<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
White Cap Industries, Inc.
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(Name of Issuer)
Common Stock, .01 par value
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(Title of Class of Securities)
963505 10 2
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(CUSIP Number)
Jennifer Bellah, Esq., Gibson, Dunn & Crutcher, LLP, 333 South Grand Avenue,
Suite 4800, Los Angeles, CA 90071
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
July 21, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following / /.
NOTE: Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. SEE
Rule 13d-7(b) for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 7 Pages)
- --------------------------
1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP No. 963505 10 2 13D Page 2 of 7 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Green Equity Investors III, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) /X/
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER 7 SOLE VOTING POWER
OF 0
SHARES ------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 4,879,772
REPORTING ------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,879,772
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/X/
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
45.5%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 963505 10 2 13D Page 3 of 7 Pages
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ITEM 1(a). NAME OF ISSUER:
---------------
White Cap Industries, Inc., a Delaware corporation (the
"Issuer").
ITEM 1(b). ADDRESS OF ISSUER'S PRINCIPAL EXECUTIVE OFFICES:
------------------------------------------------
3120 Airway Ave, P.O. Box 1770, Costa Mesa, California, 92626
ITEM 1(c). TITLE OF CLASS OF EQUITY SECURITIES:
------------------------------------
Common Stock, .01 par value
ITEM 2(a)-(c), (f). IDENTITY AND BACKGROUND:
------------------------
The Reporting Person is Green Equity Investors III, L.P., a
Delaware limited partnership ("GEI III"), an investment company having a
principal place of business at 11111 Santa Monica Boulevard, Suite 2000, Los
Angeles, California 90025.
The general partner of GEI III is GEI Capital III, L.L.C., a
Delaware limited liability company ("GEI"). LGP Management, Inc., a Delaware
corporation ("LGPM"), is the general partner of Leonard Green & Partners, L.P.,
a Delaware limited partnership ("LGP"), which is an affiliate of GEI and the
management company of GEI III. The principal place of business of each of GEI,
LGPM and LGP is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles,
California 90025.
As a result of their relationship with GEI III, GEI, LGPM and
LGP each may be deemed to have indirect beneficial ownership of the common stock
with respect to which GEI III has beneficial ownership; however, each of GEI,
LGPM and LGP disclaim beneficial ownership of the common stock.
Leonard I. Green, Jonathan D. Sokoloff, John G. Danhakl,
Gregory J. Annick, Peter J. Nolan and Jonathan A. Seiffer, each an individual
United States citizen having a principal business address at 11111 Santa Monica
Boulevard, Suite 2000, Los Angeles, California 90025, either directly (whether
through ownership interest or position) or through one or more intermediaries,
may be deemed to control LGP and GEI. As stated above, LGP and GEI may be deemed
to share beneficial ownership with respect to the common stock of which GEI III
has beneficial ownership. As such, Messrs. Green, Sokoloff, Danhakl, Annick,
Nolan and Seiffer may be deemed to have shared beneficial ownership with respect
to the common stock. However, such individuals disclaim beneficial ownership of
the common stock.
ITEM 2(d). CRIMINAL CONVICTIONS IN LAST FIVE YEARS:
----------------------------------------
Neither GEI III nor any person disclosed in response to Item
2(a) has been convicted in a criminal proceeding during the last five years.
ITEM 2(e). CERTAIN CIVIL PROCEEDINGS IN LAST FIVE YEARS:
---------------------------------------------
Neither GEI III nor any person disclosed in response to Item
2(a) has been party to any civil proceeding as a result of which it has been
subject to a judgment, decree, final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation in respect of such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION:
--------------------------------------------------
The source of funds that will be used in connection with the
Merger Transaction described in Item 4 is expected to be issuance of debt or
equity securities or bank or other commercial borrowings or some combination of
securities issuances and borrowings. As set forth in the Letter dated July 20,
1999 from LGP to the Issuer (attached hereto as Exhibit 7(c)), LGP, on behalf of
GEI III, has expressed its willingness to provide up to $114.5 million of
financing in connection with the Merger Transaction, consisting of holding
company zero coupon notes, preferred and common stock financing. This financing
is contingent upon the Issuer's satisfaction of the conditions set forth in the
Agreement described in Item 4, and the financial commitment of Donaldson, Lufkin
& Jenrette Securities Corporation (with its affiliates, "DLJ").
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CUSIP No. 963505 10 2 13D Page 4 of 7 Pages
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Additional financing for the Merger Transaction is expected to
be provided by (a) the proceeds from the issuance by the Issuer, for cash, of
$120.0 million of senior subordinated debt securities in an offering exempt from
registration under the Securities Act of 1933, (b) the proceeds of issuance by
the Issuer of $30 million zero-coupon junior subordinated notes and (c) a $100
million revolving credit facility of the type described in the Commitment Letter
dated July 20, 1999 from DLJ (the "Commitment Letter," attached hereto as
Exhibit 7(e)), of which up to $10 million will be available to finance the
Merger Transaction. In the alternative, if the Issuer is unable to issue the
$120.0 million of senior subordinated debt securities, DLJ has committed in the
Commitment Letter to provide a $70 million term loan facility and a $30 million
bridge revolving credit facility and to purchase $50 million in increasing rate
bridge notes.
ITEM 4. PURPOSE OF TRANSACTION:
-----------------------
On July 21, 1999, the Issuer and WC Recapitalization Corp., a
Delaware corporation wholly owned by GEI III ("WC"), entered into an Agreement
and Plan of Merger (the "Agreement," attached hereto as Exhibit 7(a)) pursuant
to which the Issuer agreed to be acquired in a cash merger at a price not to
exceed $16.50 per share of common stock. The Agreement provides for a
recapitalization of the Issuer, effected through a merger. Subject to
shareholder approval, all shares of the Issuer's common stock outstanding
(except for (a) 971,446 shares of common stock held by certain members of
management (the "Management Group") to remain outstanding and (b) shares of
common stock held in the Issuer's treasury or owned by WC to be canceled without
payment or conversion thereof) would be canceled and converted automatically
into the right to receive an amount equal to $16.50 in cash, without interest.
Immediately thereafter, pursuant to the Agreement, WC would effect a merger with
the Issuer, in which the Issuer would become the surviving corporation.
On July 22, 1999, holders of approximately 45.5% of the
outstanding shares of common stock of the Issuer entered into shareholder voting
agreements and executed irrevocable proxies pursuant to the Stockholders Voting
Agreement (attached hereto as Exhibit 7(b)), which provides, among other things,
that such holders will vote in favor of the Agreement.
Also, pursuant to the Agreement, members of the Management
Group agreed to enter into the Stockholders Voting Agreement (attached hereto as
Exhibit 7(b)) and into employment agreements, which effectively gave those
members a continued equity and management interest in the Issuer. Immediately
after the merger, a portion of the outstanding shares of common stock held by
the Management Group which were not canceled will be exchanged for newly-issued
shares of preferred stock of the Issuer. Together, the Management Group will
then hold shares of common stock and preferred stock of the Issuer in equivalent
proportion to the stockholder of WC. The transactions contemplated by the
Agreement are herein collectively referred to as the "Merger Transaction."
Completion of the Merger Transaction is subject to a number of
conditions, including (i) approval of the Agreement by the holders of the
Issuer's common stock, (ii) obtaining sufficient financing to complete the
Merger Transaction and (iii) compliance with all applicable regulatory
requirements.
It is anticipated that the common stock of the Issuer will be
delisted from the NASD National Market System as a result of the Merger
Transaction.
The description of the Merger Transaction disclosed in this
Item 4 is qualified in its entirety by reference to the Exhibits attached
hereto.
Except as disclosed in this Item 4, no Reporting Person nor
any other person disclosed in response to Item 2(a) has any current plans or
proposals which relate to or would result in any of the events described in
clauses (a) through (j) of the instructions to Item 4 of Schedule 13D.
ITEM 5(a) & (b). AGGREGATE NUMBER AND PERCENTAGE OF CLASS OF COMMON STOCK:
---------------------------------------------------------
<TABLE>
<CAPTION>
Number of Shares With Aggregate Number of
Sole Voting and Shared Voting and Shares Beneficially Percentage of Class
Name Dispositive Power Dispositive Power Owned Beneficially Owned (1)
---- --------------------- ----------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
GEI III 0 4,879,772 4,879,772 45.5%
</TABLE>
(1) The percentage of common stock indicated on this table are based on
10,725,188 shares of common stock outstanding as of May 28, 1999, as
disclosed in the Issuer's most recent Form 10-K filed with the Securities
and Exchange Commission.
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CUSIP No. 963505 10 2 13D Page 5 of 7 Pages
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ITEM 5(c). TRANSACTIONS IN THE COMMON STOCK WITHIN LAST 60 DAYS:
-----------------------------------------------------
Neither the Reporting Person nor any other person disclosed in
response to Item 2(a) has effected any transactions in the Common Stock in the
last 60 days.
ITEM 5(d). RIGHTS OF ANY OTHER PERSON:
---------------------------
Not applicable.
ITEM 5(e). DATE ON WHICH REPORTING PERSON CEASED TO BE BENEFICIAL OWNER
OF FIVE PERCENT OF COMMON STOCK:
--------------------------------------------------------------
Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER:
--------------------------------------------------------------
Pursuant to the Agreement, certain shareholders have entered
into a Stockholders Voting Agreement (attached hereto as Exhibit 7(b)), with
respect to an aggregate of approximately 45.5% of the shares of the Issuer's
common stock outstanding. These shareholders have agreed to vote the shares of
common stock currently held by them in favor of the Merger Transaction. In that
regard, they have executed irrevocable proxies. The names of the shareholders
who entered into these agreements are set forth on Schedule I of the
Stockholders Voting Agreement. Other than the matters disclosed in response to
Items 4 and 5 and this Item 6, neither the Reporting Person nor any other person
disclosed in response to Item 2(a) is party to any contracts, arrangements,
understandings or relationships with respect to any securities of the Issuer,
including but not limited to the transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option agreements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS:
---------------------------------
<TABLE>
<CAPTION>
<S> <C>
Exhibit 7(a) Agreement and Plan of Merger dated
as of July 21, 1999 by and between
White Cap Industries, Inc., a Delaware
corporation, and WC Recapitalization
Corp., a Delaware corporation
Exhibit 7(b) Stockholders Voting Agreement dated as
of July 22, 1999 among WC
Recapitalization Corp. and the
stockholders of White Cap Industries,
Inc. whose names appear on Schedule I
thereto
Exhibit 7(c) Letter dated July 20, 1999 from
Leonard Green & Partners, L.P. to White
Cap Industries, Inc.
Exhibit 7(d) Exclusivity Letter dated July 13, 1999
from Leonard Green & Partners, L.P. to
White Cap Industries, Inc.
Exhibit 7(e) Commitment Letter dated July 20,
1999, from Donaldson, Lufkin & Jenrette
Securities Corporation to Leonard Green
& Partners, L.P.
</TABLE>
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CUSIP No. 963505 10 2 13D Page 6 of 7 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
GREEN EQUITY INVESTORS III, L.P.
By: GEI CAPITAL III, L.L.C.,
its general partner
By: July 30, 1999
---------------------------------
Peter J. Nolan, Manager
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CUSIP No. 963505 10 2 13D Page 7 of 7 Pages
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<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
Exhibit 7(a) Agreement and Plan of Merger dated as of July 21, 1999
by and between White Cap Industries, Inc., a Delaware
corporation, and WC Recapitalization Corp., a Delaware
corporation
Exhibit 7(b) Stockholders Voting Agreement dated as of July 22, 1999
among WC Recapitalization Corp. and the stockholders of
White Cap Industries, Inc. whose names appear on
Schedule I thereto
Exhibit 7(c) Letter dated July 20, 1999 from Leonard Green &
Partners, L.P. to White Cap Industries, Inc.
Exhibit 7(d) Exclusivity Letter dated July 13, 1999 from Leonard
Green & Partners, L.P. to White Cap Industries, Inc.
Exhibit 7(e) Commitment Letter dated July 20, 1999, from Donaldson,
Lufkin & Jenrette Securities Corporation to Leonard
Green & Partners, L.P.
</TABLE>
<PAGE>
================================================================================
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WHITE CAP INDUSTRIES, INC.
AND
WC RECAPITALIZATION CORP.
JULY 21, 1999
================================================================================
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE(S)
-------
<S> <C>
ARTICLE I DEFINITIONS.............................................................................1
Section 1.1 Certain Definitions........................................1
Section 1.2 Terms Generally............................................6
ARTICLE II THE MERGER.............................................................................6
Section 2.1 The Merger.................................................6
Section 2.2 Conversion (or Retention) of Shares........................7
Section 2.3 Payment of Cash for Other Shares...........................8
Section 2.4 Proxy Materials...........................................10
Section 2.5 Exchange of Stock Certificates............................10
Section 2.6 Dissenting Shares.........................................10
Section 2.7 Stock Options.............................................11
ARTICLE III THE SURVIVING CORPORATION............................................................12
Section 3.1 Certificate of Incorporation..............................12
Section 3.2 Bylaws....................................................12
Section 3.3 Directors and Officers....................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................12
Section 4.1 Corporate Existence and Power.............................12
Section 4.2 Corporate Authorization...................................12
Section 4.3 Governmental Authorization................................13
Section 4.4 Non-contravention.........................................13
Section 4.5 Capitalization............................................13
Section 4.6 Reports and Financial Statements..........................14
Section 4.7 Disclosure Documents......................................15
Section 4.8 Absence of Certain Changes or Events......................15
Section 4.9 No Undisclosed Material Liabilities.......................17
Section 4.10 Litigation................................................17
Section 4.11 Taxes.....................................................17
Section 4.12 ERISA.....................................................19
Section 4.13 Labor Matters.............................................20
Section 4.14 Compliance with Laws and Court Orders.....................21
Section 4.15 Finders'Fees..............................................21
Section 4.16 Environmental Matters.....................................21
Section 4.17 Subsidiaries..............................................22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.18 Year 2000 Compliance......................................22
Section 4.19 Insurance.................................................23
Section 4.20 Certain Business Practices................................23
Section 4.21. Suppliers and Customers...................................23
Section 4.22. Contracts.................................................24
Section 4.23. Disclosure................................................25
Section 4.24. Intellectual Property.....................................25
Section 4.25. Related Party Transactions................................26
Section 4.26. Assets....................................................26
Section 4.27. Delaware Section 203......................................27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MERGERSUB............................................27
Section 5.1 Corporate Existence and Power.............................27
Section 5.2 Corporate Authorization...................................27
Section 5.3 Governmental Authorization................................27
Section 5.4 Non-contravention.........................................28
Section 5.5 Disclosure Documents......................................28
Section 5.6 Litigation................................................28
Section 5.7 Finders'Fees..............................................28
Section 5.8 Financing.................................................28
Section 5.9 Capitalization............................................29
ARTICLE VI COVENANTS OF THE COMPANY..............................................................29
Section 6.1 Conduct of the Company....................................29
Section 6.2 Stockholder Meeting; Proxy Material.......................31
Section 6.3 Access to Information; Right of Inspection................32
Section 6.4 Other Potential Acquirers.................................32
Section 6.5 Resignation of Directors..................................34
Section 6.6 Notice....................................................34
ARTICLE VII COVENANTS OF MERGERSUB...............................................................34
Section 7.1 Voting of Shares..........................................34
Section 7.2 Director and Officer Liability............................34
ARTICLE VIII COVENANTS OF MERGERSUB AND THE COMPANY..............................................35
Section 8.1 Reasonable Best Efforts...................................35
Section 8.2 Certain Filings...........................................35
Section 8.3 Public Announcements......................................36
Section 8.4 Further Assurances........................................36
Section 8.5 Notices of Certain Events.................................36
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX CONDITIONS TO THE MERGER..............................................................37
Section 9.1 Conditions to the Obligations of Each Party...............37
Section 9.2 Conditions to the Obligations of MergerSub................37
Section 9.3 Conditions to the Obligations of the Company..............39
ARTICLE X TERMINATION............................................................................39
Section 10.1 Termination...............................................39
Section 10.2 Termination Fee...........................................40
Section 10.3 Effect of Termination.....................................41
ARTICLE XI MISCELLANEOUS.........................................................................41
Section 11.1 Notices...................................................41
Section 11.2 Survival of Representations and Warranties................42
Section 11.3 Amendments'No Waivers.....................................43
Section 11.4 Expenses..................................................43
Section 11.5 Transfer Taxes............................................43
Section 11.6 Successors and Assigns....................................43
Section 11.7 Governing Law.............................................43
Section 11.8 Counterparts; Effectiveness...............................43
Section 11.9 Severability..............................................43
Section 11.10. Specific Performance......................................44
Section 11.11 Entire Agreement; No Third-Party Beneficiaries............44
</TABLE>
iii
<PAGE>
EXHIBITS
A. Certificate of Incorporation of Surviving Corporation
B-1. Form of Employment Agreement for Greg Grosch
B-2. Form of Employment Agreement for Dan Tsujioka
B-3. Form of Employment Agreement for Richard Gagnon
B-4. Form of Employment Agreement for Chris Lane
B-5. Form of Employment Agreement for Jack Karg
B-6. Form of Employment Agreement for Brian Etter
C. Form of Stockholders Agreement
ANNEX
1. Terms of Preferred Stock
DISCLOSURE LETTER
Section 4.1 - Corporate Existence and Power
Section 4.4 - Non-Contravention
Section 4.5 - Capitalization
Section 4.8 - Absence of Certain Changes or Events
Section 4.9 - No Undisclosed Material Liabilities
Section 4.11 - Taxes
Section 4.12 - ERISA
Section 4.13 - Labor Matters
Section 4.16 - Environmental Matters
Section 4.17 - Subsidiaries
Section 4.18 - Year 2000 Program
Section 4.22 - Contracts
Section 4.24 - Intellectual Property
Section 4.25 - Related Party Transactions
Section 4.26 - Assets
Section 6.1 - Conduct of the Company
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
July 21, 1999 by and between White Cap Industries, Inc., a Delaware
corporation (the "Company") and WC Recapitalization Corp., a Delaware
corporation ("MergerSub").
