
all matters properly presented to the shareholders of the Company; or
(iv) impose upon Purchaser or the Company, directly or
indirectly, the restraints or conditions set forth in the TBCA Business
Combinations Provisions or in Article Nine of the Charter or similar
restraints or conditions.
9.5. Purchase Price. Purchaser shall have simultaneously paid, in
accordance with the terms hereof, the Share Purchase Price or Nonvoting Share
Purchase Price, as the case may be.
9.6. Confirmation by NASD. The Company shall have received the NASD
Confirmation.
ARTICLE X
INDEMNIFICATION AND RELATED MATTERS
10.1. Indemnification.
(a) The Company hereby agrees to indemnify and hold Purchaser, its
Affiliates and the officers, directors, employees, partners, and agents thereof,
harmless (on an
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after-tax basis) from and against any and all claims, judgments, causes of
action, liabilities, obligations, damages, losses, deficiencies, costs,
penalties, interest, and expenses (including, without limitation, the reasonable
fees and expenses of counsel) (collectively, "Losses") arising out of, based
upon, attributable to, or resulting from:
(i) any inaccuracy of any representation, any breach of warranty
or nonfulfillment of any agreement or covenant on the part of the
Company contained in this Agreement or any Seller Document; and
(ii) all claims, actions, suits, proceedings, investigations,
demands, and assessments incident to any of the foregoing.
(b) Purchaser hereby agrees to indemnify and hold the Company
harmless (on an after-tax basis) from and against any and all Losses arising out
of, based upon, attributable to, or resulting from:
(i) any inaccuracy of any representation, any breach of warranty
or nonfulfillment of any agreement or covenant on the part of Purchaser
contained in this Agreement or any Purchaser Document; and
(ii) all claims, actions, suits, proceedings, investigations,
demands, and assessments incident to the foregoing.
Notwithstanding the foregoing provisions of Section 10.1(a)(ii),
Purchaser shall not be entitled to any claims for fees and expenses of counsel
in respect of any action, suit, or proceeding by Purchaser against the Company,
unless and until such action, suit, or proceeding has been determined by a
final, nonappealable order or judgment of a court of competent jurisdiction in
favor of Purchaser.
10.2. Procedures for Indemnification. (a) Whenever a claim shall arise
for indemnification under Section 10.1, with the exception of claims for
litigation expenses in respect of litigation as to which a notice of claim, as
provided in this Section 10.2, has previously been given, which expenses shall
be funded on an ongoing basis, the party entitled to indemnification (the
"Indemnified Party") shall promptly notify the party from which indemnification
is sought (the "Indemnifying Party") of such claim and, when known, the facts
constituting the basis for such claim; provided, however, that in the event of
any claim for indemnification hereunder resulting from or in connection with any
claim or legal proceeding by a third party, the Indemnified Party shall give
such notice thereof to the Indemnifying Party not later than ten business days
prior to the time any response to the asserted claim is required, if possible,
and in any event within five business days following receipt of notice thereof.
Failure to give timely notice or to include any specified information in any
notice required by this Section 10.2 will not effect the rights or obligations
of any party hereunder except and only to the extent that, as a result of such
failure, any party which was entitled to receive such notice was deprived of its
right to recover any payment under its applicable insurance coverage or was
otherwise damaged as a result of such failure. In the event of any such claim
for indemnification resulting from or in connection with a claim or legal
proceeding by a third party, the Indemnifying Party may, at its sole cost and
expense, assume the defense thereof using counsel who is reasonably satisfactory
to the Indemnified Party; provided, however, that the
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Indemnifying Party shall first have agreed in writing that it does not and will
not contest its responsibility for indemnifying the Indemnified Party in respect
of Losses attributable to such claim or proceeding; and provided, however, that
if the defendants in any such actions include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be legal defenses or rights available to it which have not been
waived and are in actual or potential conflict with those available to the
Indemnifying Party, the Indemnified Party shall have the right to select one law
firm to act as separate counsel, on behalf of such Indemnified Party, at the
expense of the Indemnifying Party. Subject to the second proviso of the
immediately preceding sentence, if an Indemnifying Party assumes the defense of
any such claim or legal proceeding, the Indemnifying Party shall be entitled to
select counsel and take all steps necessary in the defense thereof; provided,
however, that no settlement shall be made without the prior written consent of
the Indemnified Party, which consent shall not be unreasonably withheld (and if
the Indemnified Party shall withhold its consent to any monetary settlement
proposed by the Indemnifying Party and which the other party to the action has
indicated it is prepared to accept, the Indemnified Party shall in no event be
deemed for purposes of this Agreement to have suffered Losses in connection with
such claim or proceeding in excess of the proposed amount of such settlement);
and provided, further, that subject to the second proviso of the immediately
preceding sentence, the Indemnified Party may, at its own expense, participate
in any such proceeding with the counsel of its choice without any right of
control thereof. So long as the Indemnifying Party is in good faith defending
such claim or proceeding, the Indemnified Party shall not compromise or settle
such claim without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. If the Indemnifying Party does not
assume the defense of any such claim or litigation in accordance with the terms
hereof, the Indemnified Party may defend against such claim or litigation in
such manner as it may deem appropriate, including, without limitation, settling
such claim or litigation (after giving prior written notice of the same to the
Indemnifying Party and obtaining the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld) on such terms as the
Indemnified Party may deem appropriate, and the Indemnifying Party will promptly
indemnify the Indemnified Party in accordance with the provisions of this
Section 10.2. Notwithstanding the foregoing, at any time after the Indemnifying
Party has failed to discharge its liability for legal and other expenses
pursuant to this Section 10.2, which failure shall not have been cured, or at
any time the Indemnifying Party is subject to a bankruptcy case pursuant to
Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code, if the Indemnified Party
shall propose to settle a claim as to which it intends to seek indemnity, it
shall provide the Indemnifying Party with 21 days' written notice of such
proposed settlement, and the Indemnifying Party shall, within such period either
(i) consent to the terms of the proposed settlement or (ii) provide the
Indemnified Party with (A) a written notice of objection to the proposed
settlement, with a statement of reason, (B) reasonable evidence that the
financial condition of the Indemnifying Party is sufficient to permit it to pay
a judgment for the full amount being sought by the third party claimant (or, at
the Indemnified Party's request, a letter of credit in such amount) and (C) an
undertaking to satisfy any such judgment.
(b) Notwithstanding anything to the contrary herein contained, in
the event the Company is an Indemnifying Party, the Company may settle any
third-party claim against an Indemnified Party as long as it obtains an
unconditional release from such third party for the benefit of such Indemnified
Party.
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ARTICLE XI
REGISTRATION AND OTHER SHAREHOLDER RIGHTS
11.1. Demand Registration.
(a) Upon receipt by the Company at any time following the second
anniversary of the Closing Date of a written request from Purchaser for
registration of the resale of any Registrable Shares, the Company shall use
commercially reasonable efforts to cause a registration statement to be filed
under the Securities Act, and any other applicable Laws, within 60 days after
the receipt of such request. The Company shall use commercially reasonable
efforts to cause any such registration statement to become effective and to
maintain the effectiveness of such registration statement until (x) the date all
Registrable Shares have been sold pursuant thereto or (y) 180 days after the
effective date of such registration statement. The term "registration statement"
means a registration statement filed under the Securities Act, or any similar
disclosure document, filing, or listing particulars utilized in connection with
a Public Equity Offering.
(b) Purchaser shall be permitted to make four requests pursuant to
the provisions of Section 11.1(a), provided that no request will be (i) allowed
unless the Company and the security offering shall at that time satisfy the
eligibility requirements for use of Form S-1 or any successor form and (ii)
counted against this limit unless, it has become effective and remained
effective for a period of at least 30 days; provided, however, that if, within
180 days after it has become effective, an offering of Registrable Shares
pursuant to a registration is interfered with by any stop order, injunction, or
other order or requirement of the Commission or other Governmental Body, such
registration will be deemed not to have been effected and will not count as a
Demand Registration. A registration that is undertaken by the Company in
response to a valid request made by Purchaser pursuant to this Section 11.1
shall be referred to herein as a "Demand Registration." Notwithstanding the
foregoing provisions of this Section 11.1(b), the Company shall not be required
to register any Registrable Shares pursuant this Section 11.1(b) at any time (i)
within 120 days of the effective date of any registration statement filed as a
result of the exercise of any demand registration rights by Purchaser or any
other shareholder of the Company, or (ii) in the event that the Company has
registered shares of any class of its capital stock pursuant to any demand
registration rights on more than two occasions in the preceding 12 months.
(c) The Company shall pay all registration expenses incurred with
respect to Section 11.1(a) (other than customary underwriting and broker
commissions), including, without limitation, the reasonable fees and
disbursements of one (but only one) legal firm or counsel to represent Purchaser
in the case of a Demand Registration.
(d) The offering of Registrable Shares pursuant to a Demand
Registration shall be in the form of a "firm commitment" underwritten offering.
The Company shall select the investment banking firm or firms to manage the
underwritten offering; provided, however, that such selection shall be subject
to the consent of the Shareholder, which consent shall not be unreasonably
withheld or delayed.
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<PAGE> 29
11.2. Incidental or "Piggyback" Registration Rights.
(a) If the Company or any holder of shares of Stock or Nonvoting
Stock proposes to sell shares of Stock or Nonvoting Stock in a Public Equity
Offering, the Company shall give written notice, at least 15 days prior to the
filing of a registration statement related to such Public Equity Offering (other
than a registration statement relating solely to employee benefit plans or to
effect any acquisition or combination with another Person), of such proposed
Public Equity Offering to Purchaser which notice shall offer to Purchaser and
its Affiliates the opportunity to include in such Public Equity Offering such
number of Registrable Shares as Purchaser and its Affiliates may request. Within
20 days after receipt of such notice, Purchaser and its Affiliates shall,
subject to the following sentence, have the right by notifying the Company in
writing to require the Company to include in the registration statement relating
to such Public Equity Offering such number of Registrable Shares as Purchaser or
its Affiliates may request. Notwithstanding the foregoing, (x) if at any time
the managing underwriter or underwriters of such Public Equity Offering (the
"Managing Underwriter") shall advise the Company in writing that, in its
opinion, the total number of shares proposed to be sold in such Public Equity
Offering (including the total number of Registrable Shares that Purchaser and
its Affiliates have requested to be sold in such Public Equity Offering and the
total number of shares of Stock or Nonvoting Stock, as the case may be,
requested to be included by any other selling shareholder entitled to sell
shares in such Public Equity Offering) exceeds the maximum number of shares
which the Managing Underwriter believes may be sold without materially adversely
affecting the price, timing or distribution of the Public Equity Offering, then
the Company will be required to include in such Public Equity Offering only that
number of shares which the Managing Underwriter believes may be sold without
causing such adverse effect in the following order: (i) all the shares that the
Company proposes to sell in such Public Equity Offering, (ii) all the shares
that are proposed to be sold by any shareholder of the Company who is exercising
a demand registration right, if such Public Equity Offering is being made
pursuant to such demand and (iii) shares of Purchaser and its Affiliates and all
other shares that are proposed to be sold by any shareholder of the Company
exercising a so-called "piggyback" registration right on a pro rata basis in an
aggregate number which is equal to the difference between the maximum number of
shares that may be distributed in such Public Equity Offering as determined by
the Managing Underwriter and the number of shares to be sold in such Public
Equity Offering pursuant to clauses (i) and (ii) above, and (iv) any other
shares of Stock or Nonvoting Stock requested to be included in such Public
Equity Offering.
(b) The Company will have the right to postpone or withdraw any
registration statement relating to a Public Equity Offering described under this
Section 11.2 prior to the effective date of such registration statement without
obligation to Purchaser or its Affiliates. The Company shall pay all
registration expenses of Purchaser and its Affiliates (other than customary
underwriting and broker commissions) in the case of any and all registrations
governed by this Section 11.2.
11.3. Suspension. In connection with any proposed registration of
Registrable Shares pursuant to Section 11.1 or 11.2, during any consecutive
365-day period, the Company shall be entitled to postpone the filing of or to
suspend availability of a registration statement for up to two
60-consecutive-day periods if (i) at the time the Company receives a request for
a Demand Registration, the Company or any Subsidiary is engaged in confidential
negotiations or other confidential business activities, disclosure of which
would be required in such registration
29
<PAGE> 30
statement (but would not be required if such registration statement were not
filed), and the Board of Directors determines in good faith that such disclosure
would be materially detrimental to the Company and its shareholders or would
have a material adverse effect on any such confidential negotiations or other
confidential business activities, (ii) prior to receiving such request, the
Board of Directors were to have determined to effect a Public Equity Offering
for the Company's account and the Company had taken substantial steps
(including, but not limited to, selecting a managing underwriter for such
offering) and is proceeding with reasonable diligence to effect such offering,
or (iii) the Company shall furnish to Purchaser a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company and its shareholders
for such registration to be pursued at such time; provided, however, that any
suspension under clause (iii) shall not exceed 60 days.
11.4. Preparation and Filing.
(a) Whenever the Company seeks to effect the registration of any
Registrable Shares in accordance with the provisions of Section 11.1 or 11.2,
the Company shall:
(i) prepare and file with the Commission or other applicable
Governmental Body a registration statement with respect to such
Registrable Shares and use its commercially reasonable efforts to cause
such registration statement to promptly become and, subject to Section
11.3, remain effective for the period set forth in subsection (ii)
below and promptly notify Purchaser (x) when such registration
statement becomes effective, (y) when any amendment to such
registration statement becomes effective and (z) of any request by the
Commission or other applicable Governmental Body for any amendment or
supplement to such registration statement or any prospectus relating
thereto or for additional information;
(ii) prepare and file with the Commission or other applicable
Governmental Body such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act, and any other applicable
Laws, with respect to the sale or other disposition of all securities
covered by such registration statement for a period of not less than
180 days after the effective date of such registration statement (or
such shorter period to the extent necessary to permit the completion of
the sale or distribution of such securities within such period);
(iii) furnish to Purchaser, prior to filing a registration
statement, copies of such registration statement as proposed to be
filed and thereafter, such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary
prospectus) and financial statements, reports, and proxy statements
mailed to shareholders of the Company as Purchaser may reasonably
request in order to facilitate the disposition of the Registrable
Shares being sold;
(iv) use its commercially reasonable efforts to register or
qualify, not later than the effective date of any filed registration
statement, the Registrable Shares covered by such registration
statement under the securities or "blue sky" laws of such
30
<PAGE> 31
jurisdictions as Purchaser reasonably requests; provided, however, that
the Company will not be required to (A) qualify to do business as a
foreign corporation or as a dealer in any jurisdiction where it is not
so qualified, (B) subject itself to taxation in any jurisdiction where
it is not subject to taxation, (C) consent to general service of
process in any jurisdiction where it is not subject to general service
of process or (D) take any action that would subject it to service of
process in suits other than those arising out of the offer or sale of
the Registrable Shares covered by the registration statement;
(v) make available, upon reasonable notice and during business
hours, for inspection by the managing underwriter(s) for the
Registrable Shares (and one counsel representing such managing
underwriter(s)) (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents, agreements and properties
of the Company and its Subsidiaries and Affiliates as shall be
reasonably necessary to enable them to exercise their due diligence
responsibilities ("Records") and cause the Company's officers,
directors, and employees to supply all information reasonably requested
by any such Inspectors in connection with the registration statement;
provided, however, that, unless the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the
registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, the Company shall not be required to provide any
information under this subparagraph (v) if (A) the Company believes,
after consultation with counsel for the Company, that to do so would
cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (B) if either (1) the Company has
requested and been granted from the Commission confidential treatment
of such information contained in any filing with the Commission or
documents provided supplementally or otherwise or (2) the Company
reasonably determines in good faith that such Records are confidential
and so notifies the Inspectors in writing unless prior to furnishing
any such information with respect to (A) or (B) such holder of
Registrable Shares requesting such information agrees to enter into a
confidentiality agreement in a form reasonably acceptable to the
Company; and, provided, further, that each holder of Registrable Shares
agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate
action and to prevent disclosure of the Records deemed confidential;
(vi) obtain a comfort letter from the Company's independent
public accountants dated within five business days prior to the
effective date of the registration statement (and as of such other
dates as the managing underwriter(s) for the Registrable Shares may
reasonably request) in customary form and covering such matters of the
type customarily covered by such comfort letters as such managing
underwriter(s) reasonably request;
(vii) obtain an opinion of counsel dated the effective date of
the registration statement (and as of such other dates as the managing
underwriter(s) for the Registrable Shares may reasonably request) in
customary form and covering such matters of the type customarily
covered by such opinions as counsel designated by such managing
underwriter(s) reasonably request;
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<PAGE> 32
(viii) during the period when the registration statement is
required to be effective, notify Purchaser of the happening of any
event as a result of which the prospectus included in the registration
statement contains an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will
forthwith prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to Purchaser of such Registrable Shares, such
prospectus will not contain an 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 not misleading;
(ix) in the case of an underwritten offering, enter into an
underwriting agreement containing customary terms, including such
indemnity and contribution provisions as the managing underwriter(s)
customarily require or may reasonably require;
(x) cause such Registrable Shares to be listed for trading on
the primary securities exchange or quotation system upon which the
Stock is then listed or traded; and
(xi) otherwise use its commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission, and other
applicable Governmental Bodies, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act.
(b) Purchaser shall timely furnish to the Company such information
(including affidavits) regarding the distribution of such Registrable Shares as
the Company may from time to time reasonably request. The Company may exclude
from such registration the securities of Purchaser or its Affiliates if it or
they fail to furnish such information within 10 days after such request;
provided, however, that the Company's registration statement relating to such
offering is effective within 60 days after the expiration of such 10-day period.
(c) Purchaser agrees that upon the receipt of any notice from the
Company of the happening of any event of the kind described in paragraph
(a)(viii) above, it will forthwith discontinue disposition of Registrable Shares
pursuant to the registration statement covering such Registrable Shares until
Purchaser's receipt of the copies of the supplemented or amended prospectus
contemplated by paragraph (a)(viii) above. If the Company gives any such notice,
the Company shall use commercially reasonable efforts to keep any such
registration statement pursuant to a Demand Registration effective for that
number of additional days equal to the number of days during the period from and
including the date of the giving of such notice pursuant to paragraph (a)(viii)
above to and including the date on which copies of such supplemented or amended
prospectus are made available to Purchaser.
11.5. Indemnification. In connection with the filing of a registration
statement providing for the registration of any Registrable Shares pursuant to
Section 11.1 or 11.2, the Company shall indemnify and hold harmless Purchaser
and its Affiliates, to the extent customary and reasonable, pursuant to
indemnification and contribution provisions to be entered into by the
32
<PAGE> 33
Company at the time of filing of such registration statement. Purchaser and its
Affiliates shall indemnify the Company and its directors and officers and each
Person who controls the Company (within the meaning of the Securities Act or the
Exchange Act) against any and all Losses resulting from any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, prospectus, or any preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission is made in reliance upon and in strict
conformity with information furnished in writing to the Company by Purchaser for
use in such registration statement; provided, however, that the obligation to
indemnify will be several and not joint and several, among such sellers of
Registrable Shares, and the liability of each such seller of Registrable Shares
will be in proportion to, and provided further that such liability will be
limited to, the net amount received by such seller from the sale of Registrable
Shares pursuant to such registration statement; further provided, that such
seller of Registrable Shares shall not be liable in any such case to the extent
that prior to the filing of any such registration statement or prospectus or
amendment thereof or supplement thereto, such seller has furnished in writing to
the Company information expressly for use in such registration statement or
prospectus or amendment thereof or supplement thereto which corrected or made
not misleading information previously furnished to the Company.
ARTICLE XII
TERMINATION
12.1. Termination. This Agreement may be terminated by:
(a) the written agreement of Purchaser and the Company;
(b) Purchaser or the Company on or after February 15, 1999, if the
Closing has not occurred prior to such date;
(c) Purchaser or the Company in the event of a material breach by
the other party of this Agreement, which breach is not cured within five days
after receipt of written notice thereof by the breaching party from the
non-breaching party;
(d) Purchaser or the Company if there shall have been entered a
final, non-appealable order or injunction by any Governmental Body against
either party hereto that prohibits the consummation of the transactions
contemplated hereby or any material part hereof;
(e) Purchaser or the Company in the event of termination of the
Shareholder Agreement; or
(f) Purchaser or the Company, upon the Company entering into a
definitive agreement in connection with an Acquisition Proposal pursuant to
Section 6.3.
12.2. Liabilities After Termination. Upon any termination of this
Agreement pursuant to Section 12.1, except as provided in Section 13.4(b)
hereof, no party hereto shall thereafter have any further liability or
obligation hereunder; provided, however, that no such termination shall relieve
any party hereto of any liability for any intentional breach of this Agreement
prior to the date of such termination.
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<PAGE> 34
ARTICLE XIII
MISCELLANEOUS
13.1. Survival of Representations and Warranties. The parties hereto
hereby agree that the representations and warranties contained in this Agreement
shall survive the execution and delivery of this Agreement and the Closing until
18 months from the Closing Date.
13.2. Entire Agreement. This Agreement (together with the Exhibits
attached hereto and the Confidentiality Agreement) contains, and is intended as,
a complete statement of all of the terms and the arrangements between the
parties hereto with respect to the matters provided for herein, and supersedes
any previous agreements and understandings between the parties hereto with
respect to those matters.
13.3. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas applicable to agreements made
in and to be wholly performed in such state.
13.4. Expenses. (a) The Company shall, concurrently with the Closing,
reimburse Purchaser for all reasonable out-of-pocket expenses (including,
without limitation, fees and disbursements of its financial advisor, counsel,
accountants, and other experts) incurred by or on behalf of Purchaser in
connection with the transactions contemplated by this Agreement and each of the
other documents and instruments contemplated by this Agreement; provided,
however, that the Company shall not be liable for any such out-of-pocket
expenses in excess of $1,000,000.
(b) If the Company or Purchaser terminates this Agreement pursuant
to Section 12.1(f), the Company shall promptly, upon demand therefor, reimburse
Purchaser for all out-of-pocket expenses (including, without limitation, fees
and disbursements of its financial advisor, counsel, accountants, and other
experts) incurred by or on behalf of Purchaser in connection with the
transactions contemplated by this Agreement and each of the other documents and
instruments contemplated by this Agreement; provided, however, that the Company
shall not be liable for any such out-of-pocket expenses of $1,000,000.
(c) Except as otherwise provided in the Shareholder Agreement, the
Company shall bear all of the expenses (including, without limitation, fees and
disbursements of its financial advisor, counsel, accountants, and other experts)
incurred by or on behalf of the Company in connection with the preparation,
negotiation, execution, delivery, and performance of this Agreement, each of the
other documents and instruments executed in connection with or contemplated by
this Agreement, and the consummation of the transactions contemplated hereby and
thereby.
13.5. Headings. The article and section headings of this Agreement are
for reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement. Unless the context otherwise requires, all
references to Articles and Sections are to Articles and Sections of this
Agreement.
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<PAGE> 35
13.6. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or by overnight mail, or four days after being mailed by registered
mail, return receipt requested, to a party at the following address: If to the
Company, to:
Kevco, Inc.
1300 South University, Suite 200
Fort Worth, Texas 76107
Attention:
Facsimile: (817) 332-2765
with a copy to:
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202-3797
Attention: Byron F. Egan
Facsimile: (214) 953-5822
If to Purchaser, to:
Wingate Partners II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Mr. Frederick B. Hegi, Jr.
Facsimile: (214) 871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Mary R. Korby, Esq.
Facsimile: (214) 746-7777
13.7. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
13.8. Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. Except as expressly otherwise provided in Article X, nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any Person not party to this Agreement. No assignment of this Agreement or of
any rights or obligations hereunder may be made by any party (by operation of
law or otherwise) without the prior written consent of each of the other parties
hereto and any attempted assignment without such required consents shall be
void;
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<PAGE> 36
provided, however, that Purchaser may assign its right hereunder to purchase all
or any portion of the Shares and/or the Nonvoting Shares and/or the Nonvoting
Warrant and/or the right to receive the Nonvoting Warrant Shares or any portion
of the Nonvoting Warrant Shares to such Persons as previously disclosed in
writing to and approved by the Company prior to the date hereof; further
provided, that (i) no such assignment shall relieve Purchaser of its obligations
hereunder, (ii) any such assignee shall have executed and delivered to the
Company an agreement satisfactory to the Company which shall provide that such
assignee will become a party to this Agreement and be bound by all of the
obligations of Purchaser hereunder as if such assignee were "Purchaser"
hereunder, and (iii) any such assignee shall have delivered to the Company on or
before the Closing Date the representations and warranties set forth in Section
5.6.
13.9. Amendments. This Agreement may be amended, supplemented or
modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
13.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.11. Company Disclosure Schedule. Any disclosure under one section of
the Disclosure Schedule shall be deemed disclosure under all sections of the
Disclosure Schedule. Disclosure of any matter in the Disclosure Schedule shall
not constitute an expression of a view that such matter is material or is
required to be disclosed pursuant to this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WINGATE PARTNERS II, L.P.
By: Wingate Management Company II, L.P.,
its general partner
By: Wingate Management Limited, L.L.C.,
its general partner
By: /s/ FREDERICK B. HEGI, JR.
-----------------------------------------
Frederick B. Hegi, Jr.
Principal
KEVCO, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
-----------------------------------------
Name: Ellis L. McKinley, Jr.
---------------------------------------
Title: Vice President, Chief Financial
--------------------------------------
Officer and Treasurer
--------------------------------------
<PAGE> 38
EXHIBIT A
[NONVOTING STOCK]
<PAGE> 39
ARTICLE FOUR
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is __________ shares, consisting of
(a) 100,000,000 shares of a class designated as Common Stock, par value $.01 per
share (the "Common Stock"), and (b) __________ shares of a class designated as
Nonvoting Common Stock, par value $.01 per share (the "Nonvoting Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Common Stock and Nonvoting Common Stock are
as follows:
(a) Identical Rights. Except as otherwise provided in this ARTICLE
FOUR, all shares of Common Stock and Nonvoting Common Stock shall be identical
and shall entitle the holder thereof to the same rights and privileges.
(b) Dividends. From and after the date of issuance, the holders of
outstanding shares of Common Stock and Nonvoting Common Stock shall be entitled
to receive dividends on the shares of Common Stock and Nonvoting Common Stock
when, as, and if declared by the Board of Directors, out of funds legally
available for such purpose. All holders of shares of Common Stock and Nonvoting
Common Stock shall share ratably, in accordance with the numbers of shares held
by each such holder, in all dividends or distributions on shares of Common Stock
payable in cash, in property, or in securities of the Corporation (other than
shares of Common Stock). All dividends or distributions declared on shares of
Common Stock and Nonvoting Common Stock which are payable in shares of Common
Stock or Nonvoting Common Stock shall be declared on both classes of shares at
the same rate; provided, however, that any such dividend or distribution shall
be payable in shares of the class of Common Stock or Nonvoting Common Stock held
by the shareholder to whom the dividend or distribution is payable.
(c) Stock Splits, Etc. The Corporation shall not in any manner
subdivide (by stock split, stock dividend, or otherwise), or combine (by reverse
stock split or otherwise) the outstanding shares of Common Stock or Nonvoting
Common Stock unless the outstanding shares of the other class shall be
proportionately subdivided or combined. No reclassification or any other
adjustment or modification of the rights or preferences shall be effected
(including without limitation pursuant to a merger, consolidation, or
liquidation involving the Corporation) with respect to either the Common Stock
or the Nonvoting Common Stock unless both the Common Stock and Nonvoting Common
Stock are reclassified or the rights or preferences are adjusted or modified in
exactly the same manner and at the same time. In this regard, and without
limiting the generality of the foregoing, in the case of any consolidation or
merger of the Corporation with or into any other entity (other than a merger
which does not result in any reclassification, conversion, exchange, or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all the assets of the Corporation, or the reclassification of the
Common Stock into any other form of capital stock of the Corporation, whether in
whole or in part, the holder of each share of Nonvoting Common Stock shall,
after such consolidation, merger, sale, or transfer or reclassification, have
the right to convert into the kind and amount of shares of stock and other
securities and property which such holder would have been entitled to receive
upon such consolidation, merger, sale, or transfer or reclassification if such
holder had held such Common Stock issuable upon the conversion of such share of
Nonvoting Common Stock immediately
<PAGE> 40
prior to such consolidation, merger, sale, or transfer or reclassification;
provided, however, that no such shares of stock or other securities into which
shares of Nonvoting Common Stock are so converted shall have any voting rights
except for such voting rights as are provided in paragraph (e) of this ARTICLE
FOUR.
(d) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the Corporation, the
holders of shares of Common Stock and Nonvoting Common Stock shall be entitled
to share ratably, in accordance with the number of shares held by each such
holder, in all of the assets of the Corporation available for distribution to
the holders of shares of Common Stock.
(e) Voting Rights. Except as otherwise provided herein or by law, the
entire voting power of the Corporation shall be vested in the holders of shares
of Common Stock and each holder of shares of Common Stock shall be entitled to
one vote for each share of Common Stock held of record by such holder; provided,
however, that without the consent of the holders of record of at least 51% of
Nonvoting Common Stock at the time outstanding (assuming, for the purposes of
this provision, that the holders of warrants and other rights issued by the
Corporation to acquire shares of Nonvoting Common Stock shall be deemed to be
the holders of the shares of Nonvoting Common Stock which are at the time
issuable upon the full exercise thereof whether or not such holders are then
entitled to exercise such warrants or other rights pursuant to the terms
thereof), given in writing or by the vote at any regular or special meeting of
shareholders of the Corporation, the Corporation shall not:
(i) amend, alter, modify, or repeal any provision of
these Articles of Incorporation or the By-Laws of the
Corporation in any manner which adversely affects the relative
rights, preferences, qualifications, powers, limitations or
restrictions of the Nonvoting Common Stock, or amend, alter,
modify, or repeal this paragraph (e) of this ARTICLE FOUR;
(ii) increase or decrease the authorized number of
shares of any class of capital stock of the Corporation or
authorize, issue, or otherwise create securities convertible
into or exercisable for any shares of capital stock of the
Corporation other than the shares of Common Stock and
Nonvoting Common Stock authorized hereunder;
(iii) voluntarily effect an exchange or
reclassification of shares of Nonvoting Common Stock into
shares of another class of capital stock of the Corporation;
or
2
<PAGE> 41
(iv) effect a merger or consolidation of the
Corporation with another corporation, unless the certificate
or articles of incorporation of the surviving corporation
shall provide that the shares of the capital stock of such
surviving corporation into which the shares of Nonvoting
Common Stock hereunder shall be converted shall have the
identical rights and privileges as the shares of capital stock
of such surviving corporation into which the shares of Common
Stock hereunder shall be converted, other than the voting
rights in this paragraph (e) of this ARTICLE FOUR.
3
<PAGE> 42
EXHIBIT B
[NONVOTING WARRANT]
<PAGE> 43
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
WERE PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED DECEMBER
23, 1998 BETWEEN KEVCO, INC AND WINGATE PARTNERS II, L.P. NEITHER THIS
WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS AND SECTION 3 OF THIS WARRANT.
No. of Nonvoting Shares: 882,759 Nonvoting Shares Warrant No. ____
WARRANT
To purchase Nonvoting Common Stock of
KEVCO, INC.
[_______________], 1999
THIS WARRANT CERTIFIES THAT, for value received, the registered holder
hereof, Wingate Partners II, L.P., a Delaware limited partnership ("Wingate"),
or its registered assigns, is entitled to purchase from Kevco, Inc., a Texas
corporation (the "Company"), at any time and from time to time after the date
hereof (the "Initial Issue Date") and on or before 5:00 p.m. Eastern Standard
Time, on the Expiration Date (as hereinafter defined) 882,759 shares of the
Nonvoting Common Stock (as hereinafter defined) at the Basic Purchase Price (as
hereinafter defined), subject to the terms, conditions, and adjustments as
hereinafter provided in Section 5.
Section 1. Definitions and References. Unless otherwise specified,
references herein to sections, subsections, and similar subdivisions refer to
the sections, subsections, and subdivisions of this Warrant. For all purposes of
this Warrant, the following terms shall have the meanings hereinafter indicated:
"Affiliate" with respect to a party to this Agreement shall mean any
Person or entity that directly or indirectly (through one or more intermediaries
or otherwise) controls, is controlled by, or is under common control with, such
Person.
"Amendment" means the Amendment to the Company's Articles of
Incorporation required by the Stock Purchase Agreement to create the Nonvoting
Common Stock.
"Basic Purchase Price" shall mean the price of $10.25 per share of the
Nonvoting Common Stock.
<PAGE> 44
"Board of Directors" shall mean the board of directors of the Company.
"Business Day" shall mean a day on which commercial banks are open for
business with the public in New York, New York.
"Commission" shall mean the Securities and Exchange Commission and any
other similar or successor agency of the, federal government then administering
the Securities Act or the Exchange Act.
"Common Stock" shall mean the voting common stock, par value $.01 per
share, of the Company ("Voting Common Stock"), the nonvoting common stock, par
value $.01 per share, of the Company ("Nonvoting Common Stock") and any capital
stock into which such Common Stock thereafter may be changed or converted.
"Common Stock Equivalents" shall mean (without duplication with any
other Common Stock or Common Stock Equivalents) rights, warrants, options,
convertible securities or convertible indebtedness, exchangeable securities or
exchangeable indebtedness, or other rights, exercisable for or convertible or
exchangeable into, directly or indirectly, Common Stock, and any stock
appreciation rights or similar rights to payment based upon the value of the
Company's common equity, whether at the time or upon the occurrence of some
future event including all shares of Common Stock issuable in respect of this
Warrant and in respect of the Purchase Agreement (as hereinafter defined) upon
the effectiveness of the Amendment to the extent not issued and outstanding.
"Composite Tape" shall mean, with respect to any security, the
reporting by the National Association of Securities Dealers (or any successor
reporting mechanism) of all trades of such security occurring on all exchanges
on which such security is traded.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time in question.
"Expiration Date" shall mean the fifth anniversary of the Initial Issue
Date.
"Fully-Diluted Common Stock" shall mean, at any time, the then
outstanding shares of Common Stock of the Company plus (without duplication) all
shares of Common Stock issuable, whether at such time or upon passage of time or
the occurrence of future events, upon the exercise, conversion, or exchange of
all then-outstanding Common Stock Equivalents (including, for purposes of such
calculation, "phantom" shares of equivalent value to any stock appreciation or
equivalent equity-based payment right).
"Holder" shall mean the initial holder of this Warrant, and any Person
to whom this Warrant, or any portion thereof, is subsequently transferred of
record, together with the registered holder(s) of any Warrant Shares into which
this Warrant (or any subsequent Warrant) is subsequently converted.
"Independent Directors" shall mean any director of the Company not
affiliated with Wingate or its assigns or Jerry E. Kimmel who do not have any
other relationship that
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<PAGE> 45
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.
"Market Price" shall mean, with respect to any Common Stock, on a per
share basis and as of any date, an amount equal to the average, for each of the
ten (10) consecutive Trading Days immediately prior to such date, of the closing
prices for a share of Common Stock value on such Trading Day as reported on the
Composite Tape (as reported in The Wall Street Journal or, if not reported
thereby, any other authoritative source). If no price can be determined under
the foregoing, then the "Market Price" shall be deemed to be the fair market
value thereof, as determined by a majority of the Independent Directors of the
Company's Board of Directors in good faith as of a date which is within fifteen
(15) days preceding the date as of which the determination is to be made.
"NASDAQ" shall mean the NASDAQ Stock Market.
"Person" shall mean any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization, or
other entity.
"Purchase Agreement" shall mean that certain Stock Purchase Agreement,
dated as of December ____, 1998, by and between the Company and Wingate as the
same may be amended and modified from time to time.
"Purchase Price" shall mean, as of any date, the Basic Purchase Price
as adjusted pursuant to Section 5.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
any similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time in
question.
"Subsidiary" shall mean, with respect to any Person, any other Person
at least a majority of whose outstanding shares of capital stock or other equity
interests (having ordinary voting power for the election of directors or
comparable managers of such other Person) are owned, directly or indirectly, by
that Person.
"Trading Day" means any day on which NADSAQ is open for trading, or if
the shares of Common Stock are not quoted on NASDAQ, any day on which the
principal national securities exchange or national quotation system on which the
shares of Common Stock are listed, admitted to trading or quoted is open for
trading.
"Transfer", as used in Section 3, shall mean any disposition of this
Warrant, any Warrant Shares, or of any interest therein, which would constitute
a sale of or an offer to sell such Warrant or Warrant Shares within the meaning
of the Securities Act.
"Warrant" or "Warrants" shall mean this Warrant and any Warrant or
Warrants issued upon transfer hereof, including all amendments to any such
Warrants and together with all Warrants issued in exchange, transfer or
replacement of any thereof.
"Warrant Shares" shall mean all shares of Common Stock purchased or
purchasable by the registered Holders of the Warrants upon the exercise thereof,
provided that such shares of Common Stock shall be deemed to include all other
shares of Common Stock
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<PAGE> 46
issued or issuable in connection therewith, whether as a result of stock
dividends, exchanges, stock splits, reverse stock splits, recapitalizations,
mergers, consolidations, or otherwise.
Section 2. Ownership of this Warrant.
(a) Ownership. The Company may deem and treat the Person in whose name this
Warrant is registered as the Holder and owner hereof for all purposes,
notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company, and shall not be affected by any notice to the contrary,
until presentation of this Warrant for registration of transfer as provided in
Section 3. The Company shall maintain, at its office or agency in Fort Worth,
Texas (or at such other office or agency of the Company as the Company shall
designate from time to time by notice to the registered holder of this Warrant),
a register for the Warrants, in which the Company shall record the name and
address of the Person in whose name each Warrant has been issued, as well as the
name and address of each transferee and each prior owner of such Warrant. Within
five (5) Business Days after any Holder shall by notice request the same, the
Company will deliver to such Holder a certificate, signed by one of its
authorized officers, listing the name and address of every other Holder of
Warrants of this series, as such information appears in such register and in the
stock transfer books of the Company at the close of business on the day before
such certificate is signed.
(b) Term. This Warrant shall be void after 5:00 p.m. Eastern Standard time
on the Expiration Date.
Section 3. Exchange, Transfer and Replacement.
(a) Exchange. This Warrant is exchangeable, upon the surrender hereof by
the registered Holder to the Company at its office or agency provided for in
Section 2, for new Warrants of like tenor, representing in the aggregate the
right to purchase the number of shares of the Common Stock purchasable hereunder
or in the aggregate with any other Warrants tendered herewith, each of such new
Warrants to represent the right to purchase such number of shares of the Common
Stock as shall be designated by said registered Holder at the time of such
surrender, not to exceed the aggregate shares of Common Stock purchasable on the
exercise of all such tendered Warrants.
(b) Transfer. This Warrant and all rights hereunder are transferable, in
whole or in part, but only upon the register provided for in Section 2 and only
upon satisfaction of the conditions set forth in this Warrant, by the registered
Holder hereof, and a new Warrant shall be made and delivered by the Company, of
the same tenor as this Warrant but registered in the name of the transferee,
upon surrender of this Warrant with the assignment form attached hereto duly
completed, at said office or agency of the Company. No sale, transfer, or other
disposition of this Warrant or the Warrant Shares issuable hereunder will be
made without registration under the Securities Act and applicable state
securities laws or pursuant to exemptions therefrom. The Company may, as a
condition to any such transfer, require an opinion of counsel reasonably
satisfactory to it that such transfer complies with all applicable federal and
state securities laws.
(c) Replacement. Upon receipt by the Company at its office or agency
provided for in Section 2 of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and, in the case of loss,
theft or destruction, of indemnity or
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<PAGE> 47
security reasonably satisfactory to it, and upon surrender of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
replacement of this Warrant; provided that, if Wingate or any of its Affiliates
shall be the registered holder hereof, an agreement of indemnity (in form
reasonably satisfactory to the Company) by such registered Holder shall be
sufficient for all purposes of this Section 3.
(d) Cancellation and Taxes. This Warrant shall be promptly cancelled by the
Company upon the surrender hereof in connection with any exchange, transfer or
replacement pursuant to this section. The Company shall pay all taxes and other
expenses and charges payable in connection with the preparation, execution and
delivery of Warrants pursuant to this section, excluding, however, any thereof
imposed on or measured by the overall net income of the Holder of this Warrant
or any other Person by any jurisdiction in which such Holder or such other
Person is located.
(e) Legend. All Warrants issued upon transfer hereof, including all
amendments to any such Warrants shall be imprinted with a legend in
substantially the following form (in addition to any legend required by state
securities laws):
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
WERE PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED DECEMBER 23, 1998
BETWEEN WINGATE PARTNERS II, L.P. AND KEVCO, INC. NEITHER THIS WARRANT NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAW AND SECTION 3 OF THIS WARRANT.
Section 4. Exercise of This Warrant.
(a) Procedure for Exercise.
(i) In order to exercise this Warrant in whole or in part, the
registered Holder hereof shall complete a subscription form in the form attached
hereto and deliver to the Company at its office or agency provided for in
Section 2 such subscription form, this Warrant and the aggregate Purchase Price
of the shares of the Nonvoting Common Stock then being purchased; provided that
any single exercise of this Warrant not made in whole must be for a minimum of
5,000 Warrant Shares.
(ii) Such Purchase Price shall be paid to the Company in lawful money
of the United States by company check of Wingate or an Affiliate of Wingate, or,
if the Holder is other than Wingate or an Affiliate of Wingate, by certified
check drawn as a banking institution chartered by the government of the United
States or any state thereof or wire transfer of funds.
(iii) The exercise of this Warrant shall be deemed to have been
effected and the Purchase Price and the number of shares of the Nonvoting Common
Stock issuable in
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<PAGE> 48
connection with such exercise shall be determined as of the close of business on
the Business Day on which the last to be delivered of such completed
subscription form and all other items required to be delivered in connection
with such exercise by the registered Holder hereof pursuant to this Section 4
shall have been delivered at the requisite office or agency of the Company. Upon
receipt of such form and other items, the Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, issue
such shares of Nonvoting Common Stock and execute or cause to be executed and
delivered to the registered Holder hereof a certificate or certificates
representing the aggregate number of shares of the Nonvoting Common Stock
specified in such form. If this Warrant shall have been exercised only in part,
the Company shall, at its expense at the time of delivery of such stock
certificate or certificates, deliver to the registered Holder hereof a new
Warrant evidencing the rights of such Holder to purchase the remaining shares of
the Common Stock covered by this Warrant. The Company shall pay all taxes (other
than any taxes imposed on or measured by the overall net income of such Holder
in any jurisdiction in which such Holder is located) and other expenses and
charges payable in connection with the preparation, execution and delivery of
stock certificates pursuant to this Section 4.
(b) Character of Warrant Shares. All shares of the Common Stock issuable
upon the exercise of this Warrant shall, when issued and paid for in accordance
with such Warrant, be duly authorized, validly issued, fully paid and
nonassessable.
Section 5. Payment of Taxes. The Company shall pay any and all documentary,
stamp or similar issue or transfer taxes and other governmental charges that may
be imposed under the laws of the United States of America or any political
subdivision or taxing authority thereof or therein in respect of any issue or
delivery of Warrant Shares or of other securities or property deliverable upon
exercise of the Warrants evidenced by this Warrant representing such shares or
securities (other than income taxes imposed on Holders); provided that the
Company shall not be required to pay any such tax or other charge that may be
imposed in connection with any transfer involved in the issue of any certificate
for Warrant Shares or other securities or property, or payment of cash, to any
Person other than the Holder who surrendered a Warrant upon exercise, and in
case of any such tax or charge, the Company shall not be required to issue any
security or property or pay any cash until such tax or charge has been paid or
it has been established to the Company's satisfaction that no such tax or charge
is payable.
Section 6. Share Adjustment Provisions; Adjustment of Purchase Price. The
Purchase Price from time to time in effect under this Warrant, and the number of
Warrant Shares subject to purchase hereunder, shall be subject to adjustments
from time to time as hereinafter set forth in this section.
(a) Common Stock Splits. Upon any subdivision by the Company on or after
the Initial Issue Date of all of its outstanding shares of Common Stock into a
greater number of shares or upon any issuance by the Company on or after such
date of a greater number of shares of Common Stock in a pro rata exchange for
all of its outstanding shares of Common Stock, then in each case from and after
the record date for such subdivision or exchange the number of Warrant Shares
purchasable upon the exercise of this warrant shall be increased in proportion
to such increase in the number of outstanding shares of Common Stock, and the
Purchase Price then in effect shall be correspondingly decreased. Upon any pro
rata reduction by the Company on or after the Initial Issue Date of its
outstanding shares of Common Stock as
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<PAGE> 49
a whole or upon any issuance by the Company after such date of a lesser number
of shares of Common Stock in a pro rata exchange for all of its outstanding
shares of Common Stock, then in each case from and after the record date for
such reduction or exchange the number of Warrant Shares purchasable upon the
exercise of this Warrant shall be decreased in proportion to such reduction in
the number of outstanding shares of Common Stock, and the Purchase Price shall
be correspondingly increased.
(b) Common Stock Dividends. Upon any declaration and payment by the Company
on or after the Initial Issue Date of a dividend upon Common Stock payable in
Common Stock, then in each case from and after the record date for the payment
of such stock dividend, the number of Warrant Shares purchasable upon the
exercise of this Warrant shall be increased in proportion to the increase in the
number of outstanding shares of Common Stock through such stock dividend, and
the Purchase Price shall be correspondingly decreased.
(c) Other Issues. Upon any issuance by the Company of shares of Common
Stock on or after the Initial Issue Date (other than issuances of stock
requiring adjustments hereunder pursuant to the immediately preceding
subsections (a) and (b) of this Section 6) for a consideration lower than the
Market Price per share of stock in effect immediately prior to such issuance,
the Purchase Price then in effect shall be reduced to equal the following
amount:
(D x E) + (F x G)
-----------------
C x E
where C equals the number of shares of Common Stock to be outstanding
immediately after such additional issuance, D equals the number of shares of
Common Stock outstanding immediately prior to the issue of such additional
Common Stock, E equals the Market Price per share of stock in effect immediately
prior to the issue of such additional Common Stock, F equals the aggregate
consideration (before deducting underwriting discounts, commissions, and other
expenses) received or to be received by the Company in connection with the
issuance of such additional Common Stock, and G equals the Purchase Price which
would have been in effect immediately prior to such issuance had all previous
adjustments (if any) under this subsection (c) been made pursuant to the
foregoing formula. Upon any such reduction in the Purchase Price, the number of
Warrant Shares purchasable upon the exercise of this Warrant shall be
correspondingly increased. The provisions of this subsection (c) shall not be
applicable to any issuance of Common Stock upon actual exercise or actual
conversion of any option, warrant, right, or other security convertible into or
exercisable for Common Stock if the Purchase Price was fully and properly
adjusted pursuant to the immediately following subsection (d) at the time such
option, warrant, right or other security was issued.