RECITALS
A. As of the date hereof, certain holders of outstanding capital
stock of the Company have entered into shareholder voting agreements (the
"Voting Agreements") and executed irrevocable proxies (the "Irrevocable
Proxies") constituting approximately forty-five percent (45%) of the
outstanding capital stock of the Company.
B. MergerSub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger (as
defined below) and also to prescribe certain conditions to the Merger.
C. It is intended that the Merger be recorded as a recapitalization
for financial reporting purposes.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the respective meanings set forth below:
"Balance Sheet" shall mean the consolidated balance sheet of the
Company as of March 27, 1999 (and the notes thereto) set forth in the
Company's annual report on Form 10-K for the fiscal year ended March 27, 1999.
"Balance Sheet Date" shall mean March 27, 1999.
"Benefit Arrangements" shall have the meaning set forth in Section
4.12(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Share Exchange Ratio" shall have the meaning set forth in
Section 2.2(d).
"Common Shares" shall mean the shares of Common Stock.
1
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"Common Stock" shall mean the capital stock of the Company
designated as common stock, .01 par value per share.
"Company" shall mean White Cap Industries, Inc., a Delaware
corporation.
"Company Intellectual Property Rights" shall have the meaning set
forth in Section 4.24.
"Company Proxy Statement" shall have the meaning set forth in
Section 4.7.
"Company SEC Reports" shall have the meaning set forth in Section
4.6.
"Company Securities" shall have the meaning set forth in Section
4.5(b).
"Company Stockholder Meeting" shall have the meaning set forth in
Section 6.2.
"Confidentiality Agreement" shall mean the Confidentiality Agreement
dated as of April 15, 1999 by and between the Company and Leonard Green &
Partners, L.P.
"Contracts" shall have the meaning set forth in Section 4.22.
"Current Policies" shall have the meaning set forth in Section 7.2.
"Delaware Corporate Law" shall mean the Delaware General Corporation
Law, as amended.
"Director Options" shall mean the outstanding options to acquire
Shares granted to directors of the Company.
"Disbursing Agent" shall have the meaning set forth in Section 2.3.
"Disclosure Letter" shall have the meaning set forth in the preamble
to Article IV.
"Dissenting Shares" shall have the meaning set forth in Section 2.6.
"DLJ" shall mean Donaldson, Lufkin & Jenrette Securities Corporation.
"DLJ Senior Debt Fund" shall mean DLJ Capital Funding, Inc.
"Effective Time" shall have the meaning set forth in Section 2.1(b).
"Employee Benefit Plan" shall have the meaning set forth in Section
3(3) of ERISA.
"Employee Options" shall mean the outstanding options to acquire
Shares granted to employees of the Company.
"Employee Plans" shall have the meaning set forth in Section 4.12(a).
2
<PAGE>
"Environmental Laws" shall mean any and all applicable federal,
state, local and foreign statutes, Laws, regulations, ordinances, rules,
judgments, orders, decrees, codes, injunctions, permits, relating to human
health, natural resources, or the environment or to Releases of Hazardous
Substances or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances or the notification, clean-up or other remediation
thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Expenses" shall have the meaning set forth in Section 10.2.
"Financing" shall have the meaning set forth in Section 5.8.
"Financing Letters" shall have the meaning set forth in Section 5.8.
"GAAP" shall mean generally accepted accounting principles, as in
effect in the United States, from time to time.
"Governmental Authority" shall mean any agency, public or regulatory
authority, instrumentality, department, commission, court, ministry, tribunal
or board of any government, whether foreign or domestic and whether national,
federal, tribal, provincial, state, regional, local or municipal, including
without limitation the United States Federal Communications Commission.
"Hazardous Substances" shall mean any wastes, substances, radiation,
or materials (whether solids, liquids or gases) (i) which are hazardous,
toxic, infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii)
which are defined as "hazardous materials" "hazardous wastes," "hazardous
substances," "wastes" or other similar designations in any Environmental
Laws; (iii) without limitation, which contain asbestos and
asbestos-containing materials, lead-based paints, urea-formaldehyde foam
insulation, and petroleum or petroleum products (including, without
limitation, crude oil or any fraction thereof) or (iv) which pose a hazard to
human health and safety, natural resources, or the environment.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Insurance Policies" shall have the meaning set forth in Section
4.19.
"Irrevocable Proxies" shall have the meaning set forth in the
Recitals.
"Law" shall mean statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions,
decrees, licenses, agreements, settlements, governmental guidelines or
interpretations, permits, rules and bylaws of a Governmental Authority.
3
<PAGE>
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset.
"Material Adverse Effect" shall mean with respect to the same or any
similar events, acts, conditions or occurrences, whether individually or in
the aggregate, a material adverse effect on (i) the business, financial
condition, results of operations, assets or liabilities of such party, (ii)
the legality or enforceability against a party to this Agreement or (iii) the
ability of a party to perform its obligations and to consummate the
transactions under this Agreement. An adverse change in the market price or
trading volume of the Shares shall not be deemed, by itself, to constitute a
Material Adverse Effect.
"Merger" shall have the meaning set forth in Section 2.1(a).
"Merger Consideration" shall have the meaning set forth in Section
2.2(a).
"MergerSub" shall mean WC Recapitalization Corp., a Delaware
corporation.
"MergerSub Common Shares" shall mean the common stock, $.01 par
value, of MergerSub.
"MergerSub Preferred Shares" shall mean the preferred stock of
MergerSub.
"MergerSub Securities" shall have the meaning set forth in Section
5.9.
"New Financing Letters" shall have the meaning set forth in Section
5.8.
"Notice of Superior Proposal" shall have the meaning set forth in
Section 6.4(b).
"Other Shares" shall have the meaning set forth in Section 2.2(a).
"Options" shall mean Employee Options and Director Options.
"Pension Plans" shall have the meaning set forth in Section 4.12(a).
"Permits" shall mean any licenses, franchises, permits,
certificates, consents, approvals or other similar authorizations affecting,
or relating in any way to, the assets or business of the Company.
"Person" shall mean any individual, corporation, limited liability
company, partnership, association, trust or any other entity or organization,
including any government or political subdivision or any agency or
instrumentality thereof.
"Preferred Stock" shall have the meaning set forth in Section 2.2(c).
"Preferred Stock Exchange Ratio" shall have the meaning set forth in
Section 2.2(d).
"Proceeding" shall have the meaning set forth in Section 4.10.
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"Property" shall have the meaning set forth in Section 4.27.
"Related Parties" shall have the meaning set forth in Section 4.26.
"Release" means any emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping,
disposal, or release of Hazardous Substances into or upon the environment,
including the air, soil, surface water, groundwater, the sewer, septic
system, storm drain, publicly owned treatment works, or waste treatment,
storage, or disposal systems.
"Replacement Policies" shall have the meaning set forth in Section
7.2.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Shares" shall mean the Common Stock and the Series B Preferred
Stock of the Company.
"Share Exchange Ratio" shall have the meaning set forth in Section
2.2(d).
"Subsidiary" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Superior Proposal" shall have the meaning set forth in Section
6.4(c).
"Surviving Corporation Shares" shall mean the common stock, .01 par
value, of the Surviving Corporation.
"Surviving Corporation" shall have the meaning set forth in Section
2.1(a).
"System" has the meaning set forth in Section 4.18.
"Tax" or "Taxes" shall mean (A) all taxes, charges, fees, duties,
levies, penalties or other assessments, including, without limitation,
income, gross receipts, excise, real and personal property, sales, use,
transfer, license, payroll, withholding, social security, franchise,
unemployment insurance, workers' compensation, employer health tax or other
taxes, fees, assessments or charges of any kind whatsoever, imposed by any
Governmental Authority and shall include any interest, penalties or additions
to tax attributable to any of the foregoing, (B) any liability for payment of
amounts described in clause (A) whether as a result of transferee liability,
of being a member of an affiliated, consolidated, combined or unitary group
for any period, or otherwise through operation of law, and (C) any liability
for the payment of amounts described in clauses (A) or (B) as a result of any
tax sharing agreement, tax allocation agreement, tax indemnity agreement, or
other agreement that includes indemnification for any tax liability.
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"Tax Return" shall mean all returns, declarations, reports, forms,
estimates, information returns, statements or other documents (including any
related or supporting information) filed or required to be filed with or
supplied to any Governmental Authority in connection with any Taxes.
"Third Party" shall have the meaning set forth in Section 6.4(c).
"Third Party Acquisition" shall have the meaning set forth in
Section 6.4(d).
"Voting Agreements" shall have the meaning set forth in the Recitals.
"Year 2000 Compliant" shall have the meaning set forth in Section
4.18.
Section 1.2 TERMS GENERALLY. The definitions in Sections 1.1 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation"
even if not followed actually by such phrase unless the context expressly
provides otherwise. All references herein to Sections, paragraphs and
Exhibits and Schedules shall be deemed references to Sections or paragraphs
of or Exhibits or Schedules to this Agreement unless the context shall
otherwise require. Unless otherwise expressly defined, terms defined in this
Agreement shall have the same meanings when used in any Exhibit or Schedule
and terms defined in any Exhibit or Schedule shall have the same meanings
when used in this Agreement or in any other Exhibit or Schedule. The words
"herein," "hereof," "hereto" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular provision
of this Agreement.
ARTICLE II
THE MERGER
Section 2.1 THE MERGER.
(a) At the Effective Time, MergerSub shall be merged
with and into the Company in accordance with Delaware Corporate Law and the
terms and conditions hereof (the "Merger"). Upon consummation of the Merger,
the separate existence of MergerSub shall cease and the Company shall be the
surviving corporation (the "Surviving Corporation").
(b) As soon as practicable after satisfaction of (or,
to the extent permitted hereunder, waiver of) all conditions to the Merger,
the Company and MergerSub will file a certificate of merger with the
Secretary of State of the State of Delaware in accordance with Delaware
Corporate Law and make all other filings or recordings required by Law in
connection with the Merger. The Merger shall become effective at such time as
the certificate of merger is certified by the Secretary of State of the State
of Delaware or at such later time as is specified in the certificate of
merger (the "Effective Time").
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(c) The Merger shall have the effects set forth in
Sections 251, 259 and 261 of Delaware Corporate Law.
Section 2.2 CONVERSION (OR RETENTION) OF SHARES. At the Effective
Time, pursuant to this Agreement and by virtue of the Merger and without any
action on the part of MergerSub, the Company or the holders of any of the
following securities:
(a) Each share of Common Stock issued and outstanding
immediately prior to the Effective Time (including shares of Common Stock
issued upon the automatic conversion provisions applicable to the Company's
preferred stock pursuant to Article IV of the Company's certificate of
incorporation) other than: (i) any shares of Common Stock to be canceled
pursuant to Section 2.2(b) and (ii) each share of Common Stock to remain
outstanding pursuant to Section 2.2(c), shall be canceled and shall be
converted automatically into the right to receive an amount equal to $16.50
in cash, without interest (the "Merger Consideration"), payable to the holder
thereof upon surrender of the certificate formerly representing such share of
common stock in the manner provided in Section 2.3; the shares of Common
Stock being converted into the right to receive the Merger Consideration are
hereinafter referred to as the "Other Shares".
(b) Each Share held in the treasury of the Company and
each Share owned by MergerSub, if any, immediately prior to the Effective
Time shall be canceled without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(c) 813,187 shares of Common Stock registered in the
name of Greg Grosch, 57,216 shares of Common Stock registered in the name of
Dan Tsujioka, 46,000 shares of Common Stock registered in the name of Richard
Gagnon, 44,440 shares of Common Stock registered in the name of Chris Lane,
8,074 shares of Common Stock registered in the name of Jack Karg and 2,529
shares of Common Stock registered in the name of Brian Etter shall not be
converted, exchanged or canceled as provided above but shall remain
outstanding as agreed upon in the Voting Agreements. Immediately after the
Effective Time, a portion of such outstanding shares of Common Stock shall be
exchanged for newly-issued shares of preferred stock of the Company (the
"Preferred Stock") such that, after such exchange, the individuals referred
to in the first sentence of this Section 2.3(c) in the aggregate shall own
Common Stock and Preferred Stock in the same proportion as shall the sole
stockholder of MergerSub. The terms of the Preferred Stock are summarized in
Annex 1 attached hereto.
(d) Each MergerSub Common Share that is issued and
outstanding immediately prior to the Effective Time shall be converted into
one newly issued, fully paid and nonassessable share of Common Stock (the
"Common Share Exchange Ratio").
(e) Each MergerSub Preferred Share that is issued and
outstanding immediately prior to the Effective Time shall be converted into
one newly issued, fully paid and nonassessable share of Preferred Stock (the
"Preferred Share Exchange Ratio").
(f) If between the date of this Agreement and the
Effective Time the number of outstanding Shares shall have been changed into
a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split-up,
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combination, exchange of shares or the like other than pursuant to the
Merger, the amount of the Merger Consideration, the Common Share Exchange
Ratio and the Preferred Share Exchange Ratio shall be correspondingly
adjusted.
Section 2.3 PAYMENT OF CASH FOR OTHER SHARES.
(a) At the Effective Time, the Surviving Corporation
shall irrevocably deposit or cause to be deposited with a bank or trust
company to be designated by the Surviving Corporation which is organized and
doing business under the laws of the United States or any state thereof and
has a combined capital and surplus of at least $100,000,000 (the "Disbursing
Agent"), as agent for the holders of Other Shares, cash in the aggregate
amount required to pay the Merger Consideration in respect of the Other
Shares outstanding immediately prior to the Effective Time. Pending
distribution pursuant to Section 2.3(b) hereof of the cash deposited with the
Disbursing Agent, such cash shall be held in trust for the benefit of the
holders of Other Shares and such cash shall not be used for any other
purposes; provided that the Surviving Corporation may direct the Disbursing
Agent to invest such cash, provided that such investments (i) shall be
obligations of or guaranteed by the United States of America, in commercial
paper obligations receiving the highest rating from either Moody's Investors
Services, Inc. or Standard & Poor's Corporation, or in certificates of
deposit, bank repurchase agreements or bankers acceptances of domestic
commercial banks with capital exceeding $250,000,000 (collectively "Permitted
Investments") or in money market funds which are invested solely in Permitted
Investments and (ii) shall have maturities that will not prevent or delay
payments to be made pursuant to Section 2.3(b) hereof. Each holder of a
certificate or certificates representing Other Shares canceled and
extinguished at the Effective Time pursuant to Section 2.2(a) hereof may
thereafter surrender such certificate or certificates to the Disbursing
Agent, as agent for such holder of Other Shares, to effect the exchange of
such certificate or certificates on such holder's behalf for a period ending
six months after the Effective Time.
(b) After surrender to the Disbursing Agent of any
certificate which prior to the Effective Time shall have represented any
Other Shares, the Disbursing Agent shall promptly distribute to the person in
whose name such certificate shall have been registered, a check in the amount
of the Merger Consideration into which such Other Shares shall have been
converted at the Effective Time pursuant to Section 2.2(a) hereof. Until so
surrendered and exchanged, each such certificate shall, after the Effective
Time, be deemed to represent only the right to receive the Merger
Consideration, and until such surrender and exchange, no cash shall be paid
to the holder of such outstanding certificate in respect thereof. The
Surviving Corporation shall promptly after the Effective Time cause to be
distributed to such holders appropriate materials to facilitate such
surrender.
(c) If payment is to be made to a Person other than
the registered holder of the Other Shares represented by the certificate or
certificates surrendered in exchange therefor, it shall be a condition to
such payment that the certificate or certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Disbursing Agent any transfer
or other taxes required as a result of such
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payment to a Person other than the registered holder of such Other Shares or
establish to the satisfaction of the Disbursing Agent that such tax has been
paid or is not payable.
(d) After the Effective Time, there shall be no
further transfers on the stock transfer books of the Surviving Corporation of
the Other Shares that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, certificates representing Other Shares
are presented to the Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article II.
(e) If any cash deposited with the Disbursing Agent
for purposes of payment in exchange for Other Shares remains unclaimed six
months after the Effective Time, such cash shall be returned to the Surviving
Corporation, upon demand, and any such holder who has not converted his Other
Shares into the Merger Consideration prior to that time shall thereafter look
only to the Surviving Corporation for payment of the Merger Consideration.
Notwithstanding the foregoing, the Surviving Corporation shall not be liable
to any holder of Other Shares for any amount paid to a public official
pursuant to applicable unclaimed property laws. Any amounts remaining
unclaimed by holders of Other Shares seven (7) years after the Effective Time
(or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any Governmental Authority) shall,
to the extent permitted by applicable Law, become the property of the
Surviving Corporation free and clear of any claims or interest of any Person
previously entitled thereto.
(f) Any portion of the Merger Consideration made
available to the Disbursing Agent pursuant to Section 2.5(a) to pay for Other
Shares for which dissenter's rights have been perfected shall be returned to
the Surviving Corporation, upon demand.
(g) No dividends or other distributions with respect
to capital stock of the Surviving Corporation with a record date after the
Effective Time shall be paid to the holder of any unsurrendered certificate
for Other Shares.
(h) From and after the Effective Time, the holders of
Other Shares outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such Other Shares, other than the right to
receive the Merger Consideration as provided in this Agreement.
(i) In the event that any Other Share certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Other Share certificate to be lost,
stolen or destroyed and, if required by the Company, the posting by such
holder of a bond in such reasonable amount as the Company may direct as
indemnity against any claim that may be made against it with respect to such
Other Share certificate, the Disbursing Agent will issue in exchange for such
lost, stolen or destroyed Other Share certificate the Merger Consideration,
cash in lieu of fractional Other Shares, and unpaid dividends and
distributions on Other Shares deliverable in respect thereof pursuant to this
Agreement and the Merger.
Section 2.4 PROXY MATERIALS. In connection with the Company
Stockholder Meeting, the Company shall prepare and file with the SEC the
Company Proxy Statement
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relating to the transactions contemplated by this Agreement and the Merger
and shall use its reasonable best efforts to respond to the comments of the
SEC and to cause the Company Proxy Statement to be mailed to the Company's
stockholders, all as soon as reasonably practicable; provided, that prior to
the filing of the Company Proxy Statement, the Company shall consult with
MergerSub with respect to such filings and shall afford MergerSub reasonable
opportunity to comment thereon. MergerSub shall provide the Company with any
information for inclusion in the Company Proxy Statement which may be
required under applicable law and which is reasonably requested by the
Company. The Company shall promptly notify MergerSub of the receipt of the
comments of the SEC and of any request from the SEC for amendments or
supplements to the Company Proxy Statement or for additional information, and
will promptly supply MergerSub with copies of all correspondence between the
Company or its representatives, on the one hand, and the SEC or members of
its staff, on the other hand, with respect to the Company Proxy Statement or
the Merger. If at any time prior to the Company Stockholder Meeting any event
should occur which is required by applicable law to be set forth in an
amendment of, or a supplement to, the Company Proxy Statement, the Company
will promptly inform MergerSub. In such case, the Company, with the
cooperation of MergerSub, will, upon learning of such event, promptly prepare
and mail such amendment or supplement; provided, that prior to such mailing,
the Company shall consult with MergerSub with respect to such amendment or
supplement and shall afford MergerSub reasonable opportunity to comment
thereon. The Company will notify MergerSub at least 24 hours prior to the
mailing of the Company Proxy Statement, or any amendment or supplement
thereto, to the stockholders of the Company.
Section 2.5 EXCHANGE OF STOCK CERTIFICATES. Immediately
after the Effective Time, the Surviving Corporation shall deliver to the
record holder of the certificates which immediately prior to the Effective
Time represented all the outstanding shares of MergerSub Common Shares that
were converted into the right to receive shares of Common Stock or Preferred
Stock in accordance with Section 2.2(d), in exchange for such certificates,
duly endorsed in blank, share certificates, registered in the name of such
record holder, representing the number of shares of Common Stock and
Preferred Stock to which such record holder is so entitled by virtue of
Section 2.2(d). Such certificate will bear a legend restricting the
transferability of such shares to the extent contemplated by the Stockholders
Agreement referred to in Section 9.2(h), which restrictions include
restrictions designed to assure the Surviving Corporation that these shares
will not be offered or sold in contravention of any federal or state
securities laws.
Section 2.6 DISSENTING SHARES. Notwithstanding Section 2.2, Shares
which are issued and outstanding immediately prior to the Effective Time and
which are held by a holder who has not voted such Shares in favor of the Merger
and who has delivered a written demand for relief as a dissenting stockholder in
the manner provided by Delaware Corporate Law and who, as of the Effective Time,
shall not have effectively withdrawn or lost such right to relief as a
dissenting stockholder ("Dissenting Shares") shall not be converted into a right
to receive the Merger Consideration. The holders thereof shall be entitled only
to such rights as are granted by Section 262 of Delaware Corporate Law. Each
holder of Dissenting Shares who becomes entitled to payment for such Shares
pursuant to Section 262 of Delaware Corporate Law shall
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receive payment therefor from the Surviving Corporation in accordance with
Delaware Corporate Law; provided, however, that if any such holder of
Dissenting Shares (i) shall have failed to establish his entitlement to
relief as a dissenting stockholder as provided in Section 262 of Delaware
Corporate Law, (ii) shall have effectively withdrawn his demand for relief as
a dissenting stockholder with respect to such Shares or lost his right to
relief as a dissenting stockholder and payment for his Shares under Section
262 of Delaware Corporate Law or (iii) shall have failed to file a complaint
with the appropriate court seeking relief as to determination of the value of
all Dissenting Shares within the time provided in Section 262 of Delaware
Corporate Law, such holder shall forfeit the right to relief as a dissenting
stockholder with respect to such Shares and each such Share shall be
converted into the right to receive the appropriate Merger Consideration
without interest thereon, from the Surviving Corporation as provided in
Section 2.2. The Company shall give MergerSub prompt notice of any demands
received by the Company for relief as a dissenting stockholder and MergerSub
shall have the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of MergerSub, make any payment with respect to, or settle or offer to
settle, any such demands.
Section 2.7 STOCK OPTIONS.
(a) Each Option that has an exercise price of equal to
or greater than $16.50 shall be canceled at the Effective Time.
(b) Immediately prior to the Effective Time, all other
outstanding Options shall be canceled and, in lieu thereof, as soon as
reasonably practicable as of or after the Effective Time, the holders of such
Options shall receive a cash payment from the Company equal to the product of
(i) the total number of Shares previously subject to such Option and (ii) the
excess of the Merger Consideration that would be paid with respect to the
Share subject to such Option if the Option were exercised over the exercise
price per Share subject to such Option, as reduced by any required
withholding of taxes.
(c) Prior to the Effective Time, the Company shall (i)
take all steps necessary to cause the Company's stock option plans to be
terminated on or prior to the Effective Time and to otherwise make any
amendments to the terms of such stock option plans that are necessary to give
effect to the transactions contemplated by this Agreement, and (ii) use all
necessary efforts to obtain at the earliest practicable date all written
consents from holders of Options to the cancellation of such holder's Options
to take effect at the Effective Time. Notwithstanding any other provision of
this Section, payment may be withheld in respect of any Director Option or
Employee Option until necessary or appropriate consents are obtained with
respect to such Director Option or Employee Option.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 CERTIFICATE OF INCORPORATION. The certificate of
incorporation of the Company in effect immediately prior to the Effective
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Time shall be amended as of the Effective Time as set forth in EXHIBIT A,
and, as so amended, shall be the certificate of incorporation of the
Surviving Corporation until amended in accordance therewith and with
applicable law.
Section 3.2 BYLAWS. The bylaws of MergerSub in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended
in accordance therewith and in accordance with applicable law.
Section 3.3 DIRECTORS AND OFFICERS. From and after the Effective
Time, until successors are duly elected or appointed and qualified in
accordance with applicable Law, (i) the directors of MergerSub at the
Effective Time shall be the directoris of the Surviving Corporation and (ii)
the officers of the Company at the Effective Time shall be the officers of
the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to MergerSub that except as set
forth in the corresponding sections or subsections of the Disclosure Letter
delivered to MergerSub by the Company concurrently with entering into this
Agreement (the "Disclosure Letter"):
Section 4.1 CORPORATE EXISTENCE AND POWER. Each of the Company and
its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and has
all corporate powers required to carry on its business as now conducted. Each
of the Company and its Subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on the
Company. Without limiting the generality of the foregoing, the Company and it
Subsidiaries are qualified to do business in the states shown on Section 4.1
of the Disclosure Letter. The Company has heretofore made available to
MergerSub true and complete copies of the currently effective amended and
restated certificate of incorporation and bylaws or similar organizational
documents of the Company and its Subsidiaries (as the same may be amended and
restated as of the date hereof).
Section 4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby (i) are within the Company's corporate
powers and (ii) except for the adoption of this Agreement by the affirmative
vote of a majority in voting interests of the Shares, have been duly authorized
by all necessary corporate and stockholder action. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a valid, legal
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except (i) as rights to indemnity hereunder may be
limited by federal or state securities laws or the public policies embodied
therein, (ii) as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement of
creditors' rights generally, and (iii) as the remedy of specific performance and
other forms of
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injunctive relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
Section 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
Merger by the Company require no action by or in respect of, or filing with,
any governmental body, agency, official or authority other than (i) the
filing of a certificate of merger in accordance with Delaware Corporate Law;
(ii) compliance with any applicable requirements of the HSR Act; (iii)
compliance with the applicable requirements of the Exchange Act; (iv)
compliance with the applicable requirements of the Securities Act; (v)
compliance with any applicable foreign or state securities or Blue Sky laws;
(vi) the filing of appropriate documents with the relevant authorities of the
jurisdictions in which the Company is qualified to do business; and (vii)
such other items (A) required solely by reason of the participation of
MergerSub in the Merger or (B) that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the Company.
Section 4.4 NON-CONTRAVENTION. Other than as set forth in Section
4.4 of the Disclosure Letter, the execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) contravene or
conflict with the certificate of incorporation or bylaws of the Company or
any of its Subsidiaries, (ii) contravene or conflict with or constitute a
violation of any provision of any Law, regulation, judgment, writ,
injunction, order or decree of any court or Governmental Authority binding
upon or applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, (iii) constitute a default under or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of the Company or any of its Subsidiaries or to a loss of any
benefit to which the Company or any of its Subsidiaries is entitled under any
provision of any agreement, contract or other instrument binding upon the
Company or any of its Subsidiaries, or (iv) result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries
except, in the case of clauses (ii), (iii) and (iv), for any such violation,
failure to obtain any such consent or other action, default, right, loss or
Lien that would not result in any cost, loss or damage to the Company in
excess of Two Million Dollars ($2,000,000) in the aggregate.
Section 4.5 CAPITALIZATION.
(a) The authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock of which as of July 15,
1999 there were 10,725,791 shares issued and outstanding and (ii) 60,000
shares of Series B Preferred Stock, $6,000 par value, all of which as of July
15, 1999 were issued and outstanding. As of July 15, 1999 there were
outstanding Options to purchase an aggregate of 726,640 Common Shares (of
which Options to purchase an aggregate of 148,068 Common Shares were vested
and exercisable). All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable.
(b) Except as set forth in this Section 4.5 and except
for changes since July 15, 1999 resulting from the exercise of Options
outstanding on such date, there are no
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outstanding (i) shares of capital stock or other voting securities of the
Company, (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company or its
Subsidiaries, (iii) options or other rights to acquire from the Company or
its Subsidiaries, or obligations of the Company or its Subsidiaries to issue,
any shares of capital stock, voting securities or securities convertible into
or exchangeable for shares of capital stock or voting securities of the
Company, and (iv) no equity equivalent interests in the ownership or earnings
of the Company or its Subsidiaries or other similar rights (the items in
clauses (b)(i), (ii), (iii) and (iv) being referred to collectively as the
"Company Securities"). Except as set forth on Section 4.5 of the Disclosure
Letter, there are no outstanding obligations of the Company or any Subsidiary
to repurchase, redeem or otherwise acquire any Company Securities. There are
no stockholder agreements, voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company or any of its Subsidiaries or any preemptive
rights with respect thereto.
Section 4.6 REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has timely filed with the SEC all
forms, reports, schedules, statements and other documents required to be
filed by it since August 15, 1997 under the Securities Act or the Exchange
Act (such documents, as supplemented or amended since the time of filing, the
"Company SEC Reports"). As of their respective dates, the Company SEC
Reports, including without limitation, any financial statements or schedules
included or incorporated by reference therein, at the time filed (and, in the
case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (i) complied in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited consolidated interim financial statements included
or incorporated by reference in the Company SEC Reports (including any
related notes and schedules) fairly present, in all material respects, the
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the results of their operations and their cash flows for
the periods set forth therein, in each case in accordance with past practice
and GAAP consistently applied during the periods involved (except as
otherwise disclosed in the notes thereto and subject, where appropriate, to
normal year-end adjustments that would not be material in amount or effect).
(b) The Company has heretofore made available or
promptly will make available to MergerSub a complete and correct copy of any
amendments or modifications to any Company SEC Reports filed prior to the
date hereof which are required to be filed with the SEC but have not yet been
filed with the SEC.
Section 4.7 DISCLOSURE DOCUMENTS. The proxy statement (the "Company
Proxy Statement") to be filed with the SEC in connection with the Merger will
not, at the date it is first mailed to stockholders of the Company or at the
time of the Company Stockholder Meeting,
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contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Company Proxy Statement will comply as to form in all
material respects with the requirements of the Securities Act and the
Exchange Act. No representation is made by the Company with respect to
statements made in the Company Proxy Statement based on information supplied
by MergerSub for inclusion therein.
Section 4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Since the Balance Sheet Date, and except as
discussed in the Company SEC Reports, the business of the Company and its
Subsidiaries has been conducted in all material respects in the ordinary
course consistent with past practice, neither the Company nor any of its
Subsidiaries has engaged in any transaction or series of related transactions
material to the Company and its Subsidiaries taken as a whole other than in
the ordinary course consistent with past practice, and there has not been any
event, occurrence or development, alone or taken together with all other
existing facts, that, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on the Company.
(b) Without limiting the generality of the foregoing
Section 4.8(a), since the Balance Sheet Date and except as disclosed in the
Company SEC Reports or Section 4.8 of the Disclosure Letter, there has not
been:
(i) any damage, destruction or loss to any of
the assets or properties of the Company or any of its
Subsidiaries that, individually or in the aggregate, has a
Material Adverse Effect on the Company;
(ii) any declaration, setting aside or payment of
any dividend or distribution or capital return in respect of
any shares of the Company's capital stock or any redemption,
purchase or other acquisition by the Company or any of its
Subsidiaries of any shares of the Company's capital stock or
any repurchase, redemption or other purchase by the Company or
any of its Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in,
the Company or any of its Subsidiaries, or any amendment of
any material term of any outstanding security of the Company
or any of its Subsidiaries;
(iii) any sale, assignment, transfer, lease or
other disposition or agreement to sell, assign, transfer,
lease or otherwise dispose of any of the assets of the Company
or any of its Subsidiaries for consideration in the aggregate
in excess of One Million Dollars ($1,000,000) or other than in
the ordinary course of business consistent with past
practices;
(iv) any acquisition (by merger, consolidation,
or acquisition of stock or assets) by the Company or any of
its Subsidiaries of any corporation, partnership or other
business organization or division thereof or any equity
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interest therein for consideration, or any loans or advances
to any Person in excess of One Million Dollars ($1,000,000) in
the aggregate;
(v) any incurrence of or guarantee with respect
to any indebtedness for borrowed money by the Company or any
of its Subsidiaries other than pursuant to the Company's
existing credit facilities in the ordinary course of business
or any creation or assumption by the Company or any of its
Subsidiaries of any material Lien on any material asset;
(vi) any material change in any method of
accounting or accounting practice used by the Company or any
of its Subsidiaries, other than such changes required by a
change in law or generally accepted accounting principles;
(vii) (A) any employment, deferred compensation,
severance or similar agreement entered into or amended by the
Company or any of its Subsidiaries and any employee, in each
case other than sales commission agreements and product
promotional agreements entered into in the ordinary course of
business consistent with past practice, (B) any increase in
the compensation payable or to become payable by it to any of
its directors or officers or generally applicable to all or
any category of the Company's employees, (C) any increase in
the coverage or benefits available under any vacation pay,
company awards, salary continuation or disability, sick leave,
deferred compensation, bonus or other incentive compensation,
insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any of the directors or
officers of the Company or generally applicable to all or any
category of the Company's employees or (D) severance pay
arrangements made to, for or with such directors, officers or
employees other than, in the case of (B) and (C) above,
increases in the ordinary course of business consistent with
past practice and that in the aggregate have not resulted in a
material increase in the benefits or compensation expense of
the Company or any of its Subsidiaries;
(viii) any revaluing in any material respect any of
the assets of the Company or any of its Subsidiaries,
including without limitation writing down the value of
inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(ix) any loan, advance or capital contribution
made by the Company or any of its Subsidiaries to, or
investment in, any person other than loans, advances or
capital contributions, or investments of the Company made in
the ordinary course of business consistent with past
practices; or
(x) any agreement to take any actions specified
in this Section 4.8(b), except for this Agreement.