(d) Common Stock Options; Subscription Rights; Convertible Securities. Upon
any issuance by the Company on or after the Initial Issue Date of options or
rights to subscribe for shares of Common Stock or of any securities convertible
into or exchangeable for shares of Common Stock or of any similar securities for
a consideration per share other than the Market Price in effect immediately
prior to the issuance of such options, rights or securities, the Purchase Price
shall be reduced (and the number of shares of Common Stock purchasable upon the
exercise of this Warrant shall be appropriately increased), by making
computations in accordance with subsection (c) of this Section 6; provided that:
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<PAGE> 50
(i) The maximum number of shares of Common Stock deliverable under any
such option or right shall be considered to have been delivered at the time such
option or right was issued, for a consideration equal to the minimum purchase
price per share of Common Stock provided for in such option or right, plus the
consideration, if any, received by the Company for such option or right (before
deducting underwriting discounts, commissions and other expenses);
(ii) The aggregate maximum number of shares of Common Stock deliverable
upon conversion of or exchange for any such securities shall be considered to
have been delivered at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for such
securities (before deducting underwriting discounts, commissions and other
expenses) plus the minimum consideration (other than such securities) to be
received by the Company upon the exchange or conversion of such securities;
(iii) If the purchase or conversion price provided for in any rights or options
referred to above, the additional consideration, if any, payable upon the
conversion or exchange of convertible securities referred to above, or the rate
at which any convertible securities referred to above are convertible into or
exchangeable for shares of Common Stock shall change (other than under or by
reason of provisions designed to protect against dilution), the Purchase Price
(and the number of shares of Common Stock purchasable upon the exercise of this
Warrant) in effect at the time of such event shall be readjusted to the Purchase
Price (and the number of shares of Common Stock purchasable upon the exercise of
this Warrant) which would have been in effect at such time had such rights,
options or convertible securities still outstanding provided for such new
purchase or conversion price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold. If the purchase
or conversion price provided for in any such right or option referred to above,
the additional consideration, if any, payable upon the conversion or exchange of
convertible securities referred to above, or the rate at which any convertible
securities referred to above are convertible into or exchangeable for shares of
Common Stock shall be changed at any time by reason of provisions designed to
protect against dilution, then when shares of Common Stock are delivered upon
the exercise of any such right or option or upon conversion or exchange of any
such convertible security, the Purchase Price (and the number of shares of
Common Stock purchasable upon the exercise of this Warrant) then in effect
hereunder shall be readjusted to such amount as would have been obtained had
such right, option or convertible security never been issued as to such shares
of Common Stock and had the adjustments required hereunder been made at the time
of the issuance of the shares of Common Stock delivered as aforesaid; and
(iv) On the expiration of any such options or rights, or at the
termination of any such rights to convert or exchange, the Purchase Price (and
the number of shares of Common Stock purchasable upon the exercise of this
Warrant) then in effect shall be readjusted to the Purchase Price (and the
number of shares of Common Stock purchasable upon the exercise of this Warrant)
which would have been in effect had the adjustments (and readjustments) made
upon the issuance of such expired or terminated options, rights or securities
(or upon the occurrence of any event with respect thereto specified in the
immediately preceding subsection (iii)) been made without reference to the
number of shares of Common Stock subject to such terminated or expired options,
rights or securities. Notwithstanding the prior sentence, the Holder shall not
be required to surrender or adjust any shares of Common Stock theretofore
received by the Holder upon exercise of a Warrant.
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<PAGE> 51
(e) Special Dividends; Purchase Rights.
(i) If at any time on or after the Initial Issue Date the Company shall
distribute to all holders of shares of Common Stock of any class evidences of
its indebtedness or assets (excluding any regular periodic cash dividend) or a
distribution in partial liquidation, each payable otherwise than in shares of
Common Stock or in securities to which the provisions of the immediately
following subsection (e)(ii) are applicable, the Company shall pay to the Holder
of this Warrant, upon the exercise hereof at any time on or after the payment of
such dividend or distribution, the securities and other property (including
cash) which such Holder would have received (together with all subsequent
dividends and distributions thereon) if such Holder had exercised or converted
this Warrant on the record date fixed in connection with such dividend or
distribution, and the Company shall take whatever steps are necessary or
appropriate to keep in reserve at all times any securities and other properties
which are required to fulfill such obligations of the Company. Notwithstanding
the foregoing, the rights of the Holder hereof under this subsection (e)(i) upon
the Company's declaration of a dividend or distribution in partial liquidation
payable only in securities convertible into shares of Common Stock may be
exercised only in lieu of any adjustment (in this subsection (e) called a
"subsection (d) adjustment") because of such dividend or distribution called for
under subsection (d) of this Section 6, and upon exercise hereof such holder
must elect (as indicated in the Subscription Form attached hereto) either such
subsection (d) adjustment or the rights and benefits provided for in this
subsection (e)(i). For the purposes of determining the Purchase Price from time
to time in effect and the number of shares from time to time subject hereto
prior to the exercise hereof, it shall be assumed that the Holder hereof will so
elect subsection (d) adjustments, but upon any election of the rights and
benefits provided for in this subsection (e)(i) made at the time of exercise
hereof the Purchase Price then in effect (and the number of outstanding shares
of Common Stock purchasable upon such exercise) shall be redetermined to equal
the amounts which would have been in effect had such subsection (d) adjustments
never been made. Notwithstanding the provisions of this subsection (e)(i), in no
event shall any Holder have the right to receive, or to elect to receive, Voting
Common Stock pursuant to this subsection if, as a result thereof, a "change of
control" could be deemed to occur under that certain Indenture dated as of
December 1, 1997 by and among the Company, the Subsidiary Guarantors (as defined
therein) and United States Trust Company of New York, as Trustee, and, in lieu
thereof, the Holder shall have the right to receive, or the right to elect to
receive, an equivalent number of shares of Nonvoting Common Stock.
(ii) If at any time on or after the date hereof the Company shall
grant, issue or sell any options or rights to purchase stock, warrants,
securities or other property pro rata to the holders of Common Stock of all
classes ("Purchase Rights"), then each Holder shall be entitled (but not
obligated) to acquire, in lieu of any subsection (d) adjustment and upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such Holder could have acquired if it had held the number of shares of Common
Stock purchasable upon exercise of the Warrants immediately prior to the time or
times at which the Company granted, issued or sold such Purchase Rights.
(f) Additional Adjustments.
(i) If at any time or from time to time conditions arise by reason of
action taken by the Company which are not adequately covered by the provisions
of this Section 6, and which might materially and adversely affect the exercise
rights of the Holders of Warrants,
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<PAGE> 52
upon the request of a majority in interest of the Holders the Company shall
appoint a firm of independent certified public accountants of recognized
national standing (which may be the regular auditors of the Company), which
shall give their opinion upon the adjustment, if any, of the number of Warrant
Shares purchasable upon the exercise of the Warrants, on a basis consistent with
the standards established in the other provisions of this Section 6, necessary
in order to preserve without diminution the rights of the holders of the
Warrants. Upon receipt of such opinion, the Board of Directors of the Company
shall forthwith make the adjustments described therein.
(ii) Notwithstanding any other provision hereof, any antidilution
adjustments made pursuant to the terms hereof shall be deemed to be made to all
Warrants in this series simultaneously, the intention being to avoid any
iterative calculations.
(g) Effect of Reorganization and Asset Sales. If any capital reorganization
of the Company, reclassification of the capital stock of the Company, statutory
exchange, consolidation or merger of the Company with another Person, or sale of
all or substantially all of the Company's assets to another Person shall be
effected in such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets (including cash) of the Company or another Person
with respect to or in exchange for Common Stock (each such transaction being
hereinafter referred to as a "Transaction"), then, as a condition of the
consummation of each Transaction, lawful and adequate provisions shall then be
made so that each Holder, upon the exercise hereof at any time after the
consummation of such Transaction, shall be entitled to receive, and such
Warrants shall thereafter represent the right to receive, in lieu of the Common
Stock issuable upon exercise or conversion hereof but otherwise upon and subject
to all terms and conditions hereof, the cash, securities or other property to
which such Holder would have been entitled upon the consummation of such
Transaction if such Holder had exercised or converted such Warrants immediately
prior thereto (subject to adjustments from and after the consummation date of
such Transaction as nearly equivalent as possible to the adjustments provided
for in this Section 6). The Company shall not effect any Transaction unless
prior to the consummation thereof each Person (other than the Company) which may
be required to deliver any securities or other property upon the exercise of the
Warrants as provided herein shall assume, by written instrument delivered to
each registered Holder of the Warrants in form and substance reasonably
satisfactory to a majority in interest of the Holders, the obligation to
continue to honor this Warrant and to deliver to such Holder such securities or
other property to which, in accordance with the foregoing provisions, such
Holder may be entitled, and such Person shall have similarly delivered to each
registered Holder an opinion of counsel for such Person, in substance and from
such counsel as is acceptable to the Holders, stating that all the outstanding
Warrants shall thereafter continue in full force and effect and shall be
enforceable against such Person in accordance with the terms hereof and thereof.
(h) Notice of Adjustment or Substitution. On the happening of an event
requiring an adjustment of the Purchase Price and upon each change in the number
of Warrant Shares issuable upon the exercise of this Warrant, and in the event
of any change in the rights of the Holder of this Warrant by reason of other
events herein set forth, the Company shall immediately give written notice to
the registered Holder(s) of this Warrant: (i) describing the event; (ii) stating
the adjusted Purchase Price, the number of Warrant Shares issuable upon exercise
or change in rights; and (iii) stating how such adjustment of Purchase Price or
number of Warrant Shares was calculated and the facts on which the calculation
is based.
10
<PAGE> 53
(i) Accountant's Opinion. Upon each adjustment of the Purchase Price and
upon each change in the number of Warrant Shares issuable upon the exercise of
this Warrant, and in the event of any change in the rights of the Holder of this
Warrant by reason of other events herein set forth, then and in each such case,
upon the request of 50% in interest of the registered Holders of Warrants in
this Series given to the Company within thirty (30) days after the Company has
given notice of such adjustment or change, the Company will promptly obtain an
opinion of independent certified public accountants selected by the Company and
reasonably satisfactory to such Holder(s), stating the adjusted Purchase Price
and the new number of Warrant Shares so issuable, or specifying the other shares
of stock, securities or assets and the amount thereof receivable as a result of
such change in rights, and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. The Company will
promptly mail a copy of such accountant's opinion to the registered Holder of
this Warrant.
(j) Adjustment of Less Than $.01. The Company shall not be required to give
notice of any adjustment of the Purchase Price in accordance with subsection (h)
above if the amount of such adjustment shall be less than $.01, but in such case
any such adjustment shall be carried forward and notice thereof shall be given
at the time of and together with the next subsequent adjustment, which, together
with any adjustment so carried forward, shall amount to not less than $.01 per
share; provided, however, that notice of each such adjustment of the Purchase
Price shall be given not later than three years from the date such adjustment
would have been required to be made except for the provisions of this subsection
(i).
(k) Treasury Shares. The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company or any of its subsidiaries, but the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purposes of this
Section 6.
(l) Adjustment Exceptions. Anything in this Section 6 to the contrary
notwithstanding, no adjustment of the Purchase Price or the number of Warrant
Shares issuable upon the exercise of this Warrant shall be made upon (a) the
issuance of any Warrants, (b) the issuance of any Warrant Shares, and (c) the
issuance of any shares of Common Stock or other securities to any employees of
the Company pursuant to a plan established by the Company for the exclusive
benefit of its employees. Furthermore, none of the securities issued as
described in this subsection (l) shall be deemed to be outstanding for the
purposes of making the adjustments required by Section 6(c).
Section 7. Special Agreements of the Company. The Company covenants and
agrees that:
(a) Will Reserve Shares. The Company will authorize, reserve and set apart
and have available solely for issuance and delivery upon exercise at all times,
free from preemptive rights, those shares of the Nonvoting Common Stock or other
securities which are deliverable upon the exercise of the Warrants, and the
Company will have at all times all other rights or privileges necessary to
enable it at any time to fulfill all its obligations hereunder.
(b) Will Avoid Certain Actions. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the
11
<PAGE> 54
effect of avoiding the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in carrying out all of the Company's obligations pursuant to the
provisions of this Warrant and in taking all such action as may be necessary or
appropriate in order to protect the rights of the registered holder of this
Warrant against dilution or other impairment, and, in particular, will not
permit the par value, if any, of any share of the Nonvoting Common Stock to be
or become greater than the then effective Purchase Price.
(c) Will List on Securities Exchange. If and so long as the Nonvoting
Common Stock is listed on any national securities exchange (as defined in the
Exchange Act) or automatic quotation system, the Company will, at its expense,
use its reasonable best efforts to obtain and maintain the approval for listing
on each such exchange upon official notice of issuance of all shares of the
Nonvoting Common Stock receivable upon the exercise of the Warrants at the time
outstanding and in any event will use its reasonable best efforts to obtain and
maintain the listing of such shares after their issuance; and the Company will
so list on such national securities exchange or automatic quotation system, to
register under the Exchange Act (and any similar state statute then in effect),
and to maintain such listing of, any other securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities
of the same class shall be listed on such national securities exchange by the
Company.
(d) Will Bind Successors. This Warrant will be binding upon any corporation
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company's assets.
Section 8. Notifications by the Company. If at any time:
(a) the Company shall declare upon the Common Stock any dividend or other
distribution to the holders of the Common Stock;
(b) the Company shall make an offer for subscription pro rata to the
holders of the Common Stock of any additional shares of stock of any class or
other rights;
(c) the Board of Directors of the Company shall authorize (whether
definitively or subject to any conditions) any capital reorganization of the
Company, any reclassification of the capital stock of the Company, any statutory
exchange or any consolidation of the Company or merger of the Company with, or
sale of all or substantially all of its assets to, another Person;
(d) the Board of Directors of the Company shall authorize (whether
definitively or subject to any conditions) a voluntary dissolution, liquidation
or winding-up of the Company; or
(e) the Company shall become subject to involuntary dissolution,
liquidation or winding-up;
then, in any one or more of such cases, the Company shall give notice thereof to
each registered Holder of Warrants or Warrant Shares, specifying (i) the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or (ii) the date on which such
reorganization, reclassification, statutory exchange, consolidation, merger,
sale, dissolution, liquidation or winding-up shall take place or be voted upon
by stockholders of the Company, as the case may be. Any such notice under
12
<PAGE> 55
subsections (a) through (e) of this section shall also specify the date as of
which the holders of record of the Common Stock shall participate in such
dividend, distribution or subscription rights, or shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, statutory exchange, consolidation, merger,
sale, dissolution, liquidation or winding-up, as the case may be; such notice
shall be given not less than thirty (30) and not more than fifty (50) days prior
to the action in question (except in the case of notice for actions under
Section 8(e), which notice shall be promptly following such action) and not less
than thirty (30) and not more than fifty (50) days prior to the record date or
the date on which the Company's transfer books are closed in respect thereto,
and such notice shall state that the action in question or the record date is
subject to the effectiveness of a registration statement under the Securities
Act or to a favorable vote of stockholders, if either is required.
Section 9. Notices. All notices, requests and other communications required
or permitted to be given or delivered to registered Holders shall be in writing,
and shall be delivered, or shall be sent by certified or registered mail,
postage prepaid and addressed, to each such Holder at the address shown on such
Holder's Warrant or Warrant Shares, or at such other address as shall have been
furnished to the Company by notice from such Holder. All notices, requests and
other communications required or permitted to be given or delivered to the
Company shall be in writing, and shall be delivered, or shall be sent by
certified or registered mail, postage prepaid and addressed, to Company, as
follows:
Kevco, Inc.
1300 South University, Suite 200
Fort Worth, Texas 76107
Attention: President
Telecopy Number: (817) 332-2765
with a copy to:
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202-3797
Attention: Byron F. Egan
Telecopy Number: (214) 953-5822
Wingate Partners II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
James A. Johnson
Telecopy Number: (214) 871-8799
13
<PAGE> 56
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby
Telecopy Number: (214) 746-7777
or at such other address as shall have been furnished to the registered Holders
by notice from the Company. Each such notice sent by mail as described above
shall be deemed received on the date of receipt by the Holder or the company, as
applicable.
Section 10. No Rights or Liabilities as Shareholder. This Warrant shall not
entitle any Holder hereof to any of the rights of a shareholder of the Company.
No provision hereof, in the absence of affirmative action by the Holder hereof
to purchase shares of the Nonvoting Common Stock, and no mere enumeration herein
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Section 11. Governing Law. This Warrant shall be construed in accordance
with and governed by the laws of the State of Texas, without regard to the
provisions thereof relating to conflict of laws.
Section 12. Confidentiality. By its acceptance hereof each Holder of this
Warrant agrees that it will take all reasonable steps to keep confidential any
proprietary information of the Company furnished to it; provided, however, that
this restriction shall not apply to information which (i) has at the time in
question entered the public domain, (ii) is required to be disclosed by law or
by any order, rule or regulation (whether valid or invalid) of any court or
governmental agency or authority, or (iii) is furnished to purchasers or
prospective purchasers hereof (exclusive of any Person who competes with, or is
an Affiliate of a Person who competes with, the Company) so long as such
purchasers and prospective purchasers have agreed to be subject to restrictions
identical to those imposed upon such Holder under this sentence.
Section 13. Miscellaneous. Unless otherwise expressly provided herein or
unless the registered Holder hereof otherwise consents in writing, all financial
statements and reports furnished pursuant to Section 6(i) or otherwise furnished
hereunder to the registered Holder hereof shall be prepared and all computations
and determinations pursuant hereto shall be made in accordance with generally
accepted accounting principles applied on a consistent basis. This Warrant and
any provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against whom enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
14
<PAGE> 57
IN WITNESS WHEREOF, ___________________________ has caused
this Warrant to be signed and delivered by its duly authorized officer, attested
by its duly authorized officer, and to be dated as of _______________, 199__.
------------------------------------
By:
-----------------------------------
Name:
Title:
ATTEST:
By:
---------------------------------
Name:
Title:
15
<PAGE> 58
ASSIGNMENT FORM
To Be Executed by the Registered Holder
Desiring to Transfer the Within Warrant of
-----------------------------------
For Value Received, the Undersigned registered holder hereby
sells, assigns and transfers unto _______________________ the right to purchase
______ shares of the Nonvoting Common Stock covered by the within Warrant, and
does hereby irrevocably constitute and appoint ___________________________ as
Attorney to transfer the said Warrant on the books of the Company (as defined in
said Warrant), with full power of substitution.
Name of Registered Holder:
--------------------------------------
Signature:
--------------------------------------
Title of Signing Officer
or Agent (if any):
--------------------------------------
Address of Registered
Holder:
--------------------------------------
Dated:
--------------------
Signed in the presence of
- -------------------------------------
<PAGE> 59
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
Desiring to Transfer the Within Warrant of
-----------------------------------
The undersigned registered holder hereby exercises the right
to purchase ______ shares of the Common Stock covered by the within Warrant,
according to the conditions thereof, and herewith makes payment of the Purchase
Price of such shares, $____________.
Name of Registered Holder:
--------------------------------------
Signature:
--------------------------------------
Title of Signing Officer
or Agent (if any):
--------------------------------------
Address of Registered
Holder:
--------------------------------------
Dated:
-----------------------
<PAGE> 60
EXHIBIT C
[MONITORING AND OVERSIGHT AGREEMENT]]
<PAGE> 61
MONITORING AND OVERSIGHT AGREEMENT
This Monitoring and Oversight Agreement (this "Agreement") is made and
entered into effective as of __________ __, 1999, among Kevco, Inc., a Texas
corporation ("Kevco" and, together with its subsidiaries, the "Clients"), and
Wingate Management Limited, L.L.C., a Delaware limited liability company
(together with its successors, "WML").
WHEREAS, the Clients have requested that WML render certain financial
oversight and monitoring services to them.
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by WML to the Clients, and to evidence the obligations of the Clients
to WML and the mutual covenants herein contained, the Clients hereby jointly and
severally agree as follows:
1. Retention. The Clients hereby acknowledge that they have retained
WML, and WML acknowledges that, subject to reasonable advance notice in order to
accommodate scheduling, WML will provide financial oversight and monitoring
services to the Clients as requested by the board of directors of each of the
Clients during the term of this Agreement, such services include (i) during such
times as no full-time chief executive officer shall be employed by Kevco,
providing a WML affiliate to perform the management and oversight duties
associated with such office; (ii) during such times as Kevco has employed a
full-time chief executive officer, providing a chairman of the board who will
take an active roll in the management and affairs of Kevco; (iii) providing
assistance in strategic planning for Kevco, including the analysis of Kevco's
performance in various sectors of the its business and providing recommendations
for growth strategies and opportunities for new markets and products; (iv)
providing guidance in regard to consolidation and rationalization of acquired
businesses; (v) providing assistance in identifying, interviewing, and engaging
suitable candidates for senior executive positions; (vi) providing assistance in
identifying and securing suitable candidates to act as independent directors of
Kevco, as required by the rules promulgated in respect of the National
Association of Securities Dealers National Market System; (vii) providing
assistance in Kevco's annual budgetary process; (viii) providing assistance in
the analysis of existing and proposed credit arrangements for Kevco and, as and
when appropriate, identifying lenders and in negotiating credit documents; (ix)
providing assistance in identifying suitable consultants and advisors for
Kevco's varying needs and negotiating engagement arrangements for such
consultants and advisors; and (x) providing assistance in evaluating when and
whether Kevco should access the public markets for equity or debt capital and in
identifying appropriate professionals to assist in executing any strategy
involving the public offering of equity or debt.
2. Term. The term of this Agreement shall continue until the earlier to
occur of (i) the fifth anniversary of the delivery of a notice of termination of
this Agreement by either party hereto, or (ii) the date on which WML, Wingate
Partners II, L.P., and their respective affiliates cease to own beneficially,
directly or indirectly, five percent of the outstanding securities of any of the
Clients or their successors.
3. Compensation.
(a) As compensation for WML's services under this Agreement,
the Clients shall be jointly and severally obligated to pay to WML an
annual fee (the "Monitoring Fee") of (i) $200,000, and (ii) 2.4% of
Kevco's pre-tax income, provided that in the case of fees under clause
(ii) the pre-tax income of Kevco for such year is at least $5,000,000
(the fees payable under clauses (i) and (ii) being collectively
referred to as, the "Base Fee") and prorated on a daily basis for any
partial calendar year during the term of this Agreement. The Monitoring
Fee shall be payable in equal quarterly installments (plus any accrued
and unpaid portion thereof) on each January 1, April 1, July 1, and
October 1 during the term of this Agreement (each, a "Payment
<PAGE> 62
Date"), beginning with the first Payment Date following the date
hereof. All payments shall be made by wire transfer of immediately
available funds to the account described on EXHIBIT A hereto (or such
other account as WML may hereafter designate in writing).