Section 4.9 NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent,
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absolute, determined, determinable or otherwise, which would be required by
generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company (including the notes thereto), other than
liabilities and obligations which, individual or in the aggregate, will not
have a Material Adverse Effect on the Company, and other than:
(i) liabilities disclosed in the Company SEC
Reports filed prior to the date hereof;
(ii) actual trade payables incurred in the
ordinary course of business consistent with past practices;
(iii) liabilities incurred to perform this
Agreement; and
(iv) those set forth in Section 4.9 of the
Disclosure Letter.
Section 4.10 LITIGATION. Except as set forth in the Company SEC
Reports filed prior to the date hereof, (a) there is no action, suit,
investigation or proceeding pending against, or to the knowledge of the
Company threatened against or affecting, the Company or any of its
Subsidiaries or their respective properties before any court or arbitrator or
any Governmental Authority which, if determined adversely, would reasonably
be expected to have a Material Adverse Effect on the Company (a "Proceeding")
and (b) to the knowledge of the Company, there is no basis for any such
Proceeding.
Section 4.11 TAXES.
(a) Except as set forth on Section 4.11 to the Disclosure
Letter, the Company:
(i) has timely paid or caused to be paid all
Taxes required to be paid by it (including, but not limited to, any
such Taxes shown due on any Tax Return). The accrual for current Taxes
payable in the latest financial statements included or incorporated by
reference in the Company SEC Reports is adequate to cover all Taxes
attributable to periods or portions thereof ending on the date of such
financial statements, and no Taxes attributable to periods following
the date of such financial statements have been incurred other than in
the ordinary course of business;
(ii) has filed or caused to be filed in a timely
and proper manner (within any applicable extension periods) all Tax
Returns required to be filed by it with the appropriate taxing
authority in all jurisdictions in which such Tax Returns are required
to be filed, and all Tax Returns filed by the Company are true, correct
and complete and accurately set forth all items to the extent required
to be included therein; and
(iii) has not requested or caused to be requested
any extension of time within which to file any material Tax Return,
which Tax Return has not since been filed.
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(b) The Company has made available to MergerSub true,
correct and complete copies of all federal Tax Returns filed by or on behalf
of the Company or any of its Subsidiaries through the date hereof for the
periods ending on or before March 31, 1998.
(c) Except as set forth in Section 4.11 to the Disclosure
Letter:
(i) the Company has not been notified by the
Internal Revenue Service or any other taxing authority that any issues
have been raised by the Internal Revenue Service or any other taxing
authority in connection with any Tax Return filed by or on behalf of
the Company;
(ii) there are no pending Tax audits and no
waivers of statutes of limitations have been given or requested;
(iii) no Liens have been filed against the
Company, except for Liens for current Taxes not yet due and payable for
which adequate reserves have been provided for in the latest balance
sheet of the Company;
(iv) no unresolved deficiencies or additions to
Taxes have been proposed, asserted, or assessed against the Company;
(v) the Company has not received notice within
the last three years from any taxing authority in a jurisdiction in
which the Company does not file Tax Returns that the Company is or may
be subject to taxation by that jurisdiction;
(vi) the Company has withheld and paid all Taxes
required to be withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or
other third party;
(vii) the Company is not a party to a Tax sharing,
Tax allocation or similar agreement and is not bound by any closing
agreement, offer in compromise or other agreement with any Tax
authority; and
(viii) except in accordance with past practice, the
Company has not taken any action that would have the effect of
deferring any taxable income of the Company from any taxable period or
portion thereof ending before the Effective Time to any period
following the Effective Time. The Company is not required to include in
its income any adjustment pursuant to Section 481 of the Code following
the Effective Time.
Section 4.12 ERISA.
(a) Section 4.12(a) of the Disclosure Letter sets forth a
list identifying each "Employee Benefit Plan" (as defined in Section 3(3) of
ERISA), material benefit arrangement, plan, or policy, including without
limitation, (i) each deferred compensation plan, (ii) each equity compensation
plan, (iii) each plan or arrangement providing severance benefits ("Benefit
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Arrangements") which (i) is subject to any provision of ERISA or (ii) is
maintained, administered or contributed to by the Company or any affiliate (as
defined below) within the last three (3) years, under which the Company has any
liability. The most recent copies of such plans (and, if applicable, related
trust agreements) and all amendments thereto have been made available to
MergerSub together with (A) the most recent annual reports (Form 5500 including
applicable schedules and financial reports) or ERISA alternative compliance
statements prepared in connection with any such plan and (B) the most recent
actuarial valuation report prepared in connection with any such plan. Such plans
are referred to collectively herein as the "Employee Plans." For purposes of
this Section 4.12, "affiliate" of any Person means any other Person which,
together with such Person, would be treated as a single employer under Section
414 of the Code. Employee Plans which individually or collectively would
constitute an "employee pension benefit plan" as defined in Section 3(2) of
ERISA (the "Pension Plans") are identified as such in the list referred to
above.
(b) Neither the Company nor any of its affiliates
maintains or contributes to or has maintained or contributed to within the last
five (5) years a Pension Plan subject to Title IV of ERISA or Section 412 of the
Code. Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection with any Employee Plan has or will make the Company
or any Subsidiary, any officer or director of the Company or any Subsidiary
subject to any liability under Title I of ERISA or liable for any tax pursuant
to Section 4975 of the Code that could have a Material Adverse Effect.
(c) Each Employee Plan which is intended to be qualified
under Section 401(a) of the Code has received a determination letter from the
Internal Revenue Service to the effect that such Employee Plan is so qualified
and no amendments have been adopted since the receipt of such determination
letter that would result in the revocation of such letter. The Company has made
available to MergerSub copies of the most recent Internal Revenue Service
determination letters with respect to each such Plan. Nothing has occurred since
the date of the most recent Internal Revenue Service determination letters that
would adversely affect the tax-qualified status of any Plan. Each Employee Plan
has been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such Plan other than
any non-compliance which could not have a Material Adverse Effect.
(d) Except as set forth on Section 4.12(d) of the
Disclosure Letter, there is no contract, agreement, plan or arrangement covering
any employee or former employee of the Company or any of its affiliates that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code or
that could obligate the Company to make any payments that will not be fully
deductible by virtue of Section 162(m) of the Code.
(e) Except as disclosed in writing to MergerSub on
Section 4.12(e) of the Disclosure Letter, there has been no amendment to,
written interpretation or announcement (whether or not written) by the Company
or any of its affiliates relating to, or change in employee participation or
coverage under, any Employee Plan or Benefit Arrangement which
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would increase materially the expense of maintaining such Employee Plan or
Benefit Arrangement above the level of the expense incurred in respect
thereof for the fiscal year ended on the Balance Sheet Date.
(f) Except as disclosed on Section 4.12(f) of the
Disclosure Letter, the Company is not a party to or subject to (i) any
employment contract or arrangement providing for annual future compensation
of $200,000 or more with any officer, consultant, director or employee, or
that have a remaining term in excess of one year or are not cancelable
(without material penalty, cost or other liability) within one year; (ii) any
severance agreements, programs and policies with or relating to its employees
except programs and policies required to be maintained by law; or (iii) any
plans, programs, agreements and other arrangements with or relating to its
employees which contain change in control provisions. The Company has made
available to MergerSub copies (or descriptions in detail reasonably
satisfactory to MergerSub) of all such agreements, plans, programs and other
arrangements.
(g) Except as disclosed in Section 4.12(g) of the
Disclosure Letter, there will be no payment, accrual of additional benefits,
acceleration of payments or vesting in any benefit under any Employee Plan or
similar agreement or arrangement disclosed in this Agreement solely by reason
of the Company's entering into this Agreement or in connection with the
transactions contemplated by this Agreement.
Section 4.13 LABOR MATTERS.
(a) There are no strikes, slowdowns, work stoppages,
lockouts, union organizational campaigns or other protected concerted
activity under the National Labor Relations Act or, to the knowledge of
Company, threats thereof, by or with respect to any employees of the Company
or any of its Subsidiaries which could have a Material Adverse Effect on the
Company. There are no controversies pending or, to the knowledge of the
Company, threatened between the Company or any of its Subsidiaries and any of
their respective employees, which controversies have or would reasonably be
expected to have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its Subsidiaries except as disclosed in Section 4.13 of the
Disclosure Letter. There are no pending or, to the knowledge of the Company,
threatened charges or complaints against the Company or its Subsidiaries by
the National Labor Relations Board or any comparable state agency which, if
adversely determined, would have a Material Adverse Effect on the Company.
Section 4.14 COMPLIANCE WITH LAWS AND COURT ORDERS. Neither the Company
nor its Subsidiaries is in violation of, nor has it since January 1, 1997
violated, and to the knowledge of the Company nothing is under investigation
with respect to or has been threatened to be charged with or given notice of any
violation of, any applicable Law, except for possible violations that have not
had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. This Section does not
relate to matters with respect to
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Taxes or Environmental Laws which are exclusively the subject of Sections
4.11 and 4.16, respectively.
Section 4.15 FINDERS' FEES. With the exception of fees payable to
DLJ and BancBoston Robertson Stephens Inc., there is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf, of the Company or any of its Subsidiaries who
might be entitled to any fee or commission from the Company or any of its
affiliates upon consummation of the transactions contemplated by this
Agreement.
Section 4.16 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Company SEC Reports or on
Section 4.16 of the Disclosure Letter:
(i) the Company is and has at all times been in
compliance in all material respects with all Environmental Laws;
(ii) except in accordance with Permits, there has
been no Release of Hazardous Substances at any real property that is or
was owned or operated by the Company during the period of such
ownership or operation except for Releases which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company;
(iii) no notice, demand, request for information,
citation, summons, complaint or order has been received by, or, to the
knowledge of the Company, is pending or threatened by any Person
against, the Company nor has any penalty been assessed against the
Company with respect to any alleged violation of any Environmental Law;
(iv) the Company has not disposed or arranged for
the disposal of Hazardous Substances on any third party property that
has resulted in or may reasonably be expected to result in the Company
to material liability under any Environmental Law; and
(v) no underground tanks, asbestos-containing
material or polychlorinated biphenyls are or have been located on real
property that is owned or operated by the Company nor were any
underground tanks, asbestos-containing material or polychlorinated
biphenyls located on real property formerly owned or operated by the
Company during the period of the Company's ownership or operations of
such real property, or to the knowledge of the Company, prior to the
period of the Company's ownership or operations of such real property.
(b) There are no material Permits issued pursuant to or
required under any Environmental Law which require the consent, notification,
approval or other action of any Person to remain in full force and effect
following consummation of the transactions contemplated hereby. A true and
complete list of all material Permits issued pursuant to or
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required under Environmental Laws is set out in Section 4.16 of the
Disclosure Letter attached hereto.
(c) There has been no written report of any
environmental investigation, study, audit, test, review or other analysis
conducted of which the Company has knowledge and has in its possession or
control relating to the business of the Company or any real property that is
owned or operated by the Company which has not been made available to
MergerSub.
(d) The Company has not agreed to assume, undertake or
provide indemnification for any liability of any other person under any
Environmental Law, including any obligation for corrective or remedial action.
Section 4.17 SUBSIDIARIES. Section 4.17 of the Disclosure Letter lists
each Subsidiary of the Company together with the jurisdiction of incorporation
of each Subsidiary and the percentage of each Subsidiary's outstanding capital
stock or other equity interests owned by the Company or another Subsidiary of
the Company. Except as disclosed in the Company SEC Reports, all the outstanding
shares of capital stock of each Subsidiary have been validly issued, are fully
paid and nonassessable and are owned by the Company, by another Subsidiary or by
the Company and another such Subsidiary, free and clear of all Liens or any
other limitation or restriction. Except for the capital stock of the
Subsidiaries and except for the ownership interests set forth in the Company SEC
Reports, the Company does not own directly or indirectly, any capital stock or
other ownership interest in any other Person.
Section 4.18 YEAR 2000 PROGRAM.
(a) Except as described in Section 4.18 of the Disclosure
Letter or otherwise disclosed in the Company SEC Reports, to the knowledge of
the Company, the Company's central operating and accounting systems described in
the Company's most recently filed Form 10-K (the "System") are Year 2000
Compliant.
(b) "Year 2000 Compliant" means the System:
(i) will accurately input, process and output
all date and time data, whether from years in the same century or in
different centuries, including by yielding correct results in
arithmetic operations, comparisons, sequencing and sorting of date and
time data and in leap year calculations; and
(ii) will not operate abnormally or cease to
operate, return an error message or otherwise fail due to date- or
time-related processing relating to the then current date being on or
after January 1, 2000 or any other date.
(c) To the Company's knowledge, no inability exists on
the part of any material System supplier or material service provider to
timely ensure that the Company's System is Year 2000 Compliant.
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Section 4.19 INSURANCE. Each of the Company and its Subsidiaries
maintains insurance policies (the "Insurance Policies") against all risks of
a character and in such amounts as are usually insured against by similarly
situated companies in the same or similar businesses. Each Insurance Policy
is in full force and effect and is valid, outstanding and enforceable, and
all premiums due thereon have been paid in full. None of the Insurance
Policies will terminate or lapse (or be affected in any other materially
adverse manner) by reason of the transactions contemplated by this Agreement.
Each of the Company and its Subsidiaries has complied in all material
respects with the provisions of each Insurance Policy under which it is the
insured party. No insurer under any Insurance Policy has canceled or
generally disclaimed liability under any such policy or, to the Company's
knowledge, indicated any intent to do so or not to renew any such policy. All
material claims under the Insurance Policies have been filed in a timely
fashion.
Section 4.20 CERTAIN BUSINESS PRACTICES. None of the Company, any of
its Subsidiaries or any directors, officers, agents or employees of the Company
or any of its Subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment. Neither the Company nor any of its Subsidiaries
has participated in any boycotts.
Section 4.21 SUPPLIERS AND CUSTOMERS. The documents and information
supplied by the Company to MergerSub or any of its representatives in connection
with this Agreement with respect to relationships and volumes of business done
with its significant suppliers and customers are accurate in all material
respects. During the last twelve (12) months, the Company has received no
notices of termination or material alteration of a contract or business
relationship, or written threats of any such action from any of the five (5)
largest suppliers or the five (5) largest customers of the Company and its
Subsidiaries.
Section 4.22 CONTRACTS. (a) Section 4.22 of the Disclosure Letter
contains a complete and accurate list of all contracts (written or oral),
undertakings, commitments or agreements (other than contracts, undertakings,
commitments or agreements for employee benefit matters set forth in Section 4.12
of the Disclosure Letter and real property leases set forth in Section 4.26 of
the Disclosure Letter) of the following categories to which the Company or any
of its Subsidiaries is a party or by which any of them is bound (collectively,
and together with the contracts, undertakings, commitments or agreements for
employee benefit matters set forth in Section 4.12 of the Disclosure Letter and
the real property leases set forth in Section 4.26 of the Disclosure Letter, the
"Contracts"):
(i) Contracts requiring annual expenditures by
or liabilities of the Company and its Subsidiaries in excess of Five
Hundred Thousand Dollars ($500,000) which have a remaining term in
excess of one hundred eighty (180) days or are not cancelable (without
material penalty, cost or other liability) within one hundred eighty
(180) days;
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(ii) promissory notes, loans, agreements,
indentures, evidences of indebtedness or other instruments relating to
the lending of money, whether as borrower, lender or guarantor, in
excess of Two Hundred Fifty Thousand Dollars ($250,000).
(iii) Contracts containing covenants limiting the
freedom of the Company or any of its Subsidiaries to engage in any line
of business (other than prohibitions against engaging in business
relating to specific product lines) or compete with any person, in any
product line or line of business, or operate at any location;
(iv) joint venture or partnership agreements or
joint development or similar agreements pursuant to which any third
party has been entitled or is reasonably expected to be entitled to
share in profits or losses of the Company or its Subsidiaries;
(v) Contracts with any federal, state or local
government which have a remaining term in excess of one year or are not
cancelable (without material penalty, cost or other liability) within
one year;
(vi) other Contract or commitment in which the
Company or any of its Subsidiaries has granted manufacturing rights or
exclusive marketing rights relating to any product or service, any
group of products or services or any territory; and
(vii) to the knowledge of the Company, as of the
date hereof any other Contract the performance of which could be
reasonably expected to require expenditures by the Company or any of
its Subsidiaries in excess of Five Hundred Thousand Dollars ($500,000).
(b) Except as set forth in Section 4.22 of the Disclosure
Letter, true and complete copies of the written Contracts and descriptions of
verbal Contracts, if any, have been delivered or made available to MergerSub.
Each of the Contracts is a valid and binding obligation of the Company and, to
the Company's knowledge without any investigation, the other parties thereto,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium,
reorganization, arrangement or similar laws affecting creditors' rights
generally and by general principles of equity. To the knowledge of the Company,
except for the execution of this Agreement and the consummation of the
transactions contemplated hereby and thereby, no event has occurred which would,
on notice or lapse of time or both, entitle the holder of any indebtedness
issued pursuant to a Contract identified in Section 4.22 of the Disclosure
Letter in response to paragraph (ii) above to accelerate, or which does
accelerate, the maturity of any such indebtedness.
(c) None of the Company or its Subsidiaries is in breach,
default or violation (and no event has occurred or not occurred through the
Company's action or inaction or, to the knowledge of the Company, through the
action or inaction of any third parties, which with notice or the lapse of time
or both would constitute a breach, default or violation) of any term, condition
or provision of any Contract to which the Company or any of its Subsidiaries is
now a party or by which any of them or any of their respective properties or
assets may be bound, except for
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violations, breaches or defaults that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company.
Section 4.23 DISCLOSURE. None of the representations or warranties made
by the Company herein or in any schedule hereto, including the Disclosure
Letter, or in any certificate furnished by the Company pursuant to this
Agreement, or in the Company SEC Reports, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which made, not
misleading.
Section 4.24 INTELLECTUAL PROPERTY.
(a) Each of the Company and its Subsidiaries owns or
possesses adequate licenses or other valid rights to use all existing United
States and foreign patents, trademarks, trade names, service marks, copyrights,
trade secrets and applications therefor (the "Company Intellectual Property
Rights") except where the failure to own or possess valid rights to use such
Company Intellectual Property Rights would not have a Material Adverse Effect on
the Company.
(b) The validity of the Company Intellectual Property
Rights and the title thereto of the Company or any Subsidiary, as the case may
be, is not being questioned in any pending litigation proceeding to which the
Company or any Subsidiary is a party nor, to the knowledge of the Company, is
any such litigation proceeding threatened. Except as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company and except as set forth in Section 4.24 of the Disclosure Letter,
the conduct of the business of the Company and its Subsidiaries as now conducted
does not, to the knowledge of the Company, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others, and the
consummation of the transactions completed by this Agreement will not result in
the loss or impairment of any Company Intellectual Property Rights.
Section 4.25 RELATED PARTY TRANSACTIONS. Except as set forth in the
Company SEC Reports or Section 4.25 of the Disclosure Letter, (a) no beneficial
owner of 5% or more of the Company's outstanding capital stock, or (b) officer
or director of the Company or (c) any Person (other than the Company) in which
any such beneficial owner, officer or director owns any beneficial interest
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by all such Persons) (collectively,
"Related Parties") has any interest in: (i) any contract, arrangement or
understanding with, or relating to, the business or operations of, the Company
or any of its Subsidiaries; (ii) any loan, arrangement, understanding, agreement
or contract for or relating to indebtedness of the Company or any of its
Subsidiaries; or (iii) any property (real, personal or mixed), tangible or
intangible, used in the business or operations of the Company or any of its
Subsidiaries, excluding any such contract, arrangement, understanding or
agreement constituting an Employee Plan. Following the Effective Time, except
for obligations set forth in this Agreement, neither the Company nor any of its
Subsidiaries will have
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any obligations to any Related Party except for (i) accrued salary for the
pay period commencing immediately prior to the Effective Time and (ii) the
obligations set forth in the Company SEC Reports and Section 4.25 of the
Disclosure Letter.
Section 4.26 ASSETS.
(a) The assets and properties of the Company and its
Subsidiaries, considered as a whole, constitute all of the material assets and
properties which are reasonably required for the business and operations of the
Company and its Subsidiaries as presently conducted. The Company and its
Subsidiaries have good and marketable title to or a valid leasehold estate in
(i) all personal properties and assets reflected on the Company's Balance Sheet
at the Balance Sheet Date (except for properties or assets subsequently sold in
the ordinary course of business consistent with past practice), except as would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(b) Section 4.26 of the Disclosure Letter sets forth (i)
a complete and accurate list of each improved and unimproved real property (a
"Property") owned or leased by the Company or any of its Subsidiaries, and the
current use of such Property and indicating whether the Property is owned or
leased, (ii) a complete and accurate list of all leases pursuant to which the
Company or any of its Subsidiaries lease personal property and which require an
annual expenditure by the Company or any of its Subsidiaries individually in
excess of One Hundred Thousand Dollars ($100,000) or which are not cancelable
(without material penalty, cost or other liability) within one year and (iii)
with respect to each lease for real property, the term (including renewal
options) and current fixed rent.
(c) Except as set forth in Section 4.26 of the Disclosure
Letter, there are no pending or, to the knowledge of the Company, threatened
condemnation or similar proceedings relating to any of the Properties of the
Company and its Subsidiaries, except for such proceedings which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Section 4.27 DELAWARE SECTION 203. The provisions of Section 203 of
Delaware Corporate Law will not apply to this Agreement, as it may be amended
from time to time, or any of the transactions contemplated hereby. The Company
has heretofore delivered to MergerSub a complete and correct copy of the
resolutions of the Board of Directors of the Company to the effect that pursuant
to 203(a)(1) of the Delaware Corporate Law, the restrictions contained in
Section 203 of Delaware Corporate Law are and shall be inapplicable to the
Merger and the transactions contemplated by this Agreement, as it may be amended
from time to time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGERSUB
MergerSub represents and warrants to the Company that:
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Section 5.1 CORPORATE EXISTENCE AND POWER. MergerSub is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate powers to
execute and deliver this Agreement and to consummate the Merger and the
transactions contemplated hereby. Since the date of its incorporation,
MergerSub has not engaged in any activities other than in connection with or
as contemplated by this Agreement and the Merger or in connection with
arranging any financing required to consummate the transactions contemplated
hereby.
Section 5.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by MergerSub of this Agreement and the consummation by MergerSub
of the transactions contemplated hereby are within the corporate powers of
MergerSub and have been duly authorized by all necessary corporate and
stockholder action. This Agreement constitutes a valid and binding agreement
of MergerSub.
Section 5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by MergerSub of this Agreement and the consummation by MergerSub
of the transactions contemplated by this Agreement require no action by or in
respect of, or filing with, any Governmental Authority other than (a) the
filing of a certificate of merger in accordance with Delaware Corporate Law,
(b) compliance with any applicable requirements of the HSR Act; (c)
compliance with the applicable requirements of the Exchange Act; (d)
compliance with the applicable requirements of the Securities Act; (e)
compliance with any applicable foreign or state securities or Blue Sky laws;
and (f) such other items the failure of which to be obtained will not have a
Material Adverse Effect on MergerSub.
Section 5.4 NON-CONTRAVENTION. The execution, delivery and
performance by MergerSub of this Agreement and the consummation by MergerSub
of the transactions contemplated hereby do not and will not (a) contravene or
conflict with the certificate of incorporation or bylaws of MergerSub, (b)
contravene, conflict with or constitute a violation of any provision of law,
regulation, judgment, order or decree binding upon MergerSub, or (c)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of MergerSub or to a
loss of any benefit to which MergerSub is entitled under any agreement,
contract or other instrument binding upon MergerSub which in the aggregate
would have a Material Adverse Effect on MergerSub.
Section 5.5 DISCLOSURE DOCUMENTS. None of the information supplied
or to be supplied by MergerSub for inclusion in the Company Proxy Statement
will, at the date it is first mailed to stockholders of the Company or at the
time of the Company Stockholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 5.6 LITIGATION. There is no action, suit or proceeding, claim,
arbitration or investigation against MergerSub pending or, to MergerSub's
knowledge, threatened against MergerSub or any of its properties, assets or
rights before any court, arbitrator or administrative
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or environmental body, which could prevent MergerSub from consummating the
transactions contemplated by this Agreement.
Section 5.7 FINDERS' FEES. Except for the parties providing the
Financing, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of MergerSub who
would be entitled to any fee or commission from MergerSub or any of its
affiliates upon consummation of the transactions contemplated by this Agreement.
Section 5.8 FINANCING. MergerSub shall have at the Closing
sufficient cash through a combination of committed capital from its investors
and commitments from financial institutions, subject to the conditions set
forth in the Financing Letters (as defined below), to enable it to pay the
full Merger Consideration as provided herein, to make all other necessary
payments by it in connection with the Merger (including the repayment of
certain outstanding indebtedness of the Surviving Corporation) and to pay all
of the related fees and expenses (the "Financing"). The Company shall use all
reasonable efforts to cooperate with and assist MergerSub in obtaining the
Financing. The parties acknowledge that financing letters from the following
Persons have been delivered to the Board of Directors of the Company: (y)
Leonard Green & Partners, L.P. and (z) DLJ Capital Funding, Inc. and DLJ
Bridge Finance, Inc. (collectively, the "Financing Letters"). Notwithstanding
anything in this Section 5.8 to the contrary, the Financing Letters delivered
to the Board of Directors of the Company on or before the date of this
Agreement may be superseded at the option of MergerSub after the date hereof
but prior to the Effective Time by letters (the "New Financing Letters")
delivered to the Board of Directors of the Company which contemplate
co-investment by a third party, which New Financing Letters shall be
identical in all material respects to the Financing Letters except for
changes necessary to reflect the co-investment, provided that the terms of
the New Financing Letters shall not have any adverse effect upon the ability
to consummate, or expand upon the conditions precedent to, the Financing as
set forth in the Financing Letters. In such event, the term "Financing
Letters" as used herein shall be deemed to refer to the New Financing Letters.
Section 5.9 CAPITALIZATION. As of the date hereof, the authorized
capital shares of MergerSub consists of 1,000 shares of common stock, $.01
par value per share, of which as of the date hereof there were outstanding 10
shares. Immediately prior to the Effective Time, the authorized capital
shares of MergerSub will consist of (i) 3,500,000 shares of common stock,
$.01 par value per share, of which immediately prior to the Effective Time
there will be outstanding 2,151,516 shares and (ii) 21,000,000 shares of
preferred stock, of which immediately prior to the Effective Time there will
be 2,600,000 shares outstanding. All outstanding capital stock of MergerSub
have been duly authorized and validly issued and are fully paid and
nonassessable. As of the moment immediately prior to the Effective Time,
except as set forth in this Section 5.9, there will be, (A) no capital stock
or other voting securities of MergerSub, (B) no securities of MergerSub
convertible into or exchangeable for capital stock of MergerSub and (C) no
options or other rights to acquire from MergerSub, and no obligation of
MergerSub to issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
MergerSub (the items referred to in clauses (A), (B) and (C) being
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referred to collectively as the "MergerSub Securities"). There are no
outstanding obligations of MergerSub to repurchase. redeem or otherwise
acquire any MergerSub Securities.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 CONDUCT OF THE COMPANY. Except for matters set forth in
Section 6.1 of the Disclosure Letter or as otherwise contemplated by or
specifically provided in this Agreement, without the prior written consent of
MergerSub (which shall not be unreasonably withheld) from the date hereof to
the Effective Time, the Company shall carry on its business in the ordinary
and usual course of business and consistent with past practice and shall use
its reasonable best commercial efforts to (i) preserve intact its present
business organization, (ii) maintain in effect all material federal, state
and local Permits that are required for the Company or any of its
Subsidiaries to carry on its business, (iii) keep available the services of
its key officers and employees and (iv) maintain satisfactory relationships
with its customers, lenders, suppliers and others having material business
relationships with it. Without limiting the generality of the foregoing, and
except for matters set forth in Section 6.1 of the Disclosure Letter attached
hereto or as otherwise contemplated by or specifically provided in this
Agreement, without the prior written consent of MergerSub (which shall not be
unreasonably withheld), prior to the Effective Time, the Company shall not
and shall not permit its Subsidiaries to:
(a) adopt any change in its amended and restated
certificate of incorporation or bylaws or comparable organizational documents;
(b) except pursuant to existing agreements or
arrangements (i) acquire (by merger, consolidation, acquisition of stock or
assets, joint venture or otherwise of a direct or indirect ownership interest
or investment) any corporation, partnership or other business organization or
division thereof, or sell, lease or otherwise dispose of a material amount of
assets (excluding sales of inventory or other assets in the ordinary course
of business) or securities; (ii) waive, release, grant, or transfer any
rights of material value; (iii) modify or change in any material respect any
material Permit; (iv) except to refund or refinance commercial paper, incur,
assume or prepay any indebtedness for borrowed money except in the ordinary
course of business, consistent with past practice; (v) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any indebtedness for borrowed money or trade
payables of any other Person, except in the ordinary course of business
consistent with past practice; (vi) make any loans, advances or capital
contributions to, or investments in, any other Person, except in the ordinary
course of business, consistent with past practice; (vii) authorize any
capital expenditure or expenditures not in the ordinary course of business
that have not been authorized and approved prior to the date hereof (other
than the Company's computer upgrade currently in process) which (A)
individually is in excess of Five Hundred Thousand Dollars ($500,000) or (B)
in the aggregate, from the date hereof to and including October 31, 1999, are
in excess of Two Million Dollars ($2,000,000) or (C) in the aggregate,
inclusive of amounts in clause (B) above, from the date hereof to and
including January 31, 2000, are in excess of Five Million Dollars
($5,000,000); (viii) pledge or otherwise encumber shares of capital stock of
the Company or any of its Subsidiaries; (ix) mortgage or
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pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material Lien thereupon; (x) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice that would be material to the Company and its Subsidiaries, taken as
a whole; or (xi) amend, modify or waive in any material respects any right
under any material contract of the Company or any of its Subsidiaries;
(c) take any action that would result in any
representation and warranty of the Company hereunder becoming untrue in any
material respects as of the Effective Time;
(d) split, combine or reclassify any shares of, declare,
set aside or pay any dividend (including, without limitation, an extraordinary
dividend) or other distribution (whether in cash, stock or property or any
combination thereof) in respect of Company Securities or redeem, repurchase or
otherwise acquire or offer to redeem, repurchase, or otherwise acquire any
Company Securities;
(e) adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or employee benefit plan, agreement, trust,
plan, fund or other arrangement for the benefit and welfare of any director,
officer or employee, or increase in any manner the compensation or fringe
benefits of any director, officer or any class of employees (or support any
portion thereof) or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options or
stock appreciation rights or the removal of existing restrictions in any benefit
plans or agreements); provided, however, that notwithstanding the foregoing, the
Company shall be entitled to adopt or amend any bonus, profit sharing,
compensation, severance, deferred compensation, termination of employment
agreement for the benefit and welfare of any individual employee (excluding
officers), or increase in any manner the compensation or fringe benefits of any
such employee in each case in the ordinary course of business and consistent
with past practice;
(f) except as required by applicable Law or GAAP, revalue
in any material respect any of its assets, including writing down the value of
inventory in any material manner or write-off of notes or accounts receivable in
any material manner;
(g) pay, discharge or satisfy any material claims,
liabilities or 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, or as otherwise
required by the terms thereof;
(h) make any material Tax election or settle or
compromise any material Tax liability;
(i) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been required
by a change in GAAP;
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(j) authorize for issuance, issue, sell, deliver or
agree or commit to issue sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise) any Company Securities (except bank loans) or equity
equivalents;
(k) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the
Merger);
(l) alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure of ownership of
any Subsidiary; or
(m) agree or commit to do any of the foregoing.