(b) All past due payments in respect of the Monitoring Fee
shall bear interest at the lesser of the highest rate of interest which
may be charged under applicable law or the prime commercial lending
rate per annum of Chase Manhattan Bank or its successors (which rate is
a reference rate and is not necessarily its lowest or best rate of
interest actually charged to any customer) (the "Prime Rate") as in
effect from time to time, plus five percent, from the due date of such
payment to and including the date on which payment is made to WML in
full, including such interest accrued thereon.
4. Reimbursement of Expenses. In addition to the compensation to be
paid pursuant to Section 3, the Clients jointly and severally shall pay or
reimburse WML for all "Reimbursable Expenses," which shall consist of all
reasonable disbursements and out-of-pocket expenses (including costs of travel,
postage, deliveries, communications, etc.) incurred by WML or its affiliates and
representatives for the account of any of the Clients, or in connection with the
performance by WML of the services contemplated by Section 1. Promptly (but not
more than ten days) after request by or notice from WML, the applicable Client
shall pay WML, by wire transfer of immediately available funds to the account
described on EXHIBIT A hereto (or such other account as WML may hereafter
designate in writing), the Reimbursable Expenses for which WML has provided such
Client invoices or reasonably detailed descriptions. All past due payments in
respect of the Reimbursable Expenses shall bear interest at the lesser of the
highest rate of interest which may be charged under applicable law or the Prime
Rate plus five percent from the Payment Date to and including the date on which
such Reimbursable Expenses plus accrued interest thereon are fully paid to WML.
5. Indemnification. The Clients jointly and severally shall indemnify
and hold harmless each of WML, its affiliates, and their respective directors,
officers, controlling persons (within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20(a) of the Securities Exchange
Act of 1934, as amended), if any, agents and employees (collectively, the
"Indemnified Persons") from and against any and all claims, liabilities, losses,
damages, and expenses incurred by any Indemnified Person (including those
arising out of an Indemnified Person's negligence and fees and disbursements of
the respective Indemnified Person's counsel) which (i) are related to or arise
out of (A) actions taken or omitted to be taken (including any untrue statements
made or any statements omitted to be made) by any of the Clients or (B) actions
taken or omitted to be taken by an Indemnified Person with any Client's consent
or in conformity with any Client's instructions or any Client's actions or
omissions or (ii) are otherwise related to or arise out of WML's engagement, and
will reimburse each Indemnified Person for all costs and expenses, including
fees and disbursements of any Indemnified Person's counsel, as they are
incurred, in connection with investigating, preparing for, defending, or
appealing any action, formal or informal claim, investigation, inquiry, or other
proceeding, whether or not in connection with pending or threatened litigation,
caused by or arising out of or in connection with WML's acting pursuant to the
engagement, whether or not any Indemnified Person is named as a party thereto
and whether or not any liability results therefrom. None of the Clients will,
however, be responsible for any claims, liabilities, losses, damages, or
expenses pursuant to clause (ii) of the preceding sentence that have resulted
primarily from WML's bad faith, gross negligence, or willful misconduct. Each of
the Clients also agrees that neither WML nor any other Indemnified Person shall
have any liability to any Client for or in connection with such engagement
except for any such liability for claims, liabilities, losses, damages, or
expenses incurred by any Client that have resulted primarily from WML's bad
faith, gross negligence, or willful misconduct. Each Client further agrees that
it will not, without the prior written consent of WML, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit, or proceeding in respect of which indemnification may be sought hereunder
(whether or not any
2
<PAGE> 63
Indemnified Person is an actual or potential party to such claim, action, suit,
or proceeding) unless such settlement, compromise, or consent includes an
unconditional release of WML and each other Indemnified Person hereunder from
all liability arising out of such claim, action, suit, or proceeding. EACH
CLIENT HEREBY ACKNOWLEDGES THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO
ALL CLAIMS, LIABILITIES, LOSSES, DAMAGES, OR EXPENSES THAT HAVE RESULTED FROM OR
ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT, OR
CONCURRENT ORDINARY NEGLIGENCE OF WML OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights
that WML and/or any other Indemnified Person may have at common law or otherwise
and shall remain in full force and effect following the completion or any
termination of the engagement. Each Client hereby consents to personal
jurisdiction and to service and venue in any court in which any claim which is
subject to this Agreement is brought against WML or any other Indemnified
Person.
It is understood that, in connection with WML's engagement, WML may
also be engaged to act for any Client in one or more additional capacities, and
that the terms of this engagement or any such additional engagement may be
embodied in one or more separate written agreements. This indemnification shall
apply to the engagement specified in the first paragraph hereof as well as to
any such additional engagement(s) (whether written or oral) and any modification
of said engagement or such additional engagement(s) and shall remain in full
force and effect following the completion or termination of said engagement or
such additional engagement(s).
Each Client further understands that if WML is asked to furnish any
Client a financial opinion letter or act for any Client in any other formal
capacity, such further action may be subject to a separate agreement containing
provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the performance of the
services hereunder, WML shall not divulge any confidential information, secret
processes, or trade secrets disclosed by any Client to it solely in its capacity
as a financial advisor, unless such Client consents to the divulging thereof or
such information, secret processes, or trade secrets are publicly available or
otherwise available to WML without restriction or breach of any confidentiality
agreement or unless required by any governmental authority or in response to any
valid legal process.
7. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained herein shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement nor
any of the rights, interests, or obligations hereunder shall be assigned (other
than in respect of the rights and obligations of WML, which may be assigned to
any one or more of its principals or affiliates) by any of the parties without
the prior written consent of the other parties.
9. 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, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
10. Entire Agreement. All discussions, understandings, and agreements
theretofore made between any of the parties hereto in respect of the subject
matter hereof are merged in this Agreement, which alone fully and completely
expresses the agreement of the parties hereto. All calculations of the
3
<PAGE> 64
Monitoring Fee and Reimbursable Expenses shall be made by WML and, in the
absence of mathematical error, shall be final and conclusive.
11. Construction. Unless the context otherwise requires, (i) all
references to Sections and Exhibits contained in this Agreement are references
to Sections and Exhibits of or to this Agreement, (ii) words in the singular
shall include the plural and vice versa, (iii) words of any gender shall include
each other gender, (iv) "include," "including," and their derivatives shall mean
"including without limitation"; and (v) "person" shall mean any individual,
corporation, partnership, limited liability company, joint venture, trust,
unincorporated association, or other form of business or legal entity.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
4
<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
WINGATE MANAGEMENT LIMITED, L.L.C.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
KEVCO, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
KEVCO MANAGEMENT, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
KEVCO HOLDINGS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
KEVCO GP, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
KEVCO COMPONENTS, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
5
<PAGE> 66
DCM DELAWARE, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
KEVCO MANUFACTURING, L.P.
By: [ ],
-------------------------------------
its General Partner
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
KEVCO DISTRIBUTION, L.P.
By: [ ],
--------------------------------------
its General Partner
By:
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
6
<PAGE> 67
EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
[NAME OF BANK]
ABA #:
Account #:
Credit:
Reference: Payment of Monitoring Fees or Expenses by Kevco, Inc.
7
<PAGE> 68
EXHIBIT D
[FINANCIAL ADIVSORY AGREEMENT]
<PAGE> 69
FINANCIAL ADVISORY AGREEMENT
This Financial Advisory Agreement (this "Agreement") is made and
entered into effective as of _____________, 1999, among Kevco, Inc., a Texas
corporation ("Kevco" and, together with its subsidiaries, the "Clients"), and
Wingate Management Limited, L.L.C., a Delaware limited liability company
(together with its successors, "WML").
WHEREAS, the Clients have requested that WML render financial
advisory, investment banking, and other similar services to them in respect of
any future proposals for a tender offer, acquisition, sale, merger, exchange
offer, recapitalization, restructuring, or other similar transaction directly
or indirectly involving the Clients or any of their respective subsidiaries,
and any other person (collectively, "Extraordinary Transactions").
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by WML to the Clients, and to evidence the obligations of the Clients
to WML and the mutual covenants herein contained, the Clients hereby jointly
and severally agree as follows:
1. Retention. Each of the Clients acknowledges that it has retained
WML as its non-exclusive financial advisor in connection with any Extraordinary
Transaction that may be consummated during the term of this Agreement. WML
shall provide such financial advisory, investment banking, and other similar
services in connection with any such Extraordinary Transaction as may be
requested from time to time by the board of directors of Kevco.
2. Term. The term of this Agreement shall continue until the earlier
to occur of (i) the fifth anniversary of the delivery of a notice of
termination of this Agreement by either party hereof or (ii) the date on which
WML, Wingate Partners II, L.P., and their respective affiliates cease to own
beneficially, directly or indirectly, five percent of the outstanding
securities of any of the Clients or their successors.
3. Compensation.
(a) As compensation for WML's financial advisory, investment
banking, and other similar services rendered in connection with any
Extraordinary Transaction pursuant to Section 1, the applicable Client
shall pay to WML, at the closing of any such Extraordinary
Transaction, (i) a cash fee in the amount of 1.5% of the Transaction
Value of such Extraordinary Transaction if WML originates the
Extraordinary Transaction and no fee or commission is payable by the
applicable Client to any other financial advisor or investment banking
firm in respect of the origination of such Extraordinary Transaction,
or (ii) a cash fee in the amount of 1.0% of the Transaction Value of
such Extraordinary Transaction if WML does not originate such
Extraordinary Transaction but serves as the principal financial
advisor to the applicable Client in respect of the Extraordinary
Transaction. "Transaction Value" means the total value of the
Extraordinary Transaction, including, the aggregate amount of the
funds required to complete the Extraordinary Transaction (excluding
any fees payable pursuant to this Section 3(a)) including the amount
of any indebtedness, preferred stock, or similar items assumed (or
remaining outstanding).
(b) In addition to the fees set forth in Section 3(a), on the
Closing Date (as defined in the Stock Purchase Agreement dated as of
December 23, 1998, by and among Wingate Partners II, L.P. and Kevco)
Kevco shall shall pay WML a cash fee in the amount of $1,000,000.
<PAGE> 70
4. Reimbursement of Expenses. In addition to the compensation to be
paid pursuant to Section 3, the applicable Client or Clients shall reimburse
WML, promptly following demand therefor, together with invoices or reasonably
detailed descriptions thereof, for all reasonable disbursements and
out-of-pocket expenses (including fees and disbursements of counsel) incurred
by WML in connection with the performance by it of the services contemplated by
Section 1.
5. Indemnification. The Clients jointly and severally shall indemnify
and hold harmless each of WML, its affiliates, and their respective directors,
officers, controlling persons (within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20(a) of the Securities Exchange
Act of 1934, as amended), if any, agents, and employees (collectively, the
"Indemnified Persons") from and against any and all claims, liabilities,
losses, damages, and expenses incurred by any Indemnified Person (including
those resulting from the negligence of the Indemnified Person and fees and
disbursements of the respective Indemnified Person's counsel) which (i) are
related to or arise out of (A) actions taken or omitted to be taken (including
any untrue statements made or any statements omitted to be made) by any Client
or (B) actions taken or omitted to be taken by an Indemnified Person with any
Client's consent or in conformity with any Client's instructions or any
Client's actions or omissions or (ii) are otherwise related to or arise out of
WML's engagement, and will reimburse each Indemnified Person for all costs and
expenses, including fees of any Indemnified Person's counsel, as they are
incurred, in connection with investigating, preparing for, defending, or
appealing any action, formal or informal claim, investigation, inquiry, or
other proceeding, whether or not in connection with pending or threatened
litigation, caused by or arising out of or in connection with WML's acting
pursuant to the engagement, whether or not any Indemnified Person is named as a
party thereto and whether or not any liability results therefrom. None of the
Clients will, however, be responsible for any claims, liabilities, losses,
damages, or expenses pursuant to clause (ii) of the preceding sentence that
have resulted primarily from WML's bad faith, gross negligence, or willful
misconduct. The Clients also agree that neither WML nor any other Indemnified
Person shall have any liability to any Client for or in connection with such
engagement except for any such liability for claims, liabilities, losses,
damages, or expenses incurred by any Client that have resulted primarily from
WML's bad faith, gross negligence, or willful misconduct. Each Client further
agrees that it will not, without the prior written consent of WML, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit, or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit, or proceeding) unless such
settlement, compromise, or consent includes an unconditional release of WML and
each other Indemnified Person hereunder from all liability arising out of such
claim, action, suit, or proceeding. EACH CLIENT HEREBY ACKNOWLEDGES THAT THE
FOREGOING INDEMNITY SHALL BE APPLICABLE TO ALL CLAIMS, LIABILITIES, LOSSES,
DAMAGES, OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED
FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT, OR CONCURRENT ORDINARY
NEGLIGENCE OF WML OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights
that WML and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each Client hereby consents to personal
jurisdiction and to service and venue in any court in which any claim which is
subject to this Agreement is brought against WML or any other Indemnified
Person.
It is understood that, in connection with WML's engagement, WML may
also be engaged to act for any Client in one or more additional capacities, and
that the terms of this engagement or any such additional engagement may be
embodied in one or more separate written agreements. This indemnification shall
apply to the engagement specified in the first paragraph hereof as well as to
any such additional engagement(s) (whether written or oral) and any
modification of said engagement or such additional engagement(s) and shall
remain in full force and effect following the completion or termination of said
engagement or such additional engagement(s).
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<PAGE> 71
Each Client further understands that if WML is asked to furnish any
Client a financial opinion letter or act for any Client in any other formal
capacity, such further action may be subject to a separate agreement containing
provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the performance of the
services hereunder, WML shall not divulge any confidential information, secret
processes, or trade secrets disclosed by any Client to it solely in its
capacity as a financial advisor, unless the applicable Client consents to the
divulging thereof or such information, secret processes, or trade secrets are
publicly available or otherwise available to WML without restriction or breach
of any confidentiality agreement or unless required by any governmental
authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof.
8. Assignment. This Agreement and all provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned
(other than in respect of the rights and obligations of WML, which may be
assigned to any one or more of its principals or affiliates) by any of the
parties without the prior written consent of the other parties.
9. 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, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.
10. Entire Agreement. All discussions, understandings, and agreements
theretofore made between any of the parties hereto in respect of the subject
matter hereof are merged in this Agreement, which alone fully and completely
expresses the agreement of the parties hereto.
11. Construction. Unless the context otherwise requires, (i) all
references to Sections contained in this Agreement are references to Sections
of this Agreement, (ii) words in the singular shall include the plural and vice
versa, (iii) words of any gender shall include each other gender, (iv)
"include," "including," and their derivatives shall mean "including without
limitation"; and (v) "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
association, or other form of business or legal entity.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
WINGATE MANAGEMENT LIMITED, L.L.C.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
KEVCO, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
KEVCO MANAGEMENT, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
KEVCO HOLDINGS, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
KEVCO GP, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
KEVCO COMPONENTS, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
4
<PAGE> 73
DCM DELAWARE, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
KEVCO MANUFACTURING, L.P.
By:
-------------------------------------------
its General Partner
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
KEVCO DISTRIBUTION, L.P.
By:
-------------------------------------------
its General Partner
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
5
<PAGE> 1
EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of December 23, 1998 (this
"Agreement"), is made by and among Wingate Partners II, L.P., a Delaware
limited partnership ("Purchaser"), and Jerry E. Kimmel (the "Shareholder"), who
is a shareholder of Kevco, Inc., a Texas corporation (the "Company"), and
solely for purposes of Articles XI and XII the Company. Unless otherwise
indicated, capitalized terms used herein are used as defined in Section 1.1.
W I T N E S S E T H
WHEREAS, the Company is engaged in the business of wholesale
distribution and manufacturing of building products to the manufactured housing
and recreational vehicle industries;
WHEREAS, the Shareholder is the owner of at least 3,700,000 shares of
common stock, par value $0.01 per share, of the Company ("Stock");
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Shareholder desires to sell 1,103,448 shares of Stock (the "Shares")
to Purchaser, and Purchaser desires to purchase and acquire from the
Shareholder the Shares;
WHEREAS, upon the terms and subject to the conditions hereinafter set
forth, the Shareholder desires to grant a warrant in the form attached hereto
as Exhibit A (the "Warrant") to purchase 220,690 shares of Stock (the "Warrant
Shares") to Purchaser, and Purchaser desires to purchase and acquire from the
Shareholder the Warrant; and
WHEREAS, Purchaser is unwilling to enter into this Agreement, unless
contemporaneously with the execution and delivery of this Agreement, the
Company enters into a separate stock purchase agreement with Purchaser (the
"Company Agreement"), pursuant to which the Company would, among other things,
(i) sell certain shares of Stock to Purchaser, (ii) sell the Nonvoting Shares
(as defined in the Company Agreement) to Purchaser, and (iii) grant the
Nonvoting Warrant (as defined in the Company Agreement) to purchase the
Nonvoting Warrant Shares (as defined in the Company Agreement) to Purchaser,
all upon the terms and subject to the conditions set forth in the Company
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, and agreements hereinafter set forth,
the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions.
Except as otherwise provided in this Agreement the following
terms shall have the meanings assigned to them in this Section 1.1.
<PAGE> 2
"Affiliate" means, as to any Person, any Person which, directly
or indirectly, controls, is controlled by, or is under common control with,
such Person. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" has the meaning provided therefor in the preamble
hereof.
"Board of Directors" means the board of directors of the Company.
"Business Combination" means any transaction constituting a
"business combination" for purposes of the TBCA Business Combination Provisions
or Article Nine of the Charter.
"Certificates" has the meaning provided therefor in Section
4.3(c).
"Charter" means the Articles of Incorporation of the Company.
"Closing" has the meaning provided therefor in Section 3.1.
"Closing Date" has the meaning provided therefor in Section 3.1.
"Commission" means the U.S. Securities and Exchange Commission.
"Company" has the meaning provided therefor in the preamble
hereof.
"Company Agreement" has the meaning provided therefor in the
recitals hereto.
"Confidentiality Agreement" has the meaning provided therefor in
Section 7.1.
"Demand Registration" has the meaning provided therefor in
Section 12.1(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, or local, or any agency or instrumentality thereof, or any court or
arbitrator (public or private).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" has the meaning provided therefor in Section
10.1.
"Indemnifying Party" has the meaning provided therefor in Section
10.1.
"Inspectors" has the meaning provided therefor in Section
12.4(a)(v).
"Law" means any federal, state, or local law (including common
law), statute, code, ordinance, rule, regulation, or other requirement.
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<PAGE> 3
"Legal Proceeding" means any judicial, administrative, or
arbitral action, suit, proceeding (public or private), claim, or governmental
proceeding.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement, or
other real estate declaration, covenant, condition, restriction or servitude,
transfer restriction under any shareholder or similar agreement, third party
right or agreement to vote, encumbrance, or any other restriction or limitation
whatsoever.
"Losses" has the meaning provided therefor in Section 10.1(a).
"Managing Underwriter" has the meaning provided therefor in
Section 12.2(a).
"NASD" means the National Association of Securities Dealers, Inc.
"NASD Confirmation" means confirmation by the NASD that the
issuance of the Shares may be undertaken without prior approval of the
Company's shareholders under the NASD rules.
"Notice Date" has the meaning provided therefor in Section
11.1(a).
"Notice of Offer" has the meaning provided therefor in Section
11.1(a).
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body, or other entity.
"Public Equity Offering" means an underwritten public offering of
shares of Stock pursuant to an effective registration statement under the
Securities Act or comparable Law of any other jurisdiction.
"Purchase Price" has the meaning provided therefor in Section
2.2.
"Purchaser" has the meaning provided therefor in the preamble
hereof.
"Purchaser Documents" has the meaning provided therefor in
Section 5.2(a).
"Records" has the meaning provided therefor in Section
12.4(a)(v).
"Registrable Shares" means shares of Stock owned on the date
hereof by the Shareholder or his Affiliates and all other shares of Stock
acquired from time to time by the Shareholder or his Affiliates and any
securities issued or issuable with respect to any such shares of Stock by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, reorganization, Business Combination,
or otherwise. As to any particular Registrable Shares, such securities shall
cease to be Registrable Shares when (i) a registration statement with respect
to the sale of such securities shall have become effective under the Securities
Act (or under the applicable Laws of the relevant jurisdiction) and such
securities shall have been disposed of in accordance with the plan of
distribution set forth in such registration statement, (ii) such securities
shall have been distributed in accordance with Rule 144 of the Securities Act,
or (iii) such securities shall have been otherwise transferred, new
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<PAGE> 4
certificates therefor not bearing a legend restricting further transfer shall
have been delivered in exchange therefor by the Company and subsequent
disposition of such shares shall not require registration or qualification
under the Securities Act or any other applicable Law.
"registration statement" has the meaning provided therefor in
Section 12.1(a).
"Securities" means the Shares and the Warrant (including the
Shares transferable upon the exercise of the Warrant).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller Documents" has the meaning provided therefor in Section
4.1(a).
"Shareholder" has the meaning provided therefor in the preamble
hereof.
"Shares" has the meaning provided therefor in the recitals
hereto.
"Stock" has the meaning provided therefor in the recitals hereto.
"Subsidiary" means any Person of which the Company owns, directly
or indirectly, greater than 50% of the voting securities generally entitled to
vote to elect the board of directors (or any equivalent body).
"TBCA" means the Texas Business Corporation Act, as the same may
be amended from time to time.
"TBCA Business Combination Provisions" means Part Thirteen,
Articles 13.01 through 13.08, inclusive, of the TBCA.
"Warrant" has the meaning provided therefor in the recitals
hereto.
"Warrant Shares" has the meaning provided therefor in the
recitals hereto.
ARTICLE II
SALE AND PURCHASE OF THE SHARES AND WARRANT
2.1. Sale and Purchase of the Shares and Warrant. In reliance upon the
representations, warranties, covenants, and agreements contained herein and
upon the terms and subject to the conditions hereinafter set forth, at the
Closing, the Shareholder shall sell, assign, transfer, convey, and deliver to
Purchaser, and Purchaser shall purchase and acquire from the Shareholder, all
of the right, title, and interest of the Shareholder in and to the Shares and
Warrant.
2.2. Amount and Form of Consideration. The consideration to be paid by
Purchaser to the Shareholder in consideration of the Shares and the Warrant
shall be an aggregate amount in cash equal to U.S. $8,000,000 (the "Purchase
Price").
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<PAGE> 5
ARTICLE III
THE CLOSING
3.1. Closing Date. Except as hereinafter provided, the closing
hereunder (the "Closing") shall take place at the offices of Weil, Gotshal &
Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas 75201, on the first
business day following the date on which all of the conditions contained in
Articles VIII and IX have been satisfied or waived, as applicable, or at such
other place and at such other time and date as may be mutually agreed upon by
Purchaser and the Shareholder. The date of the Closing is referred to herein as
the "Closing Date."
3.2. Proceedings at Closing. All proceedings to be taken and all
documents to be executed and delivered by the Shareholder in connection with
the consummation of the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Purchaser and its counsel, and all
proceedings to be taken and all documents to be executed and delivered by
Purchaser in connection with the consummation of the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to the
Shareholder and his counsel. All proceedings to be taken and all documents to
be executed and delivered by all parties at the Closing shall be deemed to have
been taken and executed simultaneously, and no proceedings shall be deemed
taken nor any documents executed or delivered until all have been taken,
executed, and delivered.