Section 6.2 STOCKHOLDER MEETING; PROXY MATERIAL. The Company shall
cause a meeting of its stockholders (the "Company Stockholder Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of
voting on the adoption of this Agreement and the Merger. In connection with
such meeting, the Company (i) will as promptly as practicable prepare and
file with the SEC, will use its reasonable best efforts to have cleared by
the SEC and will thereafter mail to its stockholders as promptly as
practicable, the Company Proxy Statement and all other proxy materials for
such meeting, (ii) will use its reasonable best efforts to obtain the
necessary vote for adoption by its stockholders of this Agreement and the
Merger and shall take all other action necessary or, in the reasonable
opinion of MergerSub, advisable to secure any vote of stockholders required
by Delaware Corporate Law to effect the Merger and (iii) will otherwise
comply with all legal requirements applicable to such meeting.
Section 6.3 ACCESS TO INFORMATION; RIGHT OF INSPECTION. From the
date hereof until the Effective Time, the Company will give MergerSub, its
counsel, financial advisors, auditors and other authorized representatives
full access to the offices, properties, books and records of the Company (so
long as such access does not unreasonably interfere with the operations of
the Company), will furnish to MergerSub, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating
data and other information as such Persons may reasonably request and will
instruct the Company's employees, counsel and financial advisors to cooperate
with MergerSub in its investigation of the business of the Company; provided
that any information provided to MergerSub pursuant to this Section 6.3 shall
be subject to the Confidentiality Agreement.
Section 6.4 OTHER POTENTIAL ACQUIRERS.
(a) Neither the Company nor any of its affiliates
shall, nor shall the Company authorize or permit any of its or their
respective officers, directors, employees, representatives or agents to,
directly or indirectly, encourage, solicit or engage in discussions or
negotiations with or provide any non-public information to any person or
group (other than MergerSub or its affiliates or any designees of MergerSub
or its affiliates) concerning any Third Party Acquisition; provided, however,
that nothing herein shall prevent the Board of Directors of the Company from
(i) taking and disclosing to the Company's stockholders a position
contemplated by Rules 14d-9
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and 14e-2 promulgated under the Exchange Act with regard to any tender or
exchange offer; and (ii) conducting such "due diligence" inquiries (which
shall be in writing to the extent possible) in response to any Third Party
Acquisition proposal as the Board of Directors of the Company determines in
its good faith judgment, after consultation with and based, among other
things, upon the advice of legal counsel, may be required in order to comply
with its fiduciary duties. The Company shall immediately notify the MergerSub
in the event it receives any proposal or inquiry concerning a Third Party
Acquisition, including the terms and conditions thereof and the identity of
the party submitting such proposal, and shall promptly update MergerSub of
the status and any material developments concerning the same, including
furnishing copies of any such written inquiries.
(b) Except as set forth in this Section 6.4(b), the
Board of Directors of the Company shall not withdraw its recommendation of
the transactions contemplated hereby or approve or recommend, or cause the
Company to enter into any agreement with respect to, any Third Party
Acquisition. If the Board of Directors of the Company, by a majority
disinterested vote determines in its good faith judgment after consultation
with and based, among other things, upon the advice of legal counsel, that it
is required to do so in order to comply with its fiduciary duties, the Board
of Directors of the Company may withdraw its recommendation of the
transactions contemplated hereby or approve or recommend a Superior Proposal
(as defined in subsection (c) below), but in each case only (i) after
providing written notice to MergerSub (a "Notice of Superior Proposal")
advising MergerSub that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal
and (ii) if MergerSub does not, within two (2) business days of MergerSub's
receipt of the Notice of Superior Proposal, make an offer that the Board of
Directors of the Company by a majority disinterested vote determines in its
good faith judgment (after receipt of written advice of a financial adviser
of nationally recognized reputation consistent with such determination) to be
at least as favorable to the Company's stockholders as such Superior
Proposal; provided, however, that the Company shall not be entitled to enter
into any agreement with respect to a Superior Proposal unless and until this
Agreement is terminated by its terms pursuant to Section 10.1 and the Company
has paid all amounts due to MergerSub pursuant to Section 10.2. Any
disclosure that the Board of Directors of the Company may be compelled to
make with respect to the receipt of a proposal for a Third Party Acquisition
or otherwise in order to comply with its fiduciary duties or Rule 14d-9 or
14e-2 will not constitute a violation of this Agreement, provided that such
disclosure states that no action will be taken by the Board of Directors of
the Company in violation of this Section 6.4(b).
(c) For the purposes of this Agreement, "Third Party
Acquisition" means the occurrence of any of the following events: (i) the
acquisition of the Company by merger or otherwise by any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) other than MergerSub or any affiliate thereof (a "Third
Party"); (ii) the acquisition by a Third Party of any material portion of the
assets of the Company and its Subsidiaries taken as a whole, other than the
sale of its products in the ordinary course of business consistent with past
practices; (iii) the acquisition by a Third Party of ten percent (10%) or
more of the outstanding Common Stock or the issuance by the Company of
preferred stock of
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a new series containing terms which are inconsistent with the consummation of
the transactions contemplated by this Agreement; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; (v) the repurchase by the Company or any of its
Subsidiaries of more than ten percent (10%) of the outstanding Shares; or
(vi) the acquisition by the Company or any of its Subsidiaries by merger,
purchase of stock or assets, joint venture or otherwise of a direct or
indirect ownership interest or investment in any business whose annual
revenues, net income or assets is equal or greater than ten percent (10%) of
the annual revenues, net income or assets of the Company, other than any such
acquisition to which MergerSub has consented pursuant to Section 6.1(b). For
purposes of this Agreement, a "Superior Proposal" means any bona fide
proposal to acquire directly or indirectly for consideration consisting of
cash and/or securities more than ten percent (10%) of the Shares then
outstanding or all or substantially all the assets of the Company and
otherwise for a consideration higher than the Merger Consideration and on
terms that the Board of Directors of the Company by a majority vote
determines in its good faith judgment (after receipt of written advice of a
financial advisor of nationally recognized reputation consistent with such
determination) to be more favorable to the Company's stockholders than the
Merger.
Section 6.5 RESIGNATION OF DIRECTORS. Prior to the Effective Time,
the Company shall deliver to MergerSub evidence satisfactory to MergerSub of
the resignation of all directors of the Company (other than Greg Grosch)
effective at the Effective Time.
Section 6.6 NOTICE. Promptly after the date hereof, the Company
shall deliver to the holders of shares of its preferred stock in accordance
with Section D(d)(iii)(D)(a) of Article IV of the Company's certificate of
incorporation written notice of the pendency of an Automatic Conversion Event
within the meaning of Section D(d)(iii)(D)(a) of Article IV of the Company's
certificate of incorporation.
ARTICLE VII
COVENANTS OF MERGERSUB
Section 7.1 VOTING OF SHARES. MergerSub agrees to vote all Shares
beneficially owned by it (including, without limitation, the shares subject
to the Voting Agreements) in favor of adoption of this Agreement at the
Company Stockholder Meeting.
Section 7.2 DIRECTOR AND OFFICER LIABILITY. The Surviving Corporation
shall honor all of the Company's obligations to indemnify and hold harmless
(including any obligations to advance funds for expenses) the present and former
officers and directors of the Company in respect of acts or omissions occurring
prior to the Effective Time to the extent provided under the Company's articles
of incorporation and bylaws in effect on the date hereof, and such obligations
shall survive the Merger and shall continue in full force and effect in
accordance with the terms of the Surviving Corporation's articles of
incorporation and bylaws from the Effective Time until the expiration of the
applicable statue of limitations with respect to any claims against such
directors or officers arising out of such acts or omissions; provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable Law. For a period of 6 years after the Effective Time, the
Surviving Corporation shall cause to
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be maintained the current policies of officers' and directors' liability
insurance maintained by the Company (the "Current Policies") (provided that
the Surviving Corporation may substitute therefor policies with reputable and
financially sound carriers of at least the same coverage and amount
containing terms and conditions that are no less favorable (the "Replacement
Policies")) in respect of acts or omissions occurring prior to the Effective
Time covering each such Person currently covered by such Current Policies;
provided, however, that in no event will the Surviving Corporation be
required to expend in excess of 175% of the annual premium currently paid by
the Company for such coverage (or such coverage as is available for 175% of
such annual premium); provided further that if the annual premium required to
cause the Current Policies to be maintained as provided in this Section 7.2
exceeds 175% of the annual premium currently paid by the Company, any present
or former officer or director of the Company who desires to be covered by the
Current Policies may so elect and shall be covered by the Current Policies so
long as such former officer or director pays the portion of the premium for
such Current Policies in excess of the amount which the Surviving Corporation
is obligated to pay pursuant to this Section 7.2.
ARTICLE VIII
COVENANTS OF MERGERSUB AND THE COMPANY
The parties hereto agree that:
Section 8.1 REASONABLE BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
Each party shall also refrain from taking, directly or indirectly, any action
which would impair such party's ability to consummate the Merger and the
other transactions contemplated hereby. Without limiting the foregoing, the
Company shall use its reasonable best efforts to (i) take all action
necessary so that no state takeover statute or similar statute or regulation
is or becomes applicable to the Merger or any of the other transactions
contemplated by this Agreement and (ii) if any state takeover statute or
similar statute or regulation becomes applicable to any of the foregoing,
take all action necessary so that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise to minimize the
effect of such statute or regulation on the Merger and the other transactions
contemplated by this Agreement. Notwithstanding the foregoing, the Board of
Directors of the Company shall not be prohibited form taking any action
permitted by Section 6.4.
Section 8.2 CERTAIN FILINGS.
(a) The Company and MergerSub shall cooperate with one
another (i) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (ii) in seeking any such actions, consent
approvals or waivers or making
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any such filings, furnishing information required in connection therewith or
with the Company Proxy Statement and seeking to obtain any such actions,
consents, approvals or waivers, provided, however, that the Company shall not
be required to make any material monetary expenditure or grant any material
accommodation (financial or otherwise) in connection with any of the
foregoing.
(b) The Company and MergerSub shall (i) use their
respective reasonable best efforts to take or cause to be taken, (A) all
actions necessary, proper or advisable by such party with respect to the
prompt preparation and filing with the SEC of the Company Proxy Statement,
(B) such actions as may be required to have the Company Proxy Statement
cleared by the SEC, as promptly as practicable, and (C) such actions as may
be required to be taken under the Exchange Act and state securities or
applicable Blue Sky Laws in connection with the Merger and (ii) promptly
prepare and file all necessary documentation, effect all necessary
applications, notices, petitions and filings, and use all reasonable efforts
to obtain all necessary permits, consents, approvals and authorizations of
Governmental Authorities (including, without limitation, any filing under the
HSR Act or any other applicable antitrust law or regulation).
(c) The Company agrees to provide and will cause its
Subsidiaries and its and their respective officers, employees and advisors to
provide, (i) prior to the Effective Date, all documents that MergerSub may
reasonably request relating to the existence of the Company and the authority
of the Company for this Agreement, all in form and substance reasonably
satisfactory to MergerSub and (ii) all necessary cooperation in connection
with the arrangement of any financing to be consummated contemporaneous with
or at or after the Effective Date in respect of the transactions contemplated
by this Agreement, including (x) participation in meetings, and due diligence
sessions, (y) furnishing information required to be included in the
preparation of offering memoranda, private placement memoranda, prospectuses
and similar documents and (z) the execution and delivery of any commitment
letters, underwriting or placement agreements, pledge and security documents,
other definitive financing documents, or other requested certificates or
documents, including a certificate of the chief financial officer of the
Company with respect to solvency matters, comfort letters of accountants and
legal opinions as may be requested by MergerSub; provided that the form and
substance of any of the material documents referred to in clause (y) and the
terms and conditions of any of the material agreements and other documents
referred to in clause (z) shall be substantially consistent with the terms
and conditions of the Financing required to satisfy the condition precedent
set forth in Section 9.2(c).
Section 8.3 PUBLIC ANNOUNCEMENTS. MergerSub and the Company will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby (other than following a change, if any, of the Board of Directors of the
Company's recommendation of the Merger (in accordance with Section 6.4(b))), and
except for any press release or public statement as may be required by
applicable Law or any listing agreement with Nasdaq, will not issue any such
press release or make any such public statement prior to such consultation.
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Section 8.4 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or MergerSub,
any deeds, bills of sale, assignments or assurances and to take and do, in
the name and on behalf of the Company or MergerSub, any other actions and
things to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
Section 8.5 NOTICES OF CERTAIN EVENTS. Each of the parties hereto
shall promptly notify the other party of:
(i) the receipt by such party of any notice or
other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) the receipt by such party of any notice or
other communication from any Governmental Authority in connection with
the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations
or proceedings commenced or, to the best of such party's knowledge
threatened against, or affecting such party which, if pending on the
date of this Agreement, would have been required to have been disclosed
pursuant to this Agreement or which relate to the consummation of the
transactions contemplated by this Agreement.
ARTICLE IX
CONDITIONS TO THE MERGER
Section 9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company and MergerSub to consummate the Merger are subject
to the satisfaction of the following conditions:
(a) This Agreement shall have been approved in accordance
with the Delaware Corporation Law by the affirmative vote of the holders of a
majority in voting interests of the Shares;
(b) Any applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated; and
(c) No provision of any applicable Law and no judgment.
order, decree or injunction shall prohibit or restrain the consummation of the
Merger; provided, however, that the Company and MergerSub shall each use their
reasonable best efforts to have any such judgment, order, decree or injunction
vacated.
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Section 9.2 CONDITIONS TO THE OBLIGATIONS OF MERGERSUB. The
obligations of MergerSub to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) The Company shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Effective Time, the representations and warranties of the Company
contained in this Agreement shall be true in all material respects at and as of
the Effective Time (provided that representations made as of a specific date
shall be required to be true as of such date only) as if made at and as of such
time and MergerSub shall have received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of the Company to his
knowledge to the foregoing effect;
(b) There shall not be pending (i) any action or
proceeding by any Governmental Authority or (ii) any action or proceeding by any
other Person, in any case referred to in clauses (i) and (ii), before any court
or Governmental Authority that has reasonable likelihood of success seeking to
(w) make illegal, to delay materially or otherwise directly or indirectly to
restrain or prohibit the consummation of the Merger or seeking to obtain
material damages, (x) restrain or prohibit MergerSub's (including its
affiliates) ownership or operation of all or any material portion of the
business or assets of the Surviving Corporation or the Company, or to compel
MergerSub or any of its affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Surviving Corporation or the
Company, (y) impose or confirm material limitations on the ability of MergerSub
or any of its affiliates to effectively control the business or operations of
the Surviving Corporation or the Company or effectively to exercise full rights
of ownership of the Shares, including, without limitation, the right to vote any
Shares acquired or owned by MergerSub or any of its affiliates on all matters
properly presented to the Company's stockholders, or (z) require divestiture by
MergerSub or any of its affiliates of any material amount of Shares, and no
court, arbitrator or Governmental Authority shall have issued any judgment,
order, decree or injunction, and there shall not be any statute, rule or
regulation, that, in the sole judgment of MergerSub is likely, directly or
indirectly, to result in any of the consequences referred to in the preceding
clauses (w) through (z); provided, however, that MergerSub shall use its
reasonable best efforts to have any such judgment, order, decree or injunction
vacated;
(c) MergerSub shall have obtained the Financing pursuant
to Section 5.8, it being acknowledged that if the parties to the Financing
Letters or New Financing Letters other than Leonard Green & Partners, L.P. are
prepared to perform thereon, the condition contained in this Section 9.2(c)
shall be deemed to have been satisfied;
(d) The aggregate number of Shares of the Company on the
Effective Time of the Merger, the holders of which have demanded purchase of
their shares from the Company in accordance with the provisions of the Delaware
Corporate Law, shall not equal 10% or more of the shares of the Company
outstanding as of the record date for the Company Stockholder Meeting;
37
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(e) No change in accounting practices or policies after
the date hereof shall cause MergerSub reasonably to conclude that the Merger
will not be recorded as a "recapitalization" for financial reporting purposes;
(f) The Voting Agreements and the Irrevocable Proxies
shall be in full force and effect;
(g) Each of the individuals referred to in Section 2.2(c)
shall have executed and delivered to MergerSub an employment agreement
substantially in the form of EXHIBIT B;
(h) Each of the individuals referred to in Section 2.2(c)
shall have executed and delivered to MergerSub a Stockholders Agreement
substantially in the form of EXHIBIT C;
(i) The Board of Directors of the Company shall have made
a determination pursuant to Section E of Article XI of the Company's certificate
of incorporation that the transactions contemplated hereby meet the requirements
of Section C of such Article XI; and
(j) Since the date of this Agreement, there shall not
have occurred any change, event, occurrence, development or circumstance which,
individually or in the aggregate, has had, or would reasonably be expected to
have, a Material Adverse Effect on the Company.
Section 9.3 Conditions to the Obligations of the Company. The
obligation of the Company to consummate the Merger is subject to the
satisfaction of the following further conditions:
(a) MergerSub shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Effective Time, the representations and warranties of MergerSub
contained in this Agreement and in any certificate or other writing delivered by
it pursuant hereto shall be true in all material respects at and as of the
Effective Time (provided that representations made as of a specific date shall
be required to be true as of such date only) as if made at and as of such time
and the Company shall have received a certificate signed by the President or any
Vice President of MergerSub to the foregoing effect; and
(b) The Board of Directors of the Company shall have
received advice, reasonably satisfactory to the Board, from an independent
advisor to the effect that the transactions contemplated herein are fair and
reasonable to the Company and its stockholders.
ARTICLE X
TERMINATION
Section 10.1 TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any approval of this Agreement by the stockholders of the Company):
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(a) By mutual written consent of the Company on the one
hand and MergerSub on the other hand;
(b) By either the Company or MergerSub, if the Merger has
not been consummated by January 31, 2000, provided that the party seeking to
exercise such right is not then in breach in any material respect of any of its
obligations under this Agreement;
(c) By either the Company or MergerSub, if MergerSub (in
the case of termination by the Company) or the Company (in the case of
termination by MergerSub) shall have breached in any material respect any of its
covenants or obligations under this Agreement or any representation or warranty
of MergerSub (in the case of termination by the Company) or of the Company (in
the case of termination by MergerSub) shall have been incorrect in any material
respect when made or at any time prior to the Effective Time (unless such breach
is capable of cure and, in such case. the breaching party shall not have cured
such breach within 15 days after the receipt of written notice from the
non-breaching party to the breaching party of such breach);
(d) By either the Company or MergerSub, if any court of
competent jurisdiction in the United States or other United States federal or
state Governmental Entity shall have issued a final order, decree or ruling, or
taken any other final action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action is or shall have become
nonappealable;
(e) By MergerSub (i) if prior to the consummation of the
Merger, the Board of Directors of the Company shall have withdrawn, or modified
or changed in a manner adverse to MergerSub its approval or recommendation of
this Agreement or the Merger or shall have approved a Third Party Acquisition;
provided, that MergerSub shall not be entitled to terminate this Agreement
pursuant to this Section 10.1(e) solely as a result of the Company or the Board
of Directors of the Company making such disclosure to the Company's stockholders
as, in good faith judgment of the Board of Directors of the Company, after
receiving advice from outside counsel, is required under applicable law; or (ii)
if there shall have occurred a Third Party Acquisition; or (iii) if the Company,
or any of the Company's officers, directors, employees, representatives or
agents, shall take any of the actions described in the first sentence of Section
6.4(a) hereof, other than the proviso thereto;
(f) By the Company if the Company has approved a Superior
Proposal in accordance with Section 6.4(b), provided the Company has complied
with all provisions thereof, including the notice provisions therein, and that
it makes simultaneous payment of the Expenses and the Termination Fee; or
(g) By either the Company or MergerSub if, at a duly held
stockholders meeting of the Company or any adjournment thereof at which this
Agreement is voted upon, the requisite stockholder vote in favor of the adoption
of this Agreement shall not have been obtained.
39
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The party desiring to terminate this Agreement pursuant to Sections
10.1(b) through (g) shall give written notice of such termination to the other
party in accordance with Section 11.1.
Section 10.2 TERMINATION FEE.
(a) Notwithstanding any other provision of this
Agreement, if this Agreement is terminated pursuant to any of Sections
10.1(e) or 10.l(f), then the Company shall immediately pay to MergerSub a
break-up fee of Twelve Million Dollars ($12,000,000) (the "Termination Fee").
The parties hereto agree that the Termination Fee is not a penalty, but
rather is liquidated damages in a reasonable amount that will compensate
MergerSub for the costs incurred, efforts expended and opportunities foregone
while negotiating this Agreement and in reliance on this Agreement and on the
expectation of the consummation of the transactions contemplated hereby,
which amount would otherwise be impossible to calculate with precision. In
addition, if this Agreement is terminated pursuant to Section 10.1(g), or
because the stockholder's meeting contemplated therein was never noticed or
held by the Company, then in the event that, after the date hereof and prior
to such termination, either (A) a Third Party Acquisition described in
Section 6.4(c)(iii) occurs, or (B) any Third Party shall have made, proposed,
communicated or disclosed an intention to make a proposal with respect to a
Third Party Acquisition (and, if the stockholder's meeting contemplated by
Section 10.1(g) was held, in the additional circumstance where MergerSub was
unable, despite using commercially reasonable efforts, to exercise its rights
under the Voting Agreements to vote the shares covered thereby in favor of
the adoption of this Agreement) then the Company shall immediately pay to
MergerSub the Termination Fee.
(b) The Company shall pay, or reimburse MergerSub,
upon submission of one or more statements therefor, accompanied by reasonable
supporting documentation, for the amount of all out of pocket costs, fees and
expenses reasonably incurred by any of them or on their behalf arising out
of, in connection with, or related to this Agreement, the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, HSR Act and other filing fees, fees and expenses of
printers, accountants, financial advisors, attorneys, consultants and
appraisers, or any Person providing or proposing to provide Financing, as
well as commitment and other fees, charges and expenses of any such Person)
(the "Expenses"); provided, however, that the Company shall not be required
to pay or reimburse MergerSub for Expenses if (x) MergerSub fails in any
material respect to perform any of its material obligations under this
Agreement and has not cured such non-performance within 20 days after
MergerSub has received written notice from the Company specifying the nature
of such non-performance, or (y) MergerSub has materially breached any of the
material representations or warranties made by it in Article V, and such
breach is not cured (if the same is susceptible of being cured) within 20
days after MergerSub has received written notice from the Company specifying
the nature of such breach or (z) the condition to closing set forth in
Section 9.2(c) has not been fulfilled, other than by reason of the failure of
the Company to fulfill the condition to closing set forth in Section 9.2(j).
Section 10.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect with
no liability on the part of
40
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any party hereto except to the extent that such termination results from the
willful and material breach by a party of any representation, warranty or
covenant contained in this Agreement except that the agreements contained in
the last proviso of Section 6.3 and Sections 10.2, 10.3, 11.1, 11.4 and 11.7
shall survive the termination hereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
if to MergerSub, to:
WC Recapitalization Corp.
11111 Santa Monica Boulevard,
Suite 2000
Los Angeles, California 90025
Attention: Peter Nolan
Telephone: (310) 954-0444
Facsimile: (310) 954-0404
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue,
Suite 4800
Los Angeles, California 90071
Attention: Jennifer Bellah Maguire, Esq.
Telephone: (213) 229-7000
Facsimile: (213) 229-7520
if to the Company, to:
White Cap Industries, Inc.
3120 Airway Avenue
Costa Mesa, CA 92626
Attention: Greg Grosch
Telephone: (714) 850-0900
Facsimile: (714) 859-1634
with a copy to:
Hogan & Hartson L.L.P.
1200 Seventeenth Street, Suite 1500
Denver, Colorado 80202
Attention: Steven A. Cohen
41
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Telephone: (303) 899-7300
Facsimile: (303) 899-7333
or such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
Section and the appropriate telecopy confirmation is received or (ii) if
given by any other means when delivered at the address specified in this
Section 11.1.
Section 11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall survive until (but not beyond) the
Effective Time. This Section 11.2 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time.
Section 11.3 AMENDMENTS' NO WAIVERS.
(a) Any provision of this Agreement may be amended or
waived prior to the Effective Time if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment by the Company and MergerSub
or in the case of a waiver, by the party against whom the waiver is to be
effective; provided that after the adoption of this Agreement by the
stockholders of the Company, there shall be no amendment that by law requires
further approval by the stockholders of the Company without the further approval
of such stockholders.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.
Section 11.4 EXPENSES. Except as provided in Sections 6.4 and 10.2, all
costs and expenses incurred in connection with this Agreement shall be paid by
the party incurring such cost or expense.
Section 11.5 TRANSFER TAXES. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar taxes (including interest,
penalties and additions to any such Taxes) ("Transfer Taxes") incurred in
connection with the transactions contemplated by this Agreement shall be paid by
either MergerSub or the Surviving Corporation, and the Company shall cooperate
with MergerSub in preparing, executing and filing any returns with respect to
such Transfer Taxes.
Section 11.6 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto.
42
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Section 11.7 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware.
Section 11.8 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 11.9 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 11.10. SPECIFIC PERFORMANCE. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
Section 11.11 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, (i) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement and (ii) except for the
provisions of Article II and Section 7.2, is not intended to confer upon any
Person other than the parties any rights or remedies.
[Signature Page Follows]
43
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE COMPANY
WHITE CAP INDUSTRIES, INC.
By:
-------------------------------
Name
Title:
MERGERSUB
WC RECAPITALIZATION CORP.
By:
-------------------------------
Name: Peter J. Nolan
Title: President
44
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ANNEX 1
WHITE CAP INDUSTRIES, INC.
Summary of Terms--Preferred Stock
ISSUER............................ White Cap Industries, Inc.
AMOUNT............................ $65,000,000
DIVIDENDS......................... 10% per annum, payable quarterly.
Payable at the option of the Issuer
by board determination in cash or,
if not paid, then cumulates.
MANDATORY REDEMPTION.............. Redeemable in whole after 20.5 years
at the liquidation preference,
together with cumulative accrued
dividends.
VOTING............................ No voting rights, except (i) as
required by state and other
applicable law and (ii) that holders
of a majority of the outstanding
shares of Preferred Stock, voting as
a separate class, will (a) have the
right to approve each issuance by
the Issuer of any securities that
rank senior to the Preferred Stock
as to dividends or upon a
liquidation or securities that rank
on a parity with the Preferred Stock
as to dividends or upon a
liquidation and (b) have the right
to approve any amendment of the
Issuer's articles of incorporation
adverse to holders of the Preferred
Stock.
RANKING........................... The Preferred Stock will rank senior
to (a) all classes of common stock
of the Issuer and (b) all classes of
preferred stock which are designated
as junior to the Preferred Stock.
RIGHTS OF HOLDERS................. There will be no non-pro rata
redemptions by the Company.
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I TRANSFER AND VOTING OF SHARES; AND OTHER COVENANTS OF THE STOCKHOLDERS...................1
SECTION 1.1. Voting of Shares.........................................1
SECTION 1.2. No Inconsistent Arrangements.............................2
SECTION 1.3. Proxy....................................................2
SECTION 1.4. Waiver of Dissenters' Rights.............................3
SECTION 1.5. Stop Transfer............................................3
SECTION 1.6. No Solicitation..........................................3
SECTION 1.7. Management Agreements....................................3
ARTICLE II DISCLOSURE..............................................................................4
SECTION 2.1. Disclosure...............................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................................4
SECTION 3.1. Due Authorization, etc...................................4
SECTION 3.2. No Conflicts; Required Filings and Consents..............4
SECTION 3.3. Title to Shares..........................................5
SECTION 3.4. No Finder's Fees.........................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER..................................5
SECTION 4.1. Due Organization, Authorization, etc.....................5
ARTICLE V MISCELLANEOUS............................................................................6
SECTION 5.1. Definitions..............................................6
SECTION 5.2. Termination..............................................6
SECTION 5.3. Further Assurance........................................6
SECTION 5.4. Certain Events...........................................6
SECTION 5.5. No Waiver................................................6
SECTION 5.6. Specific Performance.....................................6
SECTION 5.7. Notice...................................................7
SECTION 5.8. Expenses.................................................7
SECTION 5.9. Headings.................................................7
SECTION 5.10. Severability.............................................7
SECTION 5.11. Entire Agreement; No Third-Party Beneficiaries...........7
SECTION 5.12. Assignment...............................................8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 5.13. Governing Law............................................8
SECTION 5.14. Amendment................................................8
SECTION 5.15. Waiver...................................................8
SECTION 5.16. Counterparts.............................................8
</TABLE>
ii
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STOCKHOLDERS VOTING AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of July 22, 1999 (the
"Agreement"), is entered into among WC Recapitalization Corp., a Delaware
corporation ("Purchaser"), and the stockholders of the Company whose names
appear on Schedule I hereto (collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Purchaser and the White Cap Industries, Inc., a Delaware corporation
(the "Company"), are entering into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), which provides for, upon the terms and
subject to the conditions set forth therein, the merger of Purchaser with and
into the Company (the "Merger");
WHEREAS, as of the date hereof, each Stockholder owns (beneficially and
of record) the number of Shares set forth opposite such Stockholder's name on
Schedule I hereto (all Shares so owned and which may hereafter be acquired by
such Stockholder prior to the termination of this Agreement, whether upon the
exercise of options or by means of purchase, dividend, distribution or
otherwise, being referred to herein as such Stockholder's "Owned Shares");
WHEREAS, as a condition to Purchaser's willingness to enter into the
Merger Agreement, Purchaser has required that the Stockholders enter into this
Agreement; and
WHEREAS, in order to induce Purchaser to enter into the Merger
Agreement, the Stockholders are willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Purchaser and each of the Stockholders, severally and not jointly,
hereby agree as follows:
ARTICLE I
TRANSFER AND VOTING OF SHARES;
AND OTHER COVENANTS OF THE STOCKHOLDERS
SECTION 1.1. VOTING OF SHARES. Each Stockholder agrees, at any meeting
of the stockholders of the Company, however called, and in any action by consent
of the stockholders of the Company, each Stockholder shall vote its Owned Shares
(i) in favor of the Merger and the Merger Agreement (as amended from time to
time), (ii) against any proposal for a Third Party Acquisition and against any
proposal for action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which is reasonably likely to result in any of the
conditions of the Company's obligations under the Merger Agreement not being
fulfilled, any change in the
<PAGE>
directors of the Company, any change in the present capitalization of the
Company or any amendment to the Company's Restated Articles of Incorporation
or By-Laws, any other material change in the Company's corporate structure or
business, or any other action which could reasonably be expected to impede,
interfere with, delay, postpone or materially adversely affect the
transactions contemplated by the Merger Agreement or the likelihood of such
transactions being consummated and (iii) in favor of any other matter
necessary for consummation of the transactions contemplated by the Merger
Agreement which is considered at any such meeting of stockholders, and in
connection therewith to execute any documents which are necessary or
appropriate in order to effectuate the foregoing, including the ability for
Purchaser or its nominees to vote such Owned Shares directly solely with
respect to the matters referred to in this Section 1.1.
SECTION 1.2. No Inconsistent Arrangements. Except as contemplated by
this Agreement and the Merger Agreement, each Stockholder shall not during the
term of this Agreement (i) transfer (which term shall include, without
limitation, any sale, assignment, gift, pledge, hypothecation or other
disposition), or consent to any transfer of, any or all of such Stockholder's
Owned Shares or any interest therein, or create or, except as set forth on
Schedule 1.2 hereto, permit to exist any Encumbrance (as defined below) on such
Owned Shares, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Owned Shares or
any interest therein, (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to such Owned Shares, (iv) deposit such Owned
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to such Owned Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Stockholder's
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement. Notwithstanding anything in this Agreement to the contrary, each
Stockholder may transfer all or any of such Stockholder's Owned Shares to any
trust, partnership or similar vehicle formed for estate, tax or family planning
purposes of which such Stockholder controls the vote, provided that as a
condition of such transfer, such Stockholder notifies the Purchaser and provides
the Purchaser with documentation reasonably satisfactory to the Purchaser as to
the consent of the transferee to be bound by all of the provisions of this
Agreement.
SECTION 1.3. Proxy. Each Stockholder hereby revokes any and all prior
proxies or powers-of-attorney in respect of any of such Stockholder's Owned
Shares and constitutes and appoints Purchaser or any nominee of Purchaser, with
full power of substitution and resubstitution, at any time during the term of
this Agreement, as its true and lawful attorney and proxy (its "Proxy"), for and
in its name, place and stead, to demand that the Secretary of the Company call a
special meeting of the stockholders of the Company for the purpose of
considering any matter referred to in Section 1.1 (if permitted under the
Company's Restated Articles of Incorporation or By-Laws) and to vote each of
such Owned Shares as its Proxy, at every annual, special, adjourned or postponed
meeting of the stockholders of the Company, including the right to sign its name
(as stockholder) to any consent, certificate or other document relating to the
Company that Delaware Law may permit or require as provided in Section 1.1.
2
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THE FOREGOING PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED
WITH AN INTEREST THROUGHOUT THE TERM OF THIS AGREEMENT.
SECTION 1.4. Waiver of Dissenters' Rights. Each Stockholder hereby
waives any rights to dissent from the Merger.
SECTION 1.5. Stop Transfer. Each Stockholder shall not request that the
Company register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's Owned Shares,
unless such transfer is made in compliance with this Agreement (including the
provisions of Article III hereof) and acknowledges that Purchaser and the
Company may notify the Company's transfer agent of the terms hereof.