3.3. Deliveries by the Shareholder to Purchaser. At the Closing, the
Shareholder shall deliver, or shall cause to be delivered, to Purchaser (i)
Certificates representing the number of Shares to be purchased by Purchaser,
duly endorsed in blank or accompanied by stock powers duly endorsed in blank,
in proper form for transfer and (ii) the Warrant, duly executed.
3.4. Deliveries by Purchaser to the Shareholder. At the Closing,
Purchaser shall deliver to the Shareholder a confirmation of the wire transfer
of immediately available funds in an amount equal to the Purchase Price to an
account or accounts specified by the Shareholder to Purchaser prior to the
Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to Purchaser as of the
date hereof as follows:
4.1. Authorization; Enforceability.
(a) The Shareholder has the legal capacity to execute and deliver
this Agreement and each other agreement, document, instrument, or certificate
contemplated by this Agreement or to be executed by the Shareholder in
connection with the consummation of the transactions contemplated by this
Agreement (all such other agreements, documents, instruments, and certificates
required to be executed by the Shareholder being hereinafter referred to,
collectively, as the "Seller Documents"), and to perform fully his obligations
hereunder and thereunder.
(b) The Shareholder has, and at the time of the exercise of the
Warrant will have, the power to sell, transfer, convey, and deliver to
Purchaser, in accordance with the terms
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<PAGE> 6
of this Agreement and the Warrant, good and valid title, beneficially and of
record, to the Shares to be purchased hereunder and the Warrant Shares to be
purchased upon exercise of the Warrant, free and clear of any and all Liens.
(c) This Agreement has been, and each of the Seller Documents
will be, on or prior to the Closing Date, duly executed and delivered by the
Shareholder and (assuming the due authorization, execution, and delivery by the
other parties hereto and thereto) this Agreement constitutes, and each of the
Seller Documents when so executed and delivered will constitute, the legal,
valid, and binding obligation of the Shareholder, enforceable against him in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, and similar Laws affecting creditors' rights
generally and to general principles of equity (whether considered in a
proceeding in equity or at law).
4.2. Consents of Third Parties. No consent, waiver, approval, or
authorization of, or declaration or filing with, or notification to, any Person
is required on the part of the Shareholder in connection with the Shareholder's
execution and delivery of this Agreement or the Seller Documents, the
consummation by the Shareholder of the transactions contemplated hereby and
thereby, or the compliance by the Shareholder with any of the provisions hereof
or thereof, except for compliance with the applicable requirements of the
Exchange Act.
4.3. Stock.
(a) The Shareholder owns the Shares and the Warrant Shares, and
at the time of the exercise of the Warrant will own the Warrant Shares to be
purchased upon exercise of the Warrant, free and clear of any and all Liens,
and none of such Shares or Warrant Shares is, or in the case of the Warrant
Shares will be at the time of the exercise of the Warrant, subject to any
option, warrant, right of conversion, exchange or purchase, or any similar
right other than as provided for herein.
(b) The Shareholder is not, and with respect to the Warrant
Shares will not be at the time of the exercise of the Warrant, party to any
agreements or understandings with respect to the voting, sale, or transfer of
any of the portion of the Shares to be purchased hereunder or the Warrant
Shares to be purchased upon exercise of the Warrant.
(c) The delivery by the Shareholder to Purchaser at the Closing,
and at the time of the exercise of the Warrant, as the case may be, of
certificates representing the Shares to be purchased hereunder or the Warrant
Shares to be purchased upon exercise of the Warrant ("Certificates") duly
endorsed in blank or accompanied by stock powers endorsed in blank will vest
Purchaser on the Closing Date, or at the time of the exercise of the Warrant,
as the case may be, with good title to the Shares to be purchased hereunder and
the Warrant Shares to be purchased upon exercise of the Warrant, free and clear
of any and all Liens whatsoever, except those Liens created, imposed, or
granted by Purchaser.
4.4. Litigation. As of the date of this Agreement, there is no Legal
Proceeding pending, or to the knowledge of the Shareholder, threatened against
Shareholder that questions the validity of this Agreement or any action to be
taken by the Shareholder in connection with this Agreement.
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<PAGE> 7
4.5. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Shareholder
directly with Purchaser, without the intervention of any Person on behalf of
the Shareholder in such manner as to give rise to any valid claim by any Person
against Purchaser, the Company, or any Subsidiary for a finder's fee, brokerage
commission, or similar payment.
4.6. Disclaimer. Except for the representation and warranties set forth
in this Article IV, the Shareholder makes no other representations or warranties
of any kind or character, expressed, implied, or statutory, in respect of the
Shareholder. All such other representations and warranties are disclaimed.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Shareholder as of the
date hereof as follows:
5.1. Organization and Good Standing. Purchaser is a limited
partnership, duly organized, validly existing, and in good standing under the
laws of its state of organization.
5.2. Authorization; Enforceability.
(a) Purchaser has the power to execute and deliver this Agreement
and each other agreement, document, instrument, or certificate contemplated by
this Agreement or to be executed by Purchaser in connection with the
consummation of the transactions contemplated hereby and thereby (all of such
agreements, documents, instruments, and certificates required to be executed by
Purchaser being hereinafter referred to, collectively, as the "Purchaser
Documents"), and to perform fully its obligations hereunder and thereunder.
(b) The execution, delivery, and performance by Purchaser of this
Agreement and each of the Purchaser Documents has been duly authorized by all
necessary partnership or other action on the part of Purchaser.
(c) This Agreement has been, and each of the Purchaser Documents
will be, on or prior to the Closing Date, duly executed and delivered by
Purchaser and (assuming the due authorization, execution, and delivery by the
other parties hereto) this Agreement constitutes, and each of the Purchaser
Documents when so executed and delivered will constitute, the legal, valid, and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, and similar Laws affecting creditors' rights generally
and to general principles of equity (whether considered in a proceeding in
equity or at law).
5.3. Consents of Third Parties. No consent, waiver, approval, or
authorization of, or declaration or filing with, or notification to, any Person
is required on the part of Purchaser in connection with the execution and
delivery of this Agreement or the Purchaser Documents, the consummation by
Purchaser of the transactions contemplated hereby and thereby, or the
compliance by Purchaser with any of the provisions hereof or thereof except for
compliance with the applicable requirements of the Exchange Act. The execution
and delivery by Purchaser of this Agreement and the Purchaser Documents, the
consummation by Purchaser of the
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<PAGE> 8
transactions contemplated hereby and thereby, and the compliance by Purchaser
with any of the provisions hereof or thereof will not conflict with, or result
in the breach of, any provision of the certificate of limited partnership or
limited partnership agreement or other organizational documents of Purchaser.
5.4. Litigation. There is no Legal Proceeding pending, or to the
knowledge of Purchaser, threatened against Purchaser that questions the
validity of this Agreement or any action to be taken by Purchaser in connection
with this Agreement.
5.5. Brokers. Except for such Persons who will be paid a finder's fee,
brokerage commission, or similar payment at the Closing, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by Purchaser directly with the Shareholder, without the
intervention of any Person on behalf of Purchaser or its Affiliates in such
manner as to give rise to any valid claim by any Person against Purchaser, the
Company, any Subsidiary, the Shareholder, or any of their Affiliates for a
finder's fee, brokerage commission, or similar payment.
5.6. Securities Matters.
(a) Purchaser understands and acknowledges that the Securities
have not been registered under the Securities Act, or the securities laws of
any state or foreign jurisdiction and, unless so registered, may not be
offered, sold, transferred, or otherwise disposed of except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any applicable securities laws of any
state or foreign jurisdiction.
(b) Purchaser is an "accredited investor" (as defined in Rule
501(a) of Regulation D under the Securities Act).
(c) Purchaser (i) has knowledge and experience in financial and
business matters such that it is capable of evaluating the merits and risks of
purchasing the Securities, (ii) is able to bear the economic risk of an
investment in the Securities for an indefinite period of time, including the
risk of a complete loss of any such investment, and (iii) acknowledges that the
information publicly disclosed by the Company or contained in written materials
furnished to Purchaser indicates that the expected earnings of the Company for
the fourth calendar quarter of 1998 will be substantially below estimates
previously made by the Company.
(d) Purchaser is acquiring the Securities for its own account for
investment purposes and not with a view to, or for offer or sale for the
Shareholder in connection with, the distribution or resale thereof.
(e) Purchaser understands and agrees that the Securities are
being sold in a transaction not involving any public offering within the
meaning of the Securities Act, and that the Securities may not be offered,
sold, or otherwise transferred to, or for the account or benefit of, any Person
except as permitted in the following sentence. Purchaser agrees, on its own
behalf and on behalf of any accounts for which Purchaser is acting, that if
Purchaser should sell or otherwise transfer any Securities, it will do so only
(i) pursuant to an exemption from the registration requirements of the
Securities Act (if available) or if the Securities Act does not apply or (ii)
pursuant to an effective registration statement under the Securities Act, and
Purchaser further agrees to provide to any Person purchasing any of the
Securities from it a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
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<PAGE> 9
(f) The Purchaser understands that the Securities purchased
pursuant to this Agreement will be in unregistered form only and that any
certificates delivered to it in respect of the Securities will bear a legend
substantially to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED AS OF
DECEMBER 23, 1998, AMONG JERRY E. KIMMEL, WINGATE PARTNERS
II, L.P., AND FOR THE PURPOSES OF ARTICLES XI AND XII THEREOF
KEVCO, INC. SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
5.7. Financing. Purchaser has available to it, and on the Closing Date
will have, all funds necessary to consummate the transactions contemplated by
this Agreement, including, without limitation, the payment of the Purchase
Price to the Shareholder.
ARTICLE VI
COVENANTS OF THE SHAREHOLDER
6.1. Public Statements. From and after the date hereof and until the
Closing, the Shareholder hereby covenants and agrees that before the
Shareholder shall release any information concerning this Agreement or the
transactions contemplated hereby and which is intended for or may result in
public dissemination thereof, the Shareholder shall so advise and cooperate
with Purchaser and shall not release such information without Purchaser's
consent (which consent shall not be unreasonably withheld), unless such
information is otherwise publicly available or the release thereof is required
by Law.
6.2. Consents and Conditions. From and after the date hereof and until
the Closing, the Shareholder hereby covenants and agrees that the Shareholder
will use his commercially reasonable efforts (a) to obtain any required
governmental consents to the transactions contemplated hereby required to be so
obtained by him, and (b) to cause each of the conditions precedent set forth in
Article VIII or IX to be satisfied.
6.3. No Shop Provision. Except as provided for in this Agreement from
and after the date hereof until the earlier of the Closing Date or the date on
which this Agreement shall have been terminated in accordance with the
provisions of Article XIII, the Shareholder will not and, will cause his family
members not to, and will use his commercially reasonable efforts to cause his
agents and representatives not to, authorize or permit any investment banker,
attorney, accountant, or other representative retained by any of the foregoing
in any manner, directly or
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indirectly, to (a) effect or seek, or offer (including by way of furnishing
information) or propose (whether publicly or otherwise) to effect, (i) any
sale, assignment, transfer, conveyance, or delivery of any of the Shares,
Warrant Shares, or other shares of capital stock of the Company or securities
convertible into or exercisable for capital stock other than issuance pursuant
to the exercise of options outstanding on the date hereof and listed in Section
4.2 of the Disclosure Schedule to the Company Agreement; (ii) any tender or
exchange offer or merger or other business combination or sale of a substantial
portion of assets involving the Company or any of its Subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution, or other
extraordinary transaction with respect to the Company or any of its
Subsidiaries; or (iv) any solicitation of proxies (as such terms are used in
the proxy rules of the Commission) or consents to vote any shares of the
Company's capital stock except as required by the Company Agreement, or (b)
enter into any discussions or arrangements with any third party (or provide any
information to any third party) with respect to any of the foregoing.
6.4. Further Actions. From time to time after the Closing Date, the
Shareholder agrees to execute and deliver such instruments and take such other
actions as may reasonably be required to carry out the intent of this Agreement
and to consummate the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF PURCHASER
7.1. Confidentiality. Except as otherwise permitted by the Board of
Directors (or any committee thereof) or as contemplated hereby or as provided
in Section 7.1 of the Company Agreement, from and after the date hereof and
until the Closing, Purchaser hereby covenants and agrees that it will treat as
confidential, keep secret and not use in the course of its business any
Evaluation Material (as defined in the letter agreement dated July 1998 by and
between Purchaser and Donaldson, Lufkin & Jenrette Securities Corporation, on
behalf of the Company (the "Confidentiality Agreement")), and that the
Evaluation Material shall be held in the strictest confidence by Purchaser in
accordance with, and pursuant to, the Confidentiality Agreement and, in the
event that the transactions contemplated hereby are not consummated, shall be
returned or destroyed in accordance with, and pursuant to, the Confidentiality
Agreement.
7.2. Public Statements. From and after the date hereof and until the
Closing, Purchaser hereby covenants and agrees that before it shall release any
information concerning this Agreement or the transactions contemplated hereby
and which is intended for public dissemination thereof, Purchaser shall so
advise and cooperate with the Shareholder and shall not release such
information without the Shareholder's consent (which consent shall not be
unreasonably withheld), unless such information is otherwise publicly available
or the release thereof is required by Law.
7.3. Consents and Conditions. From and after the date hereof and until
the Closing, Purchaser hereby covenants and agrees that Purchaser will (a)
cooperate in all respects with the Shareholder and the Company (including,
without limitation, by providing all necessary information concerning Purchaser
for disclosure) in connection with any filing by the Company pursuant to the
requirements, if applicable, of Rule 14f-1 under the Exchange Act and (b) use
its commercially reasonable efforts (i) to obtain any required governmental
consents to the transactions contemplated hereby required to be obtained by it
and (ii) to cause each of the conditions precedent set forth in Article VIII or
IX to be satisfied.
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7.4. Certain Information. In the event that the Company is not subject
to Section 13 or 15(d) of the Exchange Act, Purchaser shall, and shall cause
its Affiliates to, use their respective commercially reasonable efforts to
cause the Company to provide any information reasonably requested by the
Shareholder concerning the Company (including financial statements) in order to
permit the Shareholder or his Affiliates to comply with the requirements of
Rule 144(c)(2) and Rule 144A(d)(4) under the Securities Act in connection with
any sale or transfer of any or all shares of Stock owned by the Shareholder or
his Affiliates from time to time pursuant to Rule 144 and Rule 144A,
respectively, under the Securities Act.
7.5. Further Actions. From time to time after the Closing Date,
Purchaser agrees to execute and deliver such instruments and take such other
actions as may reasonably be required to carry out the intent of this Agreement
and to consummate the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction or
waiver by Purchaser of the following conditions(provided, however, that in the
event the Company Agreement has previously been terminated pursuant to Section
12.1(f) thereof, the conditions set forth in Sections 8.5, 8.6, 8.8 and 8.9
below, shall be deemed to have been satisfied):
8.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of the Shareholder contained herein shall be
true and correct on and as of the Closing Date with the same force and effect
as though the same had been made on and as of the Closing Date, other than such
representations and warranties as are made of another date.
8.2. Performance of Covenants. The Shareholder shall have performed
and complied, in all material respects, with the covenants and provisions of
this Agreement required to be performed or complied with by him between the
date hereof and the Closing Date.
8.3. Hart-Scott-Rodino. All applicable waiting periods, if any, in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
8.4. Litigation; Other Events.
(a) No preliminary or permanent injunction or other order of any
court restraining or prohibiting the consummation of the transactions
contemplated hereby shall be in effect.
(b) There shall not be pending, nor shall there have been
threatened, any inquiry by a Governmental Body or Legal Proceeding that seeks,
nor any Law that would have the effect, to:
(i) challenge, restrain, prohibit, or delay the sale or
purchase of the Shares or the Warrant Shares pursuant to this
Agreement or any of the transactions contemplated hereby or obtain
damages as a result thereof;
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(ii) make the sale or purchase of the Shares or the Warrant
Shares pursuant to this Agreement illegal or in violation of any duty;
(iii) impose or result in material limitations on the ability
of Purchaser or any of its respective Affiliates to exercise full
rights of ownership of the Shares or the Warrant Shares purchased by
it hereunder, including, without limitation, the right to vote such
portion of the Shares or the Warrant Shares purchased by it hereunder
on all matters properly presented to the shareholders of the Company;
or
(iv) impose upon Purchaser, directly or indirectly, the
restraints or conditions set forth in the TBCA Business Combination
Provisions or in Article Nine of the Charter or similar restraints or
conditions.
8.5. Board Approval. The purchase of each of the Shares and the
Warrant Shares by Purchaser shall have been approved (which approval shall not
have been withdrawn or modified) by the Board of Directors (or the Special
Committee (as defined in the Company Agreement)) for purposes of Article Nine
of the Charter and the TCBA Business Combination Provisions, and resolutions to
such effect certified by an authorized officer of the Company shall have been
delivered to Purchaser.
8.6. Company Agreement. The Closing (as defined in the Company
Agreement) shall have occurred concurrently with the Closing.
8.7. Warrant. The Shareholder shall have delivered to Purchaser a duly
executed copy of the Warrant in the form attached hereto as Exhibit A.
8.8. Termination of Employment Agreement. The Employment Agreement
dated October 1, 1996, between the Company and the Shareholder shall have been
terminated and cease to have any force and effect.
8.9. Confirmation by the NASD. The Company shall have received the
NASD Confirmation.
ARTICLE IX
CONDITIONS PRECEDENT TO THE SHAREHOLDER'S OBLIGATIONS
The obligation of the Shareholder to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction or
waiver by the Shareholder of the following conditions (provided, however, that
in the event the Company Agreement has previously been terminated pursuant to
Section 12.1(f) thereof, the conditions set forth in Sections 9.6 and 9.7
below, shall be deemed to have been satisfied):
9.1. Accuracy of Representations and Warranties. Each of the
representations and warranties of Purchaser contained herein shall be true and
correct as of the Closing Date with the same force and effect as though the
same had been made on and as of the Closing Date.
9.2. Performance of Covenants. Purchaser shall have performed and
complied, in all material respects, with the covenants and provisions in this
Agreement required herein to be performed or complied with by it between the
date hereof and the Closing Date.
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9.3. Litigation; Other Events.
(a) No preliminary or permanent injunction or other order of any
court restraining or prohibiting the consummation of the transactions
contemplated hereby shall be in effect.
(b) There shall not be pending, nor shall there have been
threatened, any inquiry by a Governmental Body or Legal Proceeding that seeks,
nor any Law that would have the effect, to:
(i) challenge, restrain, prohibit, or delay the sale and
purchase of the Shares or the Warrant Shares pursuant to this
Agreement or any of the transactions contemplated hereby or obtain
damages as a result thereof;
(ii) make the sale or purchase of the Shares or the Warrant
Shares pursuant to this Agreement illegal or in violation of any duty;
(iii) impose or result in material limitations on the ability
of Purchaser or any of its Affiliates to exercise full rights of
ownership of the portion of the Shares or the Warrant Shares purchased
by it hereunder, including, without limitation, the right to vote such
portion of the Shares or the Warrant Shares purchased by it hereunder
on all matters properly presented to the shareholders of the Company;
or
(iv) impose upon Purchaser or the Company, directly or
indirectly, the restraints or conditions set forth in the TBCA
Business Combinations Provisions or in Article Nine of the Charter or
similar restraints or conditions.
9.4. Hart-Scott-Rodino. All applicable waiting periods, if any, in
respect of the transactions contemplated by this Agreement under the HSR Act
shall have expired or been terminated.
9.5. Purchase Price. Purchaser shall have simultaneously paid, in
accordance with the terms hereof, the Purchase Price.
9.6. Consulting Agreement. The Company and the Shareholder shall have
entered into a consulting agreement in the form attached hereto as Exhibit B.
9.7. Confirmation by the NASD. The Company shall have received the
NASD Confirmation.
9.8. Company Agreement. Either the Closing (as defined in the Company
Agreement) shall have occurred concurrently with the Closing or, in the event
the Company Agreement has previously been terminated pursuant to Section
12.1(f) thereof, the transaction provided for in the definitive agreement or
other documents giving rise to such termination of the Company Agreement shall
have been consummated.
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ARTICLE X
INDEMNIFICATION AND RELATED MATTERS
10.1. Indemnification.
(a) The Shareholder hereby agrees to indemnify and hold
Purchaser, its Affiliates and the officers, directors, employees, and agents
thereof, harmless (on an after-tax basis) from and against any and all claims,
judgments, causes of action, liabilities, obligations, damages, losses,
deficiencies, costs, penalties, interest, and expenses (including, without
limitation, the reasonable fees and expenses of counsel) (collectively,
"Losses") arising out of, based upon, attributable to, or resulting from:
(i) any inaccuracy of any representation, any breach of
warranty or nonfulfillment of any agreement or covenant on the part of
the Shareholder contained in this Agreement or any Seller Document;
and
(ii) all claims, actions, suits, proceedings, investigations,
demands, and assessments incident to any of the foregoing.
(b) Purchaser hereby agrees to indemnify and hold the Shareholder
harmless (on an after-tax basis) from and against any and all Losses arising out
of, based upon, attributable to, or resulting from:
(i) any inaccuracy of any representation, any breach of
warranty or nonfulfillment of any agreement or covenant on the part of
Purchaser contained in this Agreement or any Purchaser Document; and
(ii) all claims, actions, suits, proceedings, investigations,
demands, and assessments incident to the foregoing.
Notwithstanding the foregoing provisions of Section 10.1(a)(ii) or
(b)(ii), the party entitled to indemnification ( the "Indemnified Party") shall
not be entitled to any claims for fees and expensed of counsel in respect of
any action, suit, or proceeding by the party from which indemnification is
sought (the "Indemnifying Party"), unless and until such action, suit, or
proceeding has been determined by a final, nonappealable order or judgment of a
court of competent jurisdiction in favor of such Indemnified Party.
10.2. Procedures for Indemnification. Whenever a claim shall arise for
indemnification under Section 10.1, with the exception of claims for litigation
expenses in respect of litigation as to which a notice of claim, as provided in
this Section 10.2, has previously been given, which expenses shall be funded on
an ongoing basis, the Indemnified Party shall promptly notify Indemnifying
Party of such claim and, when known, the facts constituting the basis for such
claim; provided, however, that in the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceeding by
a third party, the Indemnified Party shall give such notice thereof to the
Indemnifying Party not later than ten business days prior to the time any
response to the asserted claim is required, if possible, and in any event
within five business days following receipt of notice thereof. Failure to give
timely notice or to include any specified information in any notice required by
this Section 10.2 will not effect the rights or obligations of any party
hereunder except and only to the extent that, as a result
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of such failure, any party which was entitled to receive such notice was
deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise damaged as a result of such failure. In the event of
any such claim for indemnification resulting from or in connection with a claim
or legal proceeding by a third party, the Indemnifying Party may, at its sole
cost and expense, assume the defense thereof using counsel who is reasonably
satisfactory to the Indemnified Party; provided, however, that the Indemnifying
Party shall first have agreed in writing that it does not and will not contest
its responsibility for indemnifying the Indemnified Party in respect of Losses
attributable to such claim or proceeding; and provided, however, that if the
defendants in any such actions include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be legal defenses or rights available to it which have not been
waived and are in actual or potential conflict with those available to the
Indemnifying Party, the Indemnified Party shall have the right to select one
law firm to act as separate counsel, on behalf of such Indemnified Party, at
the expense of the Indemnifying Party. Subject to the second proviso of the
immediately preceding sentence, if an Indemnifying Party assumes the defense of
any such claim or legal proceeding, the Indemnifying Party shall be entitled to
select counsel and take all steps necessary in the defense thereof; provided,
however, that no settlement shall be made without the prior written consent of
the Indemnified Party, which consent shall not be unreasonably withheld (and if
the Indemnified Party shall withhold its consent to any monetary settlement
proposed by the Indemnifying Party and which the other party to the action has
indicated it is prepared to accept, the Indemnified Party shall in no event be
deemed for purposes of this Agreement to have suffered Losses in connection
with such claim or proceeding in excess of the proposed amount of such
settlement); and provided, further, that subject to the second proviso of the
immediately preceding sentence, the Indemnified Party may, at its own expense,
participate in any such proceeding with the counsel of its choice without any
right of control thereof. So long as the Indemnifying Party is in good faith
defending such claim or proceeding, the Indemnified Party shall not compromise
or settle such claim without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. If the Indemnifying
Party does not assume the defense of any such claim or litigation in accordance
with the terms hereof, the Indemnified Party may defend against such claim or
litigation in such manner as it may deem appropriate, including, without
limitation, settling such claim or litigation (after giving prior written
notice of the same to the Indemnifying Party and obtaining the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld) on such terms as the Indemnified Party may deem appropriate, and the
Indemnifying Party will promptly indemnify the Indemnified Party in accordance
with the provisions of this Section 10.2. Notwithstanding the foregoing, at any
time after the Indemnifying Party has failed to discharge its liability for
legal and other expenses pursuant to this Section 10.2, which failure shall not
have been cured, or at any time the Indemnifying Party is subject to a
bankruptcy case pursuant to Chapter 7 or Chapter 11 of the U.S. Bankruptcy
Code, if the Indemnified Party shall propose to settle a claim as to which it
intends to seek indemnity, it shall provide the Indemnifying Party with 21
days' written notice of such proposed settlement, and the Indemnifying Party
shall, within such period either (i) consent to the terms of the proposed
settlement or (ii) provide the Indemnified Party with (A) a written notice of
objection to the proposed settlement, with a statement of reason, (B)
reasonable evidence that the financial condition of the Indemnifying Party is
sufficient to permit it to pay a judgment for the full amount being sought by
the third party claimant (or, at the Indemnified Party's request, a letter of
credit in such amount) and (C) an undertaking to satisfy any such judgment.
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ARTICLE XI
RIGHT OF FIRST OFFER AND REIMBURSEMENT
11.1. Right of First Offer.
(a) If at any time after the Closing Date, the Shareholder
desires to transfer all or a portion of the shares of Stock owned by him to a
third party (other than an Affiliate or family member of the Shareholder and
other than as provided in the Warrant), the Shareholder shall give prompt
written notice (a "Notice of Offer") to the Company of his intent to transfer
the Stock, which notice shall contain the proposed sale price for the shares of
Stock being offered and the number of shares of Stock which the Shareholder
proposes to transfer and any other material term or condition of the proposed
transfer. The date on which such notice is sent to the Company is referred to
hereinafter as the "Notice Date." The Notice of Offer shall be deemed an
irrevocable offer to sell to the Company (or any Person designated by the
Company) such shares of Stock on the terms and conditions set forth in the
Notice of Offer. The Company shall have 15 days following the Notice Date to
notify in writing the Shareholder of its election to purchase all, but not less
than all, of such shares of Stock (or to have all, but not less than all, of
such shares of Stock purchased by its designees). If the Company notifies the
Shareholder of its election to purchase such shares of Stock, the closing for
such transaction shall take place no later than 30 days from the Notice Date.
If the Shareholder does not receive such written notice from the Company within
the 15-day period, the Company shall be deemed to have declined to purchase
such shares of Stock and the Shareholder may transfer such shares of Stock to
any third parties at not less than the sale price and upon the other terms and
conditions set forth in the Notice of Offer; provided, however, that if the
Shareholder does not complete the contemplated sale within 180 days of the
Notice Date, the provisions of this Section 11.1(a) shall again apply.
(b) Notwithstanding anything herein to the contrary, the terms
and conditions of Section 11.1(a) do not apply to transfers made by the
Shareholder (i) pursuant to an effective registration statement or in the open
market pursuant to Rule 144 under the Securities Act or otherwise or (ii) in
connection with any merger or business combination of the Company approved by
the Board of Directors.
11.2. Reimbursement of the Company by the Shareholder.
(a) In the event that each of the following conditions has been
satisfied: (i) a meeting of the shareholders of the Company to consider and
vote upon the approval of the Amendment (as defined in the Company Agreement)
shall have been duly convened and held; (ii) all of the Shares (as defined in
the Company Agreement) then issued and outstanding and the Shares acquired from
the Shareholder by Purchaser hereunder shall have been voted at such meeting in
favor of approval of the Amendment, (iii) there shall not have been in effect
as of the date of such meeting any Law or injunction or other order of any
Governmental Body restraining or preventing the Shareholder from voting any
shares of Stock as to which he possessed the power to vote in favor of approval
of the Amendment, and (iv) the Amendment shall not have been approved in
accordance with applicable Law and the Charter and By-laws of the Company, then
the Shareholder shall reimburse the Company for any amounts (but not to exceed
$1,000,000 in the aggregate) paid by the Company to Purchaser as liquidated
damages pursuant to Section 6.5 of the Company Agreement.
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(b) The Shareholder shall reimburse the Company for an amount
equal to 20% of (i) the fee of $1,000,000 to be paid by the Company to an
affiliate of Purchaser pursuant to Section 3(b) of the Financial Advisory
Agreement to be entered into between the Company and such affiliate upon the
Closing (as defined in the Company Agreement) and (ii) the fees and
disbursements of Cleary, Gottlieb, Steen & Hamilton.
ARTICLE XII
REGISTRATION AND OTHER SHAREHOLDER RIGHTS
12.1. Demand Registration.
(a) Upon receipt by the Company at any time following the second
anniversary of the Closing Date of a written request from the Shareholder for
registration of the resale of any Registrable Shares, the Company shall use its
commercially reasonable efforts to cause a registration statement to be filed
under the Securities Act, and any other applicable Laws, within 60 days after
the receipt of such request. The Company shall use all commercially reasonable
efforts to cause any such registration statement to become effective and to
maintain the effectiveness of such registration statement until (x) the date
all Registrable Shares have been sold pursuant thereto or (y) 180 days after
the effective date of such registration statement. The term "registration
statement" means a registration statement filed under the Securities Act, or
any similar disclosure document, filing, or listing particulars utilized in
connection with a Public Equity Offering.
(b) The Shareholder shall be permitted to make two requests
pursuant to the provisions of Section 12.1(a), provided that no request will be
(i) allowed unless the Company and the security offering shall at that time
satisfy the eligibility requirements for use of Form S-1 or any successor form
and (ii) counted against this limit unless, it has become effective and
remained effective for a period of at least 30 days; provided, however, that
if, within 180 days after it has become effective, an offering of Registrable
Shares pursuant to a registration is interfered with by any stop order,
injunction, or other order or requirement of the Commission or other
Governmental Body, such registration will be deemed not to have been effected
and will not count as a Demand Registration. A registration that is undertaken
by the Company in response to a valid request made by the Shareholder pursuant
to this Section 12.1 shall be referred to herein as a "Demand Registration."
Notwithstanding the foregoing provisions of this Section 12.1(b), the Company
shall not be required to register any Registrable Shares pursuant this Section
12.1(b) at any time (i) within 120 days of the effective date of any
registration statement filed as a result of the exercise of any demand
registration rights by the Shareholder or any other shareholder of the Company,
or (ii) in the event that the Company has registered shares of any class of its
capital stock pursuant to any demand registration rights on more than two
occasions in the preceding 12 months.
(c) The Company shall pay all registration expenses incurred with
respect to Section 12.1(a) (other than customary underwriting and broker
commissions), including, without limitation, the reasonable fees and
disbursements of one (but only one) legal firm or counsel to represent
Purchaser and the Shareholder in the case of a Demand Registration.
(d) The offering of Registrable Shares pursuant to a Demand
Registration shall be in the form of a "firm commitment" underwritten offering.
The Shareholder shall select the investment banking firm or firms to manage the
underwritten offering; provided, however, that such selection shall be subject
to the consent of the Company, which consent shall not be unreasonably withheld
or delayed.
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12.2. Incidental or "Piggyback" Registration Rights.
(a) If the Company or any holder of shares of Stock proposes to
sell shares of Stock in a Public Equity Offering, the Company shall give
written notice, at least 15 days prior to the filing of a registration
statement related to such Public Equity Offering (other than a registration
statement relating solely to employee benefit plans or to effect any
acquisition or combination with another Person), of such proposed Public Equity
Offering to the Shareholder which notice shall offer to the Shareholder and his
Affiliates the opportunity to include in such Public Equity Offering such
number of Registrable Shares as the Shareholder and his Affiliates may request.
Within 20 days after receipt of such notice, the Shareholder and his Affiliates
shall, subject to the following sentence, have the right by notifying the
Company in writing to require the Company to include in the registration
statement relating to such Public Equity Offering such number of Registrable
Shares as the Shareholder or his Affiliates may request. Notwithstanding the
foregoing, (x) if at any time the managing underwriter or underwriters of such
Public Equity Offering (the "Managing Underwriter") shall advise the Company in
writing that, in its opinion, the total number of shares proposed to be sold in
such Public Equity Offering (including the total number of Registrable Shares
that the Shareholder and his Affiliates have requested to be sold in such
Public Equity Offering and the total number of shares of Stock requested to be
included by any other selling shareholder entitled to sell shares in such
Public Equity Offering) exceeds the maximum number of shares which the Managing
Underwriter believes may be sold without materially adversely affecting the
price, timing, or distribution of the Public Equity Offering, then the Company
will be required to include in such Public Equity Offering only that number of
shares which the Managing Underwriter believes may be sold without causing such
adverse effect in the following order: (i) all the shares that the Company
proposes to sell in such Public Equity Offering, (ii) all the shares that are
proposed to be sold by any shareholder of the Company who is exercising a
demand registration right, if such Public Equity Offering is being made
pursuant to such demand, and (iii) shares of the Shareholder and his Affiliates
and all other shares that are proposed to be sold by any shareholder of the
Company exercising a so-called "piggyback" registration right on a pro rata
basis in an aggregate number which is equal to the difference between the
maximum number of shares that may be distributed in such Public Equity Offering
as determined by the Managing Underwriter and the number of shares to be sold
in such Public Equity Offering pursuant to clauses (i) and (ii) above, and (iv)
any other shares of Stock requested to be included in such Public Equity
Offering.
(b) The Company will have the right to postpone or withdraw any
registration statement relating to a Public Equity Offering described under
this Section 12.2 prior to the effective date of such registration statement
without obligation to the Shareholder or his Affiliates. Purchaser shall, and
shall cause its Affiliates to, use their respective commercially reasonable
efforts to cause all registration expenses of the Shareholder and his
Affiliates (other than customary underwriting and broker commissions) to be
paid by the Company in the case of any and all registrations governed by this
Section 12.2.
12.3. Suspension. In connection with any proposed registration of
Registrable Shares pursuant to Section 12.1 or 12.2, during any consecutive
365-day period, the Company shall be entitled to postpone the filing of or to
suspend availability of a registration statement for up to two
60-consecutive-day periods if (i) at the time the Company receives a request
for a Demand
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Registration, the Company or any Subsidiary is engaged in confidential
negotiations or other confidential business activities, disclosure of which
would be required in such registration statement (but would not be required if
such registration statement were not filed), and the Board of Directors
determines in good faith that such disclosure would be materially detrimental
to the Company and its shareholders or would have a material adverse effect on
any such confidential negotiations or other confidential business activities,
(ii) prior to receiving such request, the Board of Directors were to have
determined to effect a Public Equity Offering for the Company's account and the
Company had taken substantial steps (including, but not limited to, selecting a
managing underwriter for such offering) and is proceeding with reasonable
diligence to effect such offering, or (iii) the Company shall furnish to
Purchaser a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company and its shareholders for such registration to be
pursued at such time; provided, however, that any suspension under clause (iii)
shall not exceed 60 days.
12.4. Preparation and Filing.
(a) Whenever the Company seeks to effect the registration of any
Registrable Shares in accordance with the provisions of Section 12.1 or 12.2,
the Company shall:
(i) prepare and file with the Commission or other applicable
Governmental Body a registration statement with respect to such
Registrable Shares and use its commercially reasonable efforts to
cause such registration statement to promptly become and, subject to
Section 12.3, remain effective for the period set forth in subsection
(ii) below and promptly notify the Shareholder (x) when such
registration statement becomes effective, (y) when any amendment to
such registration statement becomes effective and (z) of any request
by the Commission or other applicable Governmental Body for any
amendment or supplement to such registration statement or any
prospectus relating thereto or for additional information;
(ii) prepare and file with the Commission or other applicable
Governmental Body such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act, and any other applicable
Laws, with respect to the sale or other disposition of all securities
covered by such registration statement for a period of not less than
180 days after the effective date of such registration statement (or
such shorter period to the extent necessary to permit the completion
of the sale or distribution of such securities within such period);
(iii) furnish to the Shareholder, prior to filing a
registration statement, copies of such registration statement as
proposed to be filed and thereafter, such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and financial statements, reports, and proxy
statements mailed to shareholders of the Company as the Shareholder
may reasonably request in order to facilitate the disposition of the
Registrable Shares being sold;
(iv) use its commercially reasonable efforts to register or
qualify, not later than the effective date of any filed registration
statement, the Registrable Shares
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<PAGE> 20
covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the Shareholder reasonably
requests; provided, however, that the Company will not be required to
(A) qualify to do business as a foreign corporation or as a dealer in
any jurisdiction where it is not so qualified, (B) subject itself to
taxation in any jurisdiction where it is not subject to taxation, (C)
consent to general service of process in any jurisdiction where it is
not subject to general service of process, or (D) take any action that
would subject it to service of process in suits other than those
arising out of the offer or sale of the Registrable Shares covered by
the registration statement;
(v) make available, upon reasonable notice and during
business hours, for inspection by the managing underwriter(s) for the
Registrable Shares (and one counsel representing such managing
underwriter(s)) (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents, agreements, and
properties of the Company and its Subsidiaries and Affiliates as shall
be reasonably necessary to enable them to exercise their due diligence
responsibilities ("Records") and cause the Company's officers,
directors, and employees to supply all information reasonably
requested by any such Inspectors in connection with the registration
statement; provided, however, that, unless the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in
the registration statement or the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, the Company shall not be required to provide any
information under this subparagraph (v) if (A) the Company believes,
after consultation with counsel for the Company, that to do so would
cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (B) if either (1) the Company has
requested and been granted from the Commission confidential treatment
of such information contained in any filing with the Commission or
documents provided supplementally or otherwise or (2) the Company
reasonably determines in good faith that such Records are confidential
and so notifies the Inspectors in writing unless prior to furnishing
any such information with respect to (A) or (B) such holder of
Registrable Shares requesting such information agrees to enter into a
confidentiality agreement in a form reasonably acceptable to the
Company; and, provided, further, that each holder of Registrable
Shares agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give prompt
notice to the Company and allow the Company, at its expense, to
undertake appropriate action and to prevent disclosure of the Records
deemed confidential;
(vi) obtain a comfort letter from the Company's independent
public accountants dated within five business days prior to the
effective date of the registration statement (and as of such other
dates as the managing underwriter(s) for the Registrable Shares may
reasonably request) in customary form and covering such matters of the
type customarily covered by such comfort letters as such managing
underwriter(s) reasonably request;
(vii) obtain an opinion of counsel dated the effective date
of the registration statement (and as of such other dates as the
managing underwriter(s) for the Registrable Shares may reasonably
request) in customary form and covering such matters of the type
customarily covered by such opinions as counsel designated by such
managing underwriter(s) reasonably request;
20
<PAGE> 21
(viii) during the period when the registration statement is
required to be effective, notify the Shareholder of the happening of
any event as a result of which the prospectus included in the
registration statement contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will forthwith prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus will not contain an 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 not misleading;
(ix) in the case of an underwritten offering, enter into an
underwriting agreement containing customary terms, including such
indemnity and contribution provisions as the managing underwriter(s)
customarily require or may reasonably require;
(x) cause such Registrable Shares to be listed for trading on
the primary securities exchange or quotation system upon which the
Stock is then listed or traded; and
(xi) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission,
and other applicable Governmental Bodies, and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, beginning within three
months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act.
(b) The Shareholder shall timely furnish to the Company such
information (including affidavits) regarding the distribution of such
Registrable Shares as the Company may from time to time reasonably request. The
Company may exclude from such registration the securities of the Shareholder or
his Affiliates if he or they fail to furnish such information within 10 days
after such request; provided, however, that the Company's registration
statement relating to such offering is effective within 60 days after the
expiration of such 10-day period.
(c) The Shareholder agrees that upon the receipt of any notice
from the Company of the happening of any event of the kind described in
paragraph (a)(viii) above, it will forthwith discontinue disposition of
Registrable Shares pursuant to the registration statement covering such
Registrable Shares until the Shareholder's receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph (a)(viii) above.
If the Company gives any such notice, the Company shall keep any such
registration statement pursuant to a Demand Registration effective for that
number of additional days equal to the number of days during the period from
and including the date of the giving of such notice pursuant to paragraph
(a)(viii) above to and including the date on which copies of such supplemented
or amended prospectus are made available to the Shareholder.
12.5. Indemnification. In connection with the filing of a registration
statement providing for the registration of any Registrable Shares pursuant to
Section 12.1 or 12.2, the Company shall indemnify and hold harmless the
Shareholder and his Affiliates, to the extent customary and reasonable,
pursuant to indemnification and contribution provisions to be entered into by
the Company at the time of filing of such registration statement. The
Shareholder and his
21
<PAGE> 22
Affiliates shall indemnify the Company and its directors and officers and each
Person who controls the Company (within the meaning of the Securities Act or
the Exchange Act) against any and all Losses resulting from any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement, prospectus, or any preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission is made
in reliance upon and in strict conformity with information furnished in writing
to the Company by Shareholder for use in such registration statement; provided,
however, that the obligation to indemnify will be several and not joint and
several, among such sellers of Registrable Shares, and the liability of each
such seller of Registrable Shares will be in proportion to, and provided
further that such liability will be limited to, the net amount received by such
seller from the sale of Registrable Shares pursuant to such registration
statement; further provided, that such seller of Registrable Shares shall not
be liable in any such case to the extent that prior to the filing of any such
registration statement or prospectus or amendment thereof or supplement
thereto, such seller has furnished in writing to the Company information
expressly for use in such registration statement or prospectus or amendment
thereof or supplement thereto which corrected or made not misleading
information previously furnished to the Company.
ARTICLE XIII
TERMINATION
13.1. Termination. This Agreement may be terminated by:
(a) the written agreement of Purchaser and the Shareholder;
(b) Purchaser or the Shareholder on or after February 15, 1999,
if the Closing has not occurred prior to such date; provided, however, that in
the event the Company Agreement has previously been terminated pursuant to
Section 12.1(f) thereof, the Shareholder may not terminate this Agreement
pursuant to this clause (b) until the earlier of (i) the 30th day following the
date of consummation of the transaction provided for in the definitive
agreement or other documents giving rise to such termination of the Company
Agreement and (ii) the 180th day following such termination of the Company
Agreement;
(c) Purchaser or the Shareholder in the event of a material
breach by the other party of this Agreement, which breach is not cured within
five days after receipt of written notice thereof by the breaching party from
the non-breaching party;
(d) Purchaser or the Shareholder if there shall have been entered
a final, non-appealable order or injunction by any Governmental Body against
either party hereto or the Company that prohibits the consummation of the
transactions contemplated hereby or a material part thereof; or
(e) Purchaser or the Shareholder in the event of termination of
the Company Agreement; provided, however, that in the event the Company
Agreement is terminated pursuant to Section 12.1(f) thereof, the Shareholder
may not terminate this Agreement pursuant to this clause (e) until the earlier
of (i) the 30th day following the date of consummation of the transaction
provided for in the definitive agreement or other documents giving rise to such
termination of the Company Agreement and (ii) the 180th day following such
termination of the Company Agreement.
22
<PAGE> 23
13.2. Liabilities After Termination. Upon any termination of this
Agreement pursuant to Section 13.1, no party hereto shall thereafter have any
further liability or obligation hereunder; provided, however, that no such
termination shall relieve any party hereto of any liability for any intentional
breach of this Agreement prior to the date of such termination.
ARTICLE XIV
MISCELLANEOUS
14.1. Survival of Representations and Warranties. The parties hereto
hereby agree that the representations and warranties contained in this
Agreement shall survive the execution and delivery of this Agreement and the
Closing without limitation.
14.2. Entire Agreement. This Agreement (together with the Exhibits
attached hereto and the Confidentiality Agreement) contains, and is intended
as, a complete statement of all of the terms and the arrangements between the
parties hereto with respect to the matters provided for herein, and supersedes
any previous agreements and understandings between the parties hereto with
respect to those matters.
14.3. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas applicable to agreements made
in and to be wholly performed in such state.
14.4. Expenses. Purchaser shall bear all of the expenses (including,
without limitation, fees and disbursements of its financial advisor, counsel,
accountants and other experts) incurred by or on behalf of it in connection
with the preparation, negotiation, execution, delivery, and performance of this
Agreement, each of the other documents and instruments executed in connection
with or contemplated by this Agreement and the consummation of the transactions
contemplated hereby and thereby. The Shareholder shall bear all of the expenses
(including, without limitation, fees and disbursements of its financial
advisor, counsel, accountants, and other experts) incurred by or on behalf of
the Shareholder in connection with the preparation, negotiation, execution,
delivery, and performance of this Agreement, each of the other documents and
instruments executed in connection with or contemplated by this Agreement and
the consummation of the transactions contemplated hereby and thereby.
14.5. Headings. The article and section headings of this Agreement are
for reference purposes only and are to be given no effect in the construction
or interpretation of this Agreement. Unless the context otherwise requires, all
references to Articles and Sections are to Articles and Sections of this
Agreement.
14.6. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally or by overnight mail, or four days after being mailed by registered
mail, return receipt requested, to a party at the following address:
23
<PAGE> 24
If to the Shareholder, to:
Mr. Jerry E. Kimmel
6400 Cleburne Highway
Granbury, Texas 76049
Facsimile: (817) 326-2203
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Daniel S. Sternberg, Esq.
Facsimile: (212) 225-3999
If to Purchaser, to:
Wingate Partners II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Mr. Frederick B. Hegi, Jr.
Facsimile: (214) 871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Mary R. Korby, Esq.
Facsimile: (214) 746-7777
If to the Company, as provided in Section 13.6 of the Company
Agreement.
14.7. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
14.8. Binding Effect; No Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns. Except as expressly otherwise provided in Article X, nothing in
this Agreement shall create or be deemed to create any third-party beneficiary
rights in any Person not party to this Agreement. No assignment of this
Agreement or of any rights or obligations hereunder may be made by any party
(by operation of law or otherwise) without the prior written consent of each of
the other parties hereto and any attempted assignment without such required
consents shall be void; provided, however, that (i) the Shareholder may assign
his right to sell all or any portion of the Shares or Warrant Shares to one or
more shareholders of the Company who is a family member or Affiliate of the
Shareholder, provided that any such assignment shall not release the
Shareholder from his obligations hereunder, and (ii) Purchaser may assign its
right hereunder to purchase all or any portion of the Shares and/or the right
to receive the Warrant or any portion of the Warrant to
24
<PAGE> 25
such Persons as previously disclosed in writing to and approved by Shareholder
prior to the date hereof, provided that (a) no such assignment shall relieve
Purchaser of its obligations hereunder (b) any such assignee shall have
executed and delivered to the Shareholder an agreement satisfactory to the
Shareholder which shall provide that such assignee will become a party to this
Agreement and be bound by all of the obligations of Purchaser hereunder as if
such assignee were "Purchaser" hereunder, and (c) any such assignee shall have
delivered to Shareholder on or before the Closing Date the representations and
warranties set forth in Section 5.6. In the event of the death of the
Shareholder, the Shareholder's estate, the administrator or executor of his
estate, and his other heirs, devisees, legatees, and grantees shall be bound by
the provisions of this Agreement.
14.9. Amendments. This Agreement may be amended, supplemented, or
modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
14.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.11. Spousal Consent. Carmen Kimmel, being the lawful spouse of the
Shareholder, hereby certifies and agrees to the following: (i) I have read,
understand, and approve the Agreement and the attached exhibits; (ii) I agree
on behalf of myself and all my successors in interest that the Agreement and
Warrant binds my community property interest, if any, in any stock of the
Company registered in the name of my spouse on the books of the Company; (iii)
I consent to the execution, delivery, and performance of the Agreement, the
Warrant, and all other documents by my spouse relating to the Company,
including without limitation the sale of my spouse's interest in the stock of
the Company as provided herein, without the necessity of obtaining my signature
or further consent; (iv) I grant a power of attorney to my spouse for the sole
and exclusive purpose of dealing with my interest, if any, in the stock of the
Company; and (v) I acknowledge that I have been advised to seek separate
counsel in the execution of this Agreement and the Warrant.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WINGATE PARTNERS II, L.P.
By: Wingate Management Company II, L.P.,
its general partner
By: Wingate Management Limited, L.L.C.,
its general partner
By: /s/ FREDERICK B. HEGI, JR.
------------------------------------------
Frederick B. Hegi, Jr.
Principal
/s/ JERRY E. KIMMEL
------------------------------------------
JERRY E. KIMMEL
KEVCO, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
------------------------------------------
Name: Ellis L. McKinley, Jr.
----------------------------------------
Title: Vice President, Chief Financial
---------------------------------------
Officer and Treasurer
---------------------------------------
Acknowledged for the purposes of
Section 14.11 as of the date first
above written:
/s/ CARMEN KIMMEL
- ---------------------------------
CARMEN KIMMEL
<PAGE> 27
EXHIBIT A
[FORM OF WARRANT]
<PAGE> 28
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
WERE PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED DECEMBER
23, 1998 AMONG WINGATE PARTNERS II, L.P., JERRY E. KIMMEL, AND KEVCO,
INC. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW,
AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS AND SECTION
3 OF THIS WARRANT.
No. of Shares: 220,690 Shares Warrant No. ____
WARRANT
To purchase Common Stock of
KEVCO, INC.
[______________________], 1999
THIS WARRANT CERTIFIES THAT, for value received, the registered holder
hereof, Wingate Partners II, L.P., a Delaware limited partnership ("Wingate"),
or its registered assigns, is entitled to purchase from Jerry E. Kimmel, (the
"Shareholder"), at any time and from time to time after the date hereof (the
"Initial Issue Date") and on or before 5 p.m. Eastern Standard Time, on the
Expiration Date (as hereinafter defined) 220,690 shares of the voting common
stock, par value $0.01 per share ("Voting Common Stock"), of Kevco, Inc., a
Texas corporation (the "Company") at the Basic Purchase Price (as hereinafter
defined), subject to the terms, conditions, and adjustments as hereinafter
provided in Sections 4 and 5.
Section 1. Definitions and References. Unless otherwise specified,
references herein to sections, subsections, and similar subdivisions refer to
the sections, subsections, and subdivisions of this Warrant. For all purposes of
this Warrant, the following terms shall have the meanings hereinafter indicated:
"Affiliate" with respect to a party to this Agreement shall
mean any Person that directly or indirectly (through one or more intermediaries
or otherwise) controls, is controlled by, or is under common control with, such
Person.
"Basic Purchase Price" shall mean the price of $10.25 per
share of the Common Stock.
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean a day on which commercial banks are
open for business with the public in New York, New York.
<PAGE> 29
"Commission" shall mean the Securities and Exchange Commission
and any other similar or successor agency of the federal government then
administering the Securities Act or the Exchange Act.
"Common Stock" shall mean the Voting Common Stock, the
nonvoting common stock, par value $.01 per share, of the Company ("Nonvoting
Common Stock"), and any capital stock into which such Common Stock thereafter
may be changed or converted.
"Common Stock Equivalents" shall mean (without duplication
with any other Common Stock or Common Stock Equivalents) rights, warrants,
options, convertible securities or convertible indebtedness, exchangeable
securities or exchangeable indebtedness, or other rights, exercisable for or
convertible or exchangeable into, directly or indirectly, Common Stock, and any
stock appreciation rights or similar rights to payment based upon the value of
the Company's common equity, whether at the time or upon the occurrence of some
future event including all shares of Common Stock issuable in respect of this
Warrant to the extent not issued and outstanding.
"Composite Tape" shall mean, with respect to any security, the
reporting by the National Association of Securities Dealers (or any successor
reporting mechanism) of all trades of such security occurring on all exchanges
on which such security is traded.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time in question.
"Expiration Date" shall mean the fifth anniversary of the
Initial Issue Date.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivisions thereof, whether federal,
state, or local, or any agency or instrumentality thereof, or any court or
arbitrator (public or private).
"Holder" shall mean the initial holder of this Warrant, and
any Person to whom this Warrant, or any portion thereof, is subsequently
transferred of record.
"Independent Director" shall mean any director of the Company
not affiliated with Wingate or its assigns or the Shareholder and who do not
have any other relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director.
"Lien" shall mean any lien, charge, claim, encumbrance, or
right of a third party with respect to the property in question.
"Market Price" shall mean, with respect to any Common Stock,
on a per share basis and as of any date, an amount equal to the average, for
each of the ten (10) consecutive Trading Days immediately prior to such date, of
the closing prices for a share of Common Stock on such Trading Day as reported
on the Composite Tape (as reported in The Wall Street Journal or, if not
reported thereby, any other authoritative source). If no price can be determined
under the foregoing, then the "Market Price" shall be deemed to be the fair
market value thereof, as determined by the majority of the Independent Directors
of the Company's Board of Directors in good faith as of a date which is within
fifteen (15) days preceding the date as of which the determination is to be
made.
2
<PAGE> 30
"NASDAQ" shall mean the NASDAQ Stock Market.
"Person" shall mean any individual, partnership, joint
venture, corporation, trust, unincorporated organization, or other entity.
"Purchase Price" shall mean, as of any date, the Basic
Purchase Price as adjusted pursuant to Section 6.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time in question.
"Trading Day" means any day on which NASDAQ is open for
trading, or if the shares of Common Stock are not quoted on NASDAQ, any day on
which the principal national securities exchange or national quotation system on
which the shares of Common Stock are listed, admitted to trading or quoted is
open for trading.
"Transfer", as used in Section 3, shall mean any disposition
of this Warrant, any Warrant Shares, or of any interest therein, which would
constitute a sale of or an offer to sell such Warrant or Warrant Shares within
the meaning of the Securities Act.
"Warrant" or "Warrants" shall mean this Warrant and any
Warrant or Warrants issued upon transfer hereof, including all amendments to any
such Warrants and together with all Warrants issued in exchange, transfer or
replacement of any thereof.
"Warrant Shares" shall mean all shares of Common Stock
purchased or purchasable by the registered Holders of the Warrants upon the
exercise thereof, provided that such shares of Common Stock shall be deemed to
include all other shares of Common Stock issued or issuable in connection
therewith, whether as a result of stock dividends, exchanges, stock splits,
reverse stock splits, recapitalizations, mergers, consolidations, or otherwise.
Section 2. Ownership of This Warrant; Delivery of Shares into Escrow;
Term of Warrant.
(a) Ownership. Shareholder may deem and treat the Person in whose name
this Warrant is registered as the Holder and owner hereof for all purposes,
notwithstanding any notations of ownership or writing hereon made by anyone
other than Shareholder, and shall not be affected by any notice to the contrary,
until presentation of this Warrant for registration of transfer as provided in
Section 3(b). The Company shall maintain on behalf of Holder and the
Shareholder, at its office or agency in Fort Worth, Texas (or at such other
office or agency of the Company as the Company shall designate from time to time
by notice to Shareholder and the registered Holder of this Warrant), a register
for the Warrants, in which the Company shall record the name and address of the
Person in whose name each Warrant has been issued, as well as the name and
address of each transferee and each prior owner of such Warrant. Within five (5)
Business Days after Shareholder or any Holder shall by notice request the same,
the Company will deliver to such Holder or Shareholder a certificate, signed by
one of its authorized officers, listing the name and address of every other
Holder, as such information appears in such register at the close of business on
the day before such certificate is signed.
(b) Escrow. Concurrently with the execution hereof, Shareholder is
delivering to the Company 220,690 shares of Common Stock (the "Escrow Shares"),
representing all of the shares
3
<PAGE> 31
of Common Stock deliverable upon exercise of this Warrant on the date hereof,
such shares to be held in escrow by the Company for the benefit of Holder upon
exercise of this Warrant. Shareholder agrees and covenants (i) that he will take
no action, nor willfully permit any action to be taken, that would result in any
Lien being placed on the shares of Common Stock so placed in escrow and (ii)
that he will forthwith deliver to the Company, upon request of the Company or
the Holder, any shares of Common Stock that become subject to this Warrant in
the future as a result of adjustments pursuant to Section 5 hereof, free and
clear of any Lien. Shareholder authorizes the Company, or, at any time that
Company uses a stock transfer agent, the Company's transfer agent, to place a
stop transfer legend on the stock transfer records of the Company in respect of
such shares of Common Stock until the earlier of (i) the exercise of this
Warrant with respect to such shares of Common Stock or (ii) the expiration or
cancellation hereof. Shareholder hereby authorizes the Company to act in his
place and stead in delivering Warrant Shares upon exercise of this Warrant and
authorizes the Company to accept payment of the Purchase Price on Shareholder's
behalf upon exercise, or partial exercise, of this Warrant. The Company agrees
to promptly pay over to Shareholder such Purchase Price.
(c) Term. This Warrant shall be void after 5:00 p.m. Eastern Standard
time on the Expiration Date. To the extent that this Warrant, or any portion
hereof, has not been exercised before 5:00 p.m. Eastern Standard time on the
Expiration Date, all shares of Common Stock held pursuant hereto will be
immediately released to Shareholder and the Company will remove, or cause to be
removed, all stop transfer legends placed thereon as a result of such escrow.
(d) No Rights as Shareholder. Notwithstanding the foregoing, nothing in
this Warrant shall be construed as conferring upon the Holder or its transferees
any rights as a shareholder of the Company, including the right to vote, receive
dividends, consent or receive notices as shareholder with respect to any meeting
of shareholders for the election of directors of the Company or any other
matter. Shareholder shall retain all rights as a shareholder of the Company with
respect to the Escrow Shares including any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger conveyance, or
otherwise) or to receive notice of meeting, and except as otherwise provided for
herein receive dividends or subscription rights or otherwise until the Warrant
shall have been exercised as provided herein.
Section 3. Exchange, Transfer and Replacement.
(a) Exchange. This Warrant is exchangeable, upon the surrender hereof
by the registered Holder to Shareholder at the Company's office or agency
provided for in Section 2, for new Warrants of like tenor, representing in the
aggregate the right to purchase the number of shares of the Common Stock
purchasable hereunder or under any other Warrants tendered herewith, each of
such new Warrants to represent the right to purchase such number of shares of
the Common Stock as shall be designated by said registered Holder at the time of
such surrender, not to exceed the aggregate shares of Common Stock purchasable
on the exercise of all such tendered Warrants.
(b) Transfer. This Warrant and all rights hereunder are transferable,
in whole or in part, but only upon the register provided for in Section 2 and
only upon satisfaction of the conditions set forth in this Warrant, by the
registered Holder hereof, and a new Warrant shall be made and delivered by the
Company on behalf of Shareholder, of the same tenor as this Warrant but
registered in the name of the transferee, upon surrender of this Warrant with
the assignment
4
<PAGE> 32
form attached hereto duly completed, at said office or agency of the Company. No
sale, transfer, or other disposition of this Warrant or the Warrant Shares
issuable hereunder will be made without registration under the Securities Act
and applicable state securities laws or pursuant to exemptions therefrom. The
Company or Shareholder may, as a condition to any such transfer, require an
opinion of counsel reasonably satisfactory to it that such transfer complies
with all applicable federal and state securities laws.
(c) Replacement. Upon receipt by Shareholder at the Company's office or
agency provided for in Section 2 of evidence reasonably satisfactory to
Shareholder of the loss, theft, destruction or mutilation of this Warrant, and,
in the case of loss, theft, or destruction, of indemnity or security reasonably
satisfactory to Shareholder and the Company, and upon surrender of this Warrant,
if mutilated, the Company on behalf of Shareholder will make and deliver a new
Warrant of like tenor, in replacement of this Warrant; provided that, if Wingate
or any of its Affiliates shall be the registered Holder hereof, an agreement of
indemnity (in form reasonably satisfactory to Shareholder) by such registered
Holder shall be sufficient for all purposes of this Section 3.
(d) Cancellation and Taxes. This Warrant shall be promptly cancelled by
Shareholder upon the surrender hereof in connection with any exchange, transfer,
or replacement pursuant to this Section 3.
(e) Legend. All Warrants issued upon transfer hereof, including all
amendments to any such Warrants shall be imprinted with a legend in
substantially the following form (in addition to any legend required by state
securities laws):
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT WERE PURCHASED PURSUANT TO A STOCK PURCHASE AGREEMENT DATED DECEMBER 23,
1998, AMONG WINGATE PARTNERS II, L.P., JERRY E. KIMMEL, AND KEVCO, INC. NEITHER
THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAW AND SECTION 3 OF THIS
WARRANT.
Section 4. Exercise of this Warrant.
(a) In order to exercise this Warrant in whole or in part, the
registered Holder hereof shall complete a subscription form in the form attached
hereto and deliver to Shareholder at the Company's office or agency provided for
in Section 2 such subscription form, this Warrant and the aggregate Purchase
Price of the shares of the Common Stock then being purchased; provided that any
single exercise of this Warrant not made in whole must be for a minimum of 5,000
Warrant Shares as adjusted pursuant to Section 6.
(b) Such Purchase Price shall be paid to Shareholder in lawful money of
the United States by company check of Wingate or an Affiliate of Wingate, or, if
the Holder is other than Wingate or an Affiliate of Wingate, by certified check
drawn on a banking institution chartered by the government of the United States
or any state thereof or wire transfer of funds.
5
<PAGE> 33
(c) The exercise of this Warrant shall be deemed to have been effected
and the Purchase Price and the number of shares of the Common Stock issuable in
connection with such exercise shall be determined as of the close of business on
the Business Day on which the last to be delivered of such completed
subscription form and all other items required to be delivered in connection
with such exercise by the registered Holder hereof pursuant to this Section 4
shall have been delivered to the Company on behalf of Shareholder at the
requisite office or agency of the Company. Upon receipt of such form and other
items, the Company shall, as promptly as practicable, and in any event within
five (5) Business Days thereafter, deliver from escrow such shares of Common
Stock as shall be specified on such form and for which the Purchase Price has
been tendered. The Company hereby undertakes to prepare a new certificate or
certificates, in such number of shares as is requested by Holder, and deliver
such certificate(s) representing the number of shares of Common Stock to be
received upon exercise hereof. To the extent that this Warrant is exercised only
in part, Shareholder agrees to execute and deliver a new Warrant of like tenor
to Holder for the purchase of the remaining shares subject to this Warrant.
Section 5. Payment of Taxes. The Company shall pay any and all
documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Warrant Shares or of other securities or property
deliverable upon exercise of the Warrants evidenced by this Warrant representing
such shares or securities (other than income taxes imposed on Holders); provided
that the Company shall not be required to pay any such tax or other charge that
may be imposed in connection with any transfer involved in the issue of any
certificate for Warrant Shares or other securities or property, or payment of
cash, to any Person other than the Holder who surrendered a Warrant upon
exercise, and in case of any such tax or charge, the Company shall not be
required to issue any security or property or pay any cash until such tax or
charge has been paid or it has been established to the Company's satisfaction
that no such tax or charge is payable.
Section 6. Share Adjustment Provisions; Adjustment of Purchase Price.
The Purchase Price from time to time in effect under this Warrant, and the
number of Warrant Shares subject to purchase hereunder, shall be subject to
adjustments from time to time as hereinafter set forth in this section.
(a) Common Stock Splits. Upon any subdivision by the Company on or
after the Initial Issue Date of all of its outstanding shares of Common Stock
into a greater number of shares or upon any issuance by the Company on or after
such date of a greater number of shares of Common Stock in a pro rata exchange
for all of its outstanding shares of Common Stock, then in each case from and
after the record date for such subdivision or exchange the number of Warrant
Shares purchasable upon the exercise of this Warrant shall be increased in
proportion to such increase in the number of outstanding shares of Common Stock,
and the Purchase Price then in effect shall be correspondingly decreased. Upon
any pro rata reduction by the Company on or after the Initial Issue Date of its
outstanding shares of Common Stock as a whole or upon any issuance by the
Company after such date of a lesser number of shares of Common Stock in a pro
rata exchange for all of its outstanding shares of Common Stock, then in each
case from and after the record date for such reduction or exchange the number of
Warrant Shares purchasable upon the exercise of this Warrant shall be decreased
in proportion to such reduction in the number of outstanding shares of Common
Stock, and the Purchase Price then in effect shall be correspondingly increased.
(b) Common Stock Dividends. Upon any declaration and payment by the
Company on or after the Initial Issue Date of a dividend upon Common Stock
payable in Common Stock,
6
<PAGE> 34
then in each case from and after the payment of such stock dividend, the number
of Warrant Shares purchasable upon the exercise of this Warrant shall be
increased in proportion to the increase in the number of outstanding shares of
Common Stock through such stock dividend, and the Purchase Price then in effect
shall be correspondingly decreased.
(c) Other Issues. Upon any issuance by the Company to the Shareholder
or his Affiliates or family members (the "Shareholder Group") of shares of
Common Stock on or after the Initial Issue Date (other than issuances of stock
requiring adjustments hereunder pursuant to the immediately preceding
subsections (a) and (b) of this Section 6) for a consideration lower than the
Market Price per share of stock in effect immediately prior to such issuance,
the Purchase Price then in effect shall be reduced or increased, as appropriate,
to equal the following amount:
(D x E) + (F x G)
-----------------
C x E
where C equals the number of shares of Common Stock beneficially owned by the
Shareholder Group immediately after such additional issuance, D equals the
number of shares of Common Stock beneficially owned by the Shareholder Group
prior to the issue of such additional Common Stock, E equals the Market Price
per share of stock in effect immediately prior to the issue of such additional
Common Stock, F equals the aggregate consideration (before deducting
underwriting discounts, commissions, and other expenses) received or to be
received by the Company in connection with the issuance of such additional
Common Stock, and G equals the Purchase Price which would have been in effect
immediately prior to such issuance had all previous adjustments (if any) under
this subsection (c) been made pursuant to the foregoing formula. Upon any such
reduction in the Purchase Price, the number of Warrant Shares purchasable upon
the exercise of this Warrant shall be correspondingly increased. The provisions
of this subsection (c) shall not be applicable to any issuance of Common Stock
upon actual exercise or actual conversion of any option, warrant, right, or
other security convertible into or exercisable for Common Stock if the Purchase
Price was fully and properly adjusted pursuant to the immediately following
subsection (d) at the time such option, warrant, right, or other security was
issued.
(d) Common Stock Options; Subscription Rights; Convertible Securities.
Upon any issuance by the Company to any member of the Shareholder Group on or
after the Initial Issue Date of options or rights to subscribe for shares of
Common Stock or of any securities convertible into or exchangeable for shares of
Common Stock or of any similar securities for a consideration per share less
than the Market Price in effect immediately prior to the issuance of such
options, rights, or securities, the Purchase Price shall be reduced (and the
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be appropriately increased or reduced), by making computations in
accordance with subsection (c) of this Section 6; provided that:
(i) The maximum number of shares of Common Stock deliverable under
any such option or right shall be considered to have been delivered at
the time such option or right was issued, for a consideration equal to
the minimum purchase price per share of Common Stock provided for in
such option or right, plus the consideration, if any, received by the
Company for such option or right (before deducting underwriting
discounts, commissions, and other expenses);
(ii) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or exchange for any such securities
shall be considered to have been
7
<PAGE> 35
delivered at the time of issuance of such securities, for a
consideration equal to the consideration received by the Company for
such securities (before deducting underwriting discounts, commissions,
and other expenses) plus the minimum consideration (other than such
securities) to be received by the Company upon the exchange or
conversion of such securities;
(iii) If the purchase or conversion price provided for in any
rights or options referred to above, the additional consideration, if
any, payable upon the conversion or exchange of convertible securities
referred to above, or the rate at which any convertible securities
referred to above are convertible into or exchangeable for shares of
Common Stock shall change (other than under or by reason of provisions
designed to protect against dilution), the Purchase Price (and the
number of shares of Common Stock purchasable upon the exercise of this
Warrant) in effect at the time of such event shall be readjusted to the
Purchase Price (and the number of shares of Common Stock purchasable
upon the exercise of this Warrant) which would have been in effect at
such time had such rights, options, or convertible securities still
outstanding provided for such new purchase or conversion price,
additional consideration, or conversion rate, as the case may be, at
the time initially granted, issued, or sold. If the purchase or
conversion price provided for in any such right or option referred to
above, the additional consideration, if any, payable upon the
conversion or exchange of convertible securities referred to above, or
the rate at which any convertible securities referred to above are
convertible into or exchangeable for shares of Common Stock shall be
changed at any time by reason of provisions designed to protect against
dilution, then when shares of Common Stock are delivered upon the
exercise of any such right or option or upon conversion or exchange of
any such convertible security, the Purchase Price (and the number of
shares of Common Stock purchasable upon the exercise of this Warrant)
then in effect hereunder shall be readjusted to such amount as would
have been obtained had such right, option, or convertible security
never been issued as to such shares of Common Stock and had the
adjustments required hereunder been made at the time of the issuance of
the shares of Common Stock delivered as aforesaid; and
(iv) On the expiration of any such options or rights, or at the
termination of any such rights to convert or exchange, the Purchase
Price (and the number of shares of Common Stock purchasable upon the
exercise of this Warrant) then in effect shall be readjusted to the
Purchase Price (and the number of shares of Common Stock purchasable
upon the exercise of this Warrant) which would have been in effect had
the adjustments (and readjustments) made upon the issuance of such
expired or terminated options, rights, or securities (or upon the
occurrence of any event with respect thereto specified in the
immediately preceding subsection (iii)) not been made. Notwithstanding
the prior sentence, the Holder shall not be required to surrender or
adjust any shares of Common Stock theretofore received by the Holder
upon exercise of a Warrant.
(e) Special Dividends; Purchase Rights.
(i) If at any time on or after the Initial Issue Date the Company
shall distribute to all holders of shares of Common Stock of any class
evidences of its indebtedness or assets (excluding any regular periodic
cash dividend) or a distribution in partial liquidation, each payable
otherwise than in shares of Common Stock or in securities to which the
provisions of the immediately following subsection (e)(ii) are
applicable, Shareholder shall pay to the Holder of this Warrant, upon
the exercise hereof at any time on or after the payment of such
dividend or distribution, the securities and
8
<PAGE> 36
other property (including cash) which such Holder would have received
(together with all subsequent distributions thereon) if such Holder had
exercised or converted this Warrant on the record date fixed in
connection with such dividend or distribution, and Shareholder shall
take whatever steps are necessary or appropriate to keep available at
all times any securities and other properties which are required to
fulfill such obligations of Shareholder. Notwithstanding the foregoing,
the rights of the Holder hereof under this subsection (e)(i) upon the
Company's declaration of a dividend or distribution in partial
liquidation payable only in securities convertible into shares of
Common Stock may be exercised only in lieu of any adjustment (in this
subsection (e) called a "subsection (d) adjustment") because of such
dividend or distribution called for under subsection (d) of this
Section 6, and upon exercise hereof such Holder must elect (as
indicated in the subscription form attached hereto) either such
subsection (d) adjustment or the rights and benefits provided for in
this subsection (e)(i). Upon the election by Holder of rights under
this subsection (e)(i), and delivery of the subscription form to
Shareholder, Shareholder shall exercise such rights on behalf of Holder
and deliver to Holder certificates for any Common Stock so received,
originally executed for transfer to Holder promptly upon receipt
thereof from the Company. For the purposes of determining the Purchase
Price from time to time in effect and the number of shares from time to
time subject hereto prior to the exercise hereof, it shall be assumed
that the Holder hereof will so elect subsection (d) adjustments, but
upon any election of the rights and benefits provided for in this
subsection (e)(i) made at the time of exercise hereof the Purchase
Price then in effect (and the number of outstanding shares of Common
Stock purchasable upon such exercise) shall be redetermined to equal
the amounts which would have been in effect had such subsection (d)
adjustments never been made. Notwithstanding the provisions of this
subsection (e)(i), in no event shall any Holder have the right to, or
the right to elect to, receive Common Stock pursuant to this Warrant
if, as a result thereof, a "change of control" could be deemed to occur
under that certain Indenture dated as of December 1, 1997, by and among
the Company, the Subsidiary Guarantors (as defined therein) and United
States Trust Company of New York, as Trustee, and, in lieu thereof, the
Holder shall have the right to receive, or the right to elect to
receive, Nonvoting Common Stock. Shareholder hereby undertakes to
deliver or cause to be delivered to the Company shares of Common Stock
in equivalent number to any shares of Nonvoting Common Stock
deliverable pursuant to this provision. The Company hereby undertakes
to deliver to Holder, upon receipt of such Common Stock from
Shareholder (which shall include any shares held in escrow) such shares
of Nonvoting Common Stock.
(ii) If at any time on or after the date hereof the Company shall
grant, issue or sell any options or rights to purchase stock, warrants,
securities or other property pro rata to the holders of Common Stock of
all classes ("Purchase Rights"), then each Holder shall be entitled
(but not obligated) to acquire from Shareholder upon 10 days notice and
subject to advance payment to Shareholder of the consideration, costs
and expenses, if any, related to the Purchase Rights, in lieu of any
subsection (d) adjustment and upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could
have acquired if it had held the number of shares of Common Stock
purchasable upon exercise of the Warrants immediately prior to the time
or times at which the Company granted, issued or sold such Purchase
Rights.
(f) Effect of Reorganization and Asset Sales. If any capital
reorganization of the Company, reclassification of the capital stock of the
Company, statutory exchange, consolidation or merger of the Company with another
Person, or sale of all or substantially all of the Company's assets to another
Person shall be effected in such a way that holders of Common Stock shall be
9
<PAGE> 37
entitled to receive stock, securities or assets (including cash) of the Company
or another Person with respect to or in exchange for Common Stock (each such
transaction being hereinafter referred to as a "Transaction"), then each Holder
shall be entitled to receive, and such Warrants shall thereafter represent the
right to receive, in lieu of the Common Stock issuable upon such exercise or
conversion but otherwise upon and subject to all terms and conditions hereof,
the cash, securities or other property to which such Holder would have been
entitled upon the consummation of such Transaction if such Holder had exercised
or converted such Warrants immediately prior thereto (subject to adjustments
from and after the consummation date of such Transactions as nearly equivalent
as possible to the adjustments provided for in this Section 6).
(g) Notice of Adjustment or Substitution. On the happening of an event
requiring an adjustment of the Purchase Price and upon each change in the number
of Warrant Shares issuable upon the exercise of this Warrant, and in the event
of any change in the rights of the Holder of this Warrant by reason of other
events herein set forth, the Company shall, on behalf of Shareholder,
immediately give written notice to the registered Holder(s) of this Warrant: (i)
describing the event; (ii) stating the adjusted Purchase Price, the number of
Warrant Shares issuable upon exercise or change in rights; and (iii) stating how
such adjustment of Purchase Price or number of Warrant Shares was calculated and
the facts on which the calculation is based.
(h) Adjustment Exceptions. Anything in this Section 6 to the contrary
notwithstanding, no adjustment of the Purchase Price or the number of Warrant
Shares issuable upon the exercise of this Warrant shall be made upon (a) the
issuance of any Warrants, (b) the issuance of any Warrant Shares, and (c) the
issuance of any shares of Common Stock or (d) other options or rights to
purchase stock, warrants, other securities to any member of the Shareholder
Group who is an employee of the Company pursuant to a plan established by the
Company for the exclusive benefit of its employees. Furthermore, none of the
securities issued as described in this subsection (h) shall be deemed to be
outstanding for the purposes of making the adjustments required by Section 6(c).
(i) Company Undertakings. The Company hereby agrees to withhold from
any dividend, distribution, right, securities or property otherwise receivable
by the Shareholder as a result of any stock split, recapitalization,
reorganization, statutory exchange, Transaction, Purchase Right or like event,
such portion of the securities and other property (including cash) otherwise
payable to Shareholder as a result of his record ownership of the Warrant Shares
subject to this Warrant and to hold such securities and property in escrow for
the benefit of the Holder upon exercise of this Warrant; provided, however, that
the Company shall not be required to withhold any Purchase Right to the extent
that such Purchase Right expires prior to the Expiration Date and shall, in lieu
thereof, provide notice in accordance with Section 7 hereof.
Section 7. Notifications by the Company. If at any time:
(a) the Company shall declare upon the Common Stock any dividend or
other distribution to the holders of the Common Stock;
(b) the Company shall make an offer for subscription pro rata to the
holders of the Common Stock of any additional shares of stock of any class or
other rights whether by Purchase Rights or otherwise;
(c) the Board of Directors of the Company shall authorize (whether
definitively or subject to any conditions) any capital reorganization of the
Company, any statutory exchange,
10
<PAGE> 38
any reclassification of the capital stock of the Company, or any consolidation
of the Company or merger of the Company with, or sale of all or substantially
all of its assets to, another Person;
(d) the Board of Directors of the Company shall authorize (whether
definitively or subject to any conditions) a voluntary dissolution, liquidation
or winding-up of the Company; or
(e) the Company shall become subject to involuntary dissolution,
liquidation or winding-up;
then, in any one or more of such cases, the Company, on behalf of the
Shareholder shall give notice thereof to each registered Holder of Warrants,
specifying (i) the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
(ii) the date on which such reorganization, reclassification, statutory
exchange, consolidation, merger, sale, dissolution, liquidation or winding-up
shall take place or be voted upon by shareholders of the Company, as the case
may be. Any such notice under subsections (a) through (e) of this section shall
also specify the date as of which the holders of record of the Common Stock
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up, as the case may be; such
notice shall be given not less than thirty (30) and not more than fifty (50)
days prior to the action in question (except in the case of notice for actions
under Section 7(e), which notice shall be promptly following such action) and
not less than thirty (30) and not more than fifty (50) days prior to the record
date or the date on which the Company's transfer books are closed in respect
thereto, and such notice shall state that the action in question or the record
date is subject to the effectiveness of a registration statement under the
Securities Act or to a favorable vote of stockholders, if either is required.
Section 8. Notices. All notices, requests and other communications
required or permitted to be given or delivered to registered Holders shall be in
writing, and shall be delivered, or shall be sent by certified or registered
mail, postage prepaid and addressed, to each such Holder at the address shown on
such Holder's Warrant, or at such other address as shall have been furnished to
the Company by notice from such Holder. All notices, requests and other
communications required or permitted to be given or delivered to the Company on
behalf of the Shareholder shall be in writing, and shall be delivered, or shall
be sent by certified or registered mail, postage prepaid and addressed, to
Company, as follows:
Kevco, Inc.
1300 South University, Suite 200
Fort Worth, Texas 76107
Attention: President
Telecopy Number: (817) 332-2765
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<PAGE> 39
with a copy to:
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202-3797
Attention: Byron F. Egan
Telecopy Number: (214) 953-5822
Wingate Partners II, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
James A. Johnson
Telecopy Number: (214) 871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby
Telecopy Number: (214) 746-7777
or at such other address as shall have been furnished to the registered Holders
by notice from the Company. Each such notice sent by mail as described above
shall be deemed received on the date of receipt by the Holder or the company, as
applicable.
Section 9. No Rights or Liabilities as Shareholder. This Warrant shall
not entitle any Holder hereof to any of the rights of a shareholder of the
Company, including, without limitation, the right to receive dividends, the
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger conveyance, or otherwise) or to receive notice of
meetings, (except as otherwise provided for herein) receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised as
provided herein. No provision hereof, in the absence of affirmative action by
the Holder hereof to purchase shares of the Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the Purchase Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
Section 10. Governing Law. This Warrant shall be construed in
accordance with and governed by the laws of the State of Texas, without regard
to the provisions thereof relating to conflict of laws.
Section 11. Confidentiality. By its acceptance hereof each Holder of
this Warrant agrees that it will take all reasonable steps to keep confidential
any proprietary information of the Company furnished to it, provided, however,
that this restriction shall not apply to information which (i) has at the time
in question entered the public domain, (ii) is required to be disclosed by law
or by any order, rule or regulation (whether valid or invalid) of any
Governmental Body, or (iii) is furnished to purchasers or prospective purchasers
hereof (exclusive of any Person who
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<PAGE> 40
competes with, or is an Affiliate of a Person who competes with, the Company) so
long as such purchasers and prospective purchasers have agreed to be subject to
restrictions identical to those imposed upon such Holder under this sentence.
Section 12. Miscellaneous. Unless otherwise expressly provided herein
or unless the registered Holder hereof otherwise consents in writing, all
financial statements and reports furnished by the Company pursuant to Section
6(i) or otherwise furnished hereunder to the registered Holder hereof shall be
prepared and all computations and determinations pursuant hereto shall be made
in accordance with generally accepted accounting principles in the United States
consistently applied. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against whom enforcement of the same is sought. The headings in this
Warrant are for purposes of reference only and shall not affect the meaning or
construction of any provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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<PAGE> 41
IN WITNESS WHEREOF, ______________________ has caused this Warrant to
be signed and delivered and to be dated as of __________, 1999.
------------------------------------
By:
---------------------------------
Name:
ATTEST:
By:
--------------------------------
Name:
The Company hereby agrees to be bound by the covenants and obligations of the
Company contained herein:
KEVCO, INC.
By:
--------------------------------
Name:
Title:
14
<PAGE> 42
ASSIGNMENT FORM
To Be Executed by the Registered Holder
Desiring to Transfer the Within Warrant of
-------------------------------------------
For Value Received, the Undersigned registered holder hereby sells,
assigns and transfers unto _______________________ the right to purchase ______
shares of the Common Stock covered by the within Warrant, and does hereby
irrevocably constitute and appoint ___________________________ as Attorney to
transfer the said Warrant on the books of the Company (as defined in said
Warrant), with full power of substitution.
Name of Registered Holder:
--------------------------------
Signature:
--------------------------------
Title of Signing Officer
or Agent (if any):
--------------------------------
Address of Registered
Holder:
--------------------------------
Dated:
-----------------------
Signed in the presence of
- -------------------------------------
<PAGE> 43
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
Desiring to Transfer the Within Warrant of
------------------------------------------
The undersigned registered holder hereby exercises the right
to purchase ______ shares of the Common Stock covered by the within Warrant,
according to the conditions thereof, and herewith makes payment of the Purchase
Price of such shares, $____________.
Name of Registered Holder:
--------------------------------
Signature:
--------------------------------
Title of Signing Officer or Agent (if any):
--------------------------------
Address of Registered
Holder:
--------------------------------
Dated:
----------------------
<PAGE> 44
EXHIBIT B
[FORM OF CONSULTING AGREEMENT]
<PAGE> 45
FORM OF
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement") is made as of
_______________, 1999 between Kevco, Inc, a Texas corporation (the "Company"),
and Mr. Gerald E. Kimmel (the "Consultant").
WHEREAS, prior to the date hereof, the Consultant has served as the
Chairman of the Board of Directors of the Company (the "Board") and President
and Chief Executive Officer of the Company and has contributed greatly to the
Company's growth and success;
WHEREAS, on the date hereof, in connection with certain business
transactions which the Company is completing and in consideration of the
Company's obligations hereunder, the Company and the Consultant have agreed to
terminate the Consultant's current Employment Agreement, dated as of October 1,
1996 (the "Existing Agreement"), and the Consultant is resigning from the
positions described above;
WHEREAS, the Company desires to ensure the availability to the Company
of the Consultant's expertise and experience;
WHEREAS, following the date hereof, the Consultant will continue to be
the beneficial owner of a substantial amount of the Company's outstanding voting
common stock;
WHEREAS, the Company wishes the Consultant to continue to serve as a
Director of the Company and to serve as the non-executive Vice Chairman of the
Board and the Consultant is willing to and desirous of serving in such
positions; and
WHEREAS, the Consultant is willing to provide such assistance and
assurance, all upon and subject to the terms and conditions contained in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, the Company and the Consultant agree as
follows:
1. Term of Consultancy Engagement; Duties.
(a) Term. The Company hereby agrees to engage the Consultant as a
consultant, and the Consultant hereby agrees to serve in such capacity, for a
period of four years commencing on the date hereof (the "Term").
(b) Engagement. In his capacity as a consultant hereunder, the
Consultant periodically will make himself reasonably available to the Company to
advise with respect to issues that may arise from time to time concerning
aspects of the Company's businesses with which the Consultant has particular
expertise or experience. In performing his duties hereunder, the Consultant
shall coordinate and communicate his efforts with the Board. The Consultant
shall not be required to follow any formal schedule of duties or assignments and
shall perform the consultancy in a manner that the Consultant determines is
reasonable.
<PAGE> 46
2. Compensation; Benefits.
(a) Compensation. In consideration for the Consultant's consulting
undertakings as set forth in paragraph 1, the Company shall pay the Consultant
an annual fee of $315,000.00 per year, which amount shall be payable in equal
installments not less than once each month during the Term. The Company shall
reimburse the Consultant promptly after receipt of an invoice evidenced by
appropriate receipts, for all reasonable business expenses (including travel
expenses) incurred by the Consultant in connection with performing consulting
services for the Company hereunder.
(b) Medical and Dental Benefits. Until the death of the survivor of the
Consultant and the Consultant's Spouse (the "Coverage Term"), the Company shall
use its reasonable best efforts to include the Consultant and Consultant's
spouse in all present and future group health, medical, dental, hospitalization,
and similar programs offered by the Company and its subsidiaries to their
respective employees generally (collectively the "Insurance Coverage"), and the
Company shall not take any action, or fail to take any action, the effect or
result of which would be to exclude or otherwise disqualify the Consultant or
Consultant's spouse from inclusion in the Insurance Coverage. During the Term,
the Company shall bear all costs and expenses of the Insurance Coverage for the
Consultant and the Consultant's spouse but at all times thereafter during the
Coverage Term, the Consultant shall bear the premium costs and shall be
responsible for all co-payments, deductibles, and all other costs in the same
manner and to the same extent as the active employees of the Company with
respect to such Insurance Coverage. During the Term, the Consultant or
Consultant's spouse cannot be included in or covered by the Insurance Coverage
or if there is no Insurance Coverage or to the extent there is no Insurance
Coverage, the Company shall obtain for Consultant or Consultant's spouse and
shall keep in full force and effect during the Term, comparable or additional
coverage for such persons; provided, however, if any such coverage is not
available or to the extent any of such coverage is not available, the Company
shall, at its sole cost and expense, pay or reimburse the Consultant and
Consultant's spouse for, all health, medical, dental, hospitalization,
deductibles, and other similar costs and expenses (collectively, the "Health
Costs") incurred or sustained by such persons during the Term not covered or
paid for by the Insurance Coverage or such other coverage, including the
insurance premiums for the Insurance Coverage or other coverage. In determining
whether coverage is "comparable coverage" the following factors, among others,
shall be considered relevant: quality of care, freedom to select facilities,
physicians, and other health care providers, relative financial responsibility
of insured and insurer to cover Health Costs, benefits and illnesses covered by
the applicable insurance, and each of obtaining health care provider services.
If the Company desires to sell or otherwise transfer to a third
party all or substantially all of the assets or equity of the Company, the
Company covenants and agrees to and with the Consultant to cause such third
party to assume the obligations set forth in this paragraph 2(b), but any such
assumption shall not relieve the Company of its obligations hereunder. The
obligations of the Company under this paragraph 2(b) shall survive the
expiration of the Term.
(c) Obligations Absolute. The Company's obligations in respect of the
compensation payments and medical and dental benefits provided herein shall be
an absolute obligation of the Company and shall be paid regardless of whether
the Consultant actually performs any consulting services during the Term and
such obligations shall not be subject to any claims or rights of set-off,
mitigation or otherwise.
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3. Directorship; Information; Indemnity for Certain Expenses.
(a) Directorship. (i) For so long as the Consultant remains the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of at least twelve percent (12%) of the
outstanding common stock of the Company, the Company shall use its reasonable
best efforts to ensure that at all times the Consultant and one other person
designated by the Consultant and reasonably acceptable to the Company (such
person or any replacement designated by the Consultant, hereinafter the
"Designee") shall be directors of the Company and, to such end, the Company
agrees to (acting through the Board or otherwise) nominate the Consultant and
the Designee to serve as directors of the Company, to include the Consultant and
the Designee in the slate of nominees recommended by the Board to the Company's
shareholders for election as directors at such annual meetings (or special
meetings) as applicable and to use its reasonable best efforts to cause the
election of the Consultant and the Designee as directors of the Company,
including by soliciting proxies in favor of the election of the Consultant and
the Designee.
(ii) For so long as the Consultant remains the "beneficial owner"
of at least five percent (5%) of the outstanding common stock of the Company but
less than twelve percent (12%) of the outstanding common stock of the Company,
the Company shall use its reasonable best efforts to ensure that at all times
the Consultant shall be a director of the Company and, to such end, the Company
agrees to (acting through the Board or otherwise) nominate the Consultant to
serve as a director of the Company, to include the Consultant in the slate of
nominees recommended by the Board to the Company's shareholders for election as
directors at such annual meetings (or special meetings) as applicable and to use
its reasonable best efforts to cause the election of the Consultant as a
director of the Company, including by soliciting proxies in favor of the
election of the Consultant.
(iii) At all times during which the Consultant serves as a director
of the Company, the Company agrees to (acting through the Board or otherwise)
appoint the Consultant to serve as the non-executive Vice Chairman of the Board.
(b) Information. At any time during which the Consultant has the right
to be nominated as a director pursuant to Section 3(a) hereof, the Company will
make available to the Consultant such financial and other information concerning
the Company and its business and affairs as he may reasonably request in
connection with his status as a director of the Company.
(c) Reimbursement for Certain Expenses. The Company agrees that, in
addition to any rights the Consultant may have to indemnification or
reimbursement from the Company pursuant to the provisions of the Company's
charter, under applicable law or any applicable policy of insurance, in his
capacities as a present or former officer and/or director of the Company, the
Company will reimburse the Consultant for costs or expenses (including
reasonable attorney's fees and expenses) incurred in defending or responding to
any claim, action, suit, proceeding or investigation arising out of or
pertaining to this Agreement, the Stock Purchase Agreement, dated as of December
23, 1998, among the Consultant, the Company, and Wingate Partners II, L.P., the
Stock Purchase Agreement, dated as of December 23, 1998, between the Company and
Wingate Partners II, L.P. or any of the transactions contemplated hereby or
thereby, provided the Consultant is ultimately found not to be liable to the
Company or its shareholders in any such claim, action, suit, proceeding, or
investigation.
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4. Nondisclosure of Confidential Information. Consultant acknowledges
that he may have access, during the course of service as a Consultant to the
Company, to certain confidential and proprietary information and products of the
Company (collectively referred to herein as the "Confidential Information").
Consultant agrees not to disclose any Confidential Information unless (i)
expressly authorized in writing by the Company, (ii) such Confidential
Information is publicly available or (iii) disclosure is required by any
governmental authority or in response to any valid legal process.
5. Miscellaneous.
(a) Entire Agreement. This Agreement contains, and is intended as, a
complete statement of all of the terms and the arrangements between the parties
hereto with respect to the matters provided for herein, and supersedes any
previous agreements and understandings between the Company and the Consultant,
including the Existing Agreement.
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE IN
AND TO BE WHOLLY PERFORMED IN SUCH STATE.
(c) Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally or by
overnight mail, or four days after being mailed by registered mail, return
receipt requested, to a party at the following address:
If to the Consultant, to:
Mr. Gerald E. Kimmel
6400 Cleburne Highway
Granbury, Texas 76049
Facsimile: (817) 326-2203
If to the Company, to:
Kevco, Inc.
1300 South University Drive
Suite 200
Fort Worth, Texas 76107
Facsimile: (817) 332-3403
(d) Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
(e) Binding Effect; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either party without the prior written consent of
the other party.
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<PAGE> 49
(f) Amendments. This Agreement may be amended, supplemented or
modified, and any provision hereof may be waived, only pursuant to a written
instrument making specific reference to this Agreement signed by each of the
parties hereto.
(g) Independent Contractor. The Consultant shall be an independent
contractor and the Company shall not withhold any income or other taxes from the
payments hereunder.
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IN WITNESS WHEREOF, the Company and the Consultant have executed this
Agreement as of the day and year first above written.
KEVCO, INC.
By:
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Name:
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Title:
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GERALD E. KIMMEL