SECTION 1.6. No Solicitation. Each Stockholder shall not, nor shall it
permit or authorize any of its officers, directors, employees, agents or
representatives (collectively, the "Representatives") to, (i) solicit or
initiate, or encourage, directly or indirectly, any inquiries regarding or the
submission of, any proposal for a Third Party Acquisition, (ii) participate in
any discussions or negotiations regarding, or furnish to any Person any
information or data with respect to, or take any other action to knowingly
facilitate the making of any proposal that constitutes, or may reasonably be
expected to lead to, any proposal for a Third Party Acquisition or (iii) enter
into any agreement with respect to any proposal for a Third Party Acquisition or
approve or resolve to approve any proposal for a Third Party Acquisition. Upon
execution of this Agreement, each Stockholder shall, and it shall cause its
Representatives to, immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Each Stockholder will promptly notify Purchaser of the existence of
any proposal, discussion, negotiation or inquiry received by such Stockholder,
and each Stockholder will immediately communicate to Purchaser the terms of any
proposal, discussion, negotiation or inquiry which it may receive (and will
promptly provide to Purchaser copies of any written materials received by it in
connection with such proposal, discussion, negotiation or inquiry) and the
identity of the Person making such proposal or inquiry or engaging in such
discussion or negotiation. Nothing in this Section 1.6 shall be a limitation on
any Stockholder or representative thereof serving solely in his capacity as a
director of the Company, each of whom in his capacity as director of the Company
shall be subject to the terms and provisions of Section 6.4 of the Merger
Agreement.
SECTION 1.7. Management Agreements. By executing this Agreement, each
Stockholder named in Section 2.2(c) of the Merger Agreement agrees and commits
to consummate the transactions set forth therein, and agrees to execute and
deliver, to the extent contemplated thereby, the agreements referred to in
Sections 9.2(g) and (h) of the Merger Agreement. Purchaser agrees to cause the
Company and its subsidiary party thereto to execute and deliver such agreements
to such Stockholders to the extent contemplated by Sections 9.2(g) and (h).
3
<PAGE>
ARTICLE II
DISCLOSURE
SECTION 2.1. DISCLOSURE. Each Stockholder hereby authorizes Purchaser
to publish and disclose in the Company Proxy Statement (including all documents
and schedules filed with the SEC) its identity and ownership of the Shares and
the nature of its commitments, arrangements and understandings under this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby represents and warrants to Purchaser as
follows:
SECTION 3.1. Due Authorization, etc. Such Stockholder has all requisite
power and authority to execute, deliver and perform this Agreement, to appoint
Purchaser as its Proxy and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement, the appointment of
Purchaser as Stockholder's Proxy and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Stockholder. This Agreement has been duly executed and delivered by
or on behalf of such Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding for such remedy may be brought. There
is no beneficiary or holder of a voting trust certificate or other interest of
any trust of which such Stockholder is trustee whose consent is required for the
execution and delivery of this Agreement of the consummation by such Stockholder
of the transactions contemplated hereby.
SECTION 3.2. No Conflicts; Required Filings and Consents.
(a) The execution and delivery of this Agreement by such
Stockholder does not, and the performance of this Agreement by such Stockholder
will not, (i) conflict with or violate any trust agreement or other similar
documents relating to any trust of which such Stockholder is trustee, (ii)
conflict with or violate any law applicable to such Stockholder or by which such
Stockholder or any of such Stockholder's properties is bound or affected or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any assets of such Stockholder, including,
without limitation, such Stockholder's Owned Shares, pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which such Stockholder is a party or by which
such Stockholder or any of such Stockholder's assets is bound or affected,
except, in the case of clauses (ii) and (iii), for any such breaches, defaults
or other occurrences that would not prevent or delay the performance by such
Stockholder of such Stockholder's obligations under this Agreement.
4
<PAGE>
(b) The execution and delivery of this Agreement by such
Stockholder does not, and the performance of this Agreement by such Stockholder
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority (other than
any necessary filing under the HSR Act or approvals or consents required under
applicable foreign antitrust or competition laws or the Exchange Act), domestic
or foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by such Stockholder of such Stockholder's
obligations under this Agreement.
SECTION 3.3. Title to Shares. Such Stockholder is the sole record and
beneficial owner of its Owned Shares, free and clear of any pledge, lien,
security interest, mortgage, charge, claim, equity, option, proxy, voting
restriction, voting trust or agreement, understanding, arrangement, right of
first refusal, limitation on disposition, adverse claim of ownership or use or
encumbrance of any kind ("Encumbrances"), other than as set forth on Schedule
1.2 hereto and other than restrictions imposed by the securities laws or
pursuant to this Agreement or the Merger Agreement.
SECTION 3.4. No Finder's Fees. Except as disclosed in the Merger
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of such Stockholder the payment of which could
become the obligation of the Company or Purchaser. Such Stockholder, on behalf
of itself and its affiliates, hereby acknowledges that it is not entitled to
receive any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby or by the
Merger Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Purchaser hereby represents and warrants to the Stockholders as
follows:
SECTION 4.1. Due Organization, Authorization, etc. Purchaser is duly
organized, validly existing and in good standing under the laws of Delaware.
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Purchaser has been duly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser and constitutes a legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding for such remedy may be brought.
5
<PAGE>
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Definitions. Terms used but not otherwise defined in this
Agreement have the meanings ascribed to such terms in the Merger Agreement.
SECTION 5.2. Termination. This Agreement shall terminate and be of no
further force and effect (i) by the written mutual consent of the parties hereto
or (ii) automatically and without any required action of the parties hereto upon
(x) the Effective Time or (y) the termination of the Merger Agreement in
accordance with its terms. No such termination of this Agreement shall relieve
any party hereto from any liability for any breach of this Agreement prior to
termination.
SECTION 5.3. Further Assurance. From time to time, at another party's
request and without consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transaction contemplated by this Agreement.
SECTION 5.4. Certain Events. Each Stockholder agrees that this
Agreement and such Stockholder's obligations hereunder shall attach to such
Stockholder's Owned Shares and shall be binding upon any person or entity to
which legal or beneficial ownership of such Owned Shares shall pass, whether by
operation of law or otherwise, including, without limitation, such Stockholder's
heirs, guardians, administrators, or successors. Notwithstanding any transfer of
Owned Shares, the transferor shall remain liable for the performance of all its
obligations under this Agreement.
SECTION 5.5. No Waiver. The failure of any party hereto to exercise any
right, power, or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
SECTION 5.6. Specific Performance. Each Stockholder acknowledges that
if such Stockholder fails to perform any of its obligations under this Agreement
immediate and irreparable harm or injury would be caused to Purchaser for which
money damages would not be an adequate remedy. In such event, each Stockholder
agrees that Purchaser shall have the right, in addition to any other rights it
may have, to specific performance of this Agreement. Accordingly, if Purchaser
should institute an action or proceeding seeking specific enforcement of the
provisions hereof, each Stockholder hereby waives the claim or defense that
Purchaser has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
Each Stockholder further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
6
<PAGE>
SECTION 5.7. Notice. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, and (ii) on the third business day after deposit in
the U.S. mail, if mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) If to Purchaser: Leonard Green & Partners, Inc.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Attention: Peter J. Nolan
Facsimile: (310) 954-0404
with a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier: 213-229-7520
Attention: Jennifer Bellah Maguire
(b) If to a Stockholder, at the address set forth below
such Stockholder's name on Schedule I hereto.
SECTION 5.8. EXPENSES. Except as otherwise expressly set forth herein,
all fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses. Notwithstanding the foregoing, Purchaser acknowledges that
the Company will pay the reasonable fees of Hogan & Hartson for negotiating the
provisions of this Agreement.
SECTION 5.9. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 5.10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 5.11. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement constitutes the entire agreement and supersedes any and all other
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject
7
<PAGE>
matter hereof, and this Agreement is not intended to confer upon any other
person any rights or remedies hereunder.
SECTION 5.12. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 5.13. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed entirely within that State.
SECTION 5.14. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 5.15. WAIVER. Any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other parties hereto with any of their agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only as against such party and only if
set forth in an instrument in writing signed by such party. The failure of any
party hereto to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 5.16. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
shall constitute one and the same agreement.
8
<PAGE>
IN WITNESS WHEREOF, Purchaser and the Stockholders have caused this
Agreement to be executed as of the date first written above.
WC RECAPITALIZATION CORP.
By:
----------------------
Name: Peter J. Nolan
Title: President
9
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NAME AND ADDRESS OF STOCKHOLDER NUMBER OF SHARES BENEFICIALLY OWNED
<S> <C>
Greg Grosch 2,429,722
Grosch Family Trust 269,967
3120 Airway Avenue
Costa Mesa, CA 92626
Chris Lane 136,010
Marianne Lane 21,750
3120 Airway Avenue
Costa Mesa, CA 92626
Richard Gagnon 174,000
3120 Airway Avenue
Costa Mesa, CA 92626
Dan Tsujioka 161,969
39 Rockingham
Newport Beach, CA 92660
Brian Etter 500
3120 Airway Avenue
Costa Mesa, CA 92626
Apex Investment Fund III, L.P. 515,778
233 S. Wacker Drive, Suite 9500
Chicago, IL 60606
Apex Strategic Partners, L.L.C. 39,573
233 S. Wacker Drive, Suite 9500
Chicago, IL 60606
Mark King 202,517
Brenda King 58,346
MBK Children's Trust 22,360
23956 Currant Drive
Golden, CO 80401
Bayview Investors, Ltd. 192,509
6065 Shelter Bay Ave.
Mill Valley, CA 94941
<PAGE>
Bruce & Sally Rogers 210,303
Rogers Family Trust 26,100
Sally K. Rogers Trust 43,500
1515 Arapahoe St., Tower 1, Suite 1500 Denver, CO 80202
Andrew J. Gwirtsman 13,230
Daniel L. Gwirtsman 13,230
1515 Arapahoe St., Tower 1, Suite 1500 Denver, CO 80202
Charles R. Gwirtsman 93,707
Nancy J. Reichman 45,901
1515 Arapahoe St., Tower 1, Suite 1500 Denver, CO 80202
Capital Resources Growth, Inc. 208,800
1515 Arapahoe St., Tower 1, Suite 1500
Denver, CO 80202
</TABLE>
<PAGE>
LEONARD GREEN & PARTNERS L.P.
July 20, 1999
Board of Directors of White Cap Industries, Inc.
WHITE CAP INDUSTRIES, INC.
3120 Airway Avenue
Costa Mesa, CA 92626
Gentlemen:
This letter will confirm that Leonard Green & Partners, L.P. ("LGP") on behalf
of Green Equity Investors III, L.P. ("GEI III"), will commit to provide WC
Recapitalization Corp. up to $114.5 million of Holding Company Zero Coupon
Notes, Preferred Stock and Common Stock financing sufficient to complete the
recapitalization of White Cap Industries, Inc. (the "Company") by Green Equity
Investors III, L.P. and the management team of the Company at a cash purchase
price of $16.50 per share (the "Recapitalization").
GEI III's investment will be provided immediately prior to the closing of the
Recapitalization and is subject only to compliance with the Agreement and Plan
of Merger to be executed by the Company and WC Recapitalization Corp. and as may
be later amended (the "Agreement") and satisfaction of the conditions set forth
therein, including receipt of the portion of the Financing to be provided by
DLJ. LGP will cause WC Recapitalization Corp. to perform its obligations under
the Agreement.
LGP understands that you will be relying on its commitments in this letter if
the Company enters into the Agreement.
LGP is delighted to be part of a transaction that will bring substantial value
to the public shareholders of White Cap Industries, Inc.
Very truly yours,
LEONARD GREEN & PARTNERS, L.P.
By: LGP Management, Inc.
By: /S/ PETER J. NOLAN
------------------
Peter J. Nolan
<PAGE>
LEONARD GREEN & PARTNERS, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, California 900025
July 13, 1999
PERSONAL AND CONFIDENTIAL
Board of Directors
White Cap Industries, Inc.
3120 Airway Avenue
Costa Mesa, CA 92626
Re: EXCLUSIVITY AGREEMENT
Ladies and Gentlemen:
The purpose of this letter is to set forth the terms upon which Leonard
Green & Partners, L.P. ("LGP") and White Cap Industries, Inc. ("White Cap")
agree to commit the resources necessary to proceed with negotiations towards the
execution of a Merger Agreement for the acquisition of White Cap pursuant to a
recapitalization of White Cap (the "Transaction") no later than 9:30 a.m.
Eastern Daylight Time Friday, July 23, 1999 (the "Exclusivity Period"). The
Exclusivity Period shall be deemed to commence at 6:00 p.m. Eastern Daylight
Time on the date hereof and White Cap represents and warrants that it has not
received an economically superior proposal to that put forward by LGP in
conjunction with this letter agreement from any third party within 72 hours
prior to commencement of the Exclusivity Period. In accordance with the
provisions of this letter agreement, White Cap agrees to negotiate exclusively
and in good faith with LGP for the acquisition of White Cap during the
Exclusivity Period.
By countersignature below, White Cap agrees that neither White Cap nor
any of its officers, affiliates, directors, employees, agents or representatives
will, during the Exclusivity Period, engage in any discussions or negotiations
with, provide any non-public information to, or take any action to encourage the
submission of a proposal by, any third party in respect of a possible
acquisition of White Cap or any substantial portion of its business and assets,
or any transaction which would preclude the accomplishment of the Transaction.
In the event White Cap (a) receives a proposal or offer from a third party
competing with LGP during the Exclusivity Period or is contacted by a third
party with respect to a possible acquisition of White Cap or any substantial
portion of its business and assets during the Exclusivity Period and (b) either
(i) enters into a definitive agreement with respect to such offer or proposal at
any time on or prior to August 23, 1999 or (ii) consummates a transaction with
respect to such offer or
<PAGE>
White Cap Industries, Inc.
July 13, 1999
Page 2
proposal at any time on or prior to January 31, 2000, White Cap will
immediately pay to LGP a break-up fee (the "Break-Up Fee"), by wire transfer
to an account designated by LGP, of (1) $12,000,000 immediately upon entering
into such definitive agreement described in clause (b)(i) above, or (2)
$6,000,000 immediately upon consummation of such a transaction described in
clause (b)(ii) above. White Cap further agrees that it will (x) immediately
communicate to LGP the terms of any inquiry, proposal or offer received by
White Cap (and the identity of the inquiring, proposing or offering party, as
the case may be) during the Exclusivity Period with respect to the potential
acquisition of White Cap or any substantial portion of its business or assets
and (y) in the event any such proposal or offer provides for terms
economically superior to terms proposed by LGP on a per share basis, extend
the Exclusivity Period by five (5) calendar days. Notwithstanding anything in
this letter agreement to the contrary, White Cap will not be deemed to have
breached this letter agreement in the event another party seeks or obtains
investment banking or financing services from Donaldson, Lufkin & Jenrette
provided (i) such service are rendered only by such individuals within
Donaldson, Lufkin & Jenrette that are not and have not been representatives
of White Cap with respect to the proposed Transaction or any similar
transaction and (ii) neither such party nor those individuals within
Donaldson, Lufkin & Jenrette providing such services shall receive any
cooperation or assistance from White Cap's directors, officers, employees or
other agents or those individuals within Donaldson, Lufkin & Jenrette that
are or have been representatives of White Cap with respect to the proposed
Transaction or any similar transaction.
You agree to pay all of the reasonable, out-of-pocket expenses
(including, without limitation, reasonable expenses of counsel, accountants,
Hart-Scott-Rodino and other filing fees, commitment fees and expenses required
to be paid to financing sources) incurred by LGP in the pursuit of the
Transaction, whether or not an agreement in respect of the Transaction is
reached. In the event we determine during the Exclusivity Period not to proceed
with the Transaction, we will so advise you, and thereafter this letter
agreement shall immediately terminate and you shall not be responsible for any
out-of-pocket expenses incurred by LGP subsequent to such notification.
Both parties hereto agree that without prior written consent of the
other party and except as required by law or the rules of the Nasdaq National
Market, no disclosure shall be made of the fact that we are in discussions
concerning the Transaction until such time as we have entered into a definitive
agreement with respect thereto. Notwithstanding the foregoing, White Cap may
make general reference to entering into this letter agreement for purposes of
terminating any existing discussions or negotiations.
This letter agreement may not be amended or modified except by an
instrument in writing signed by each of the parties hereto. This letter
agreement shall be governed by the laws of the State of California without
regard to principles of conflicts of laws, and each party hereby submits to the
non-exclusive jurisdiction of any state or federal court sitting within the
County of Los Angeles. The parties hereto agree that irreparable damage would
occur in the event any provision of this letter agreement was not performed in
accordance with the terms hereof and that
<PAGE>
White Cap Industries, Inc.
July 13, 1999
Page 3
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity. Notwithstanding the foregoing,
the parties hereto agree that in the event of any payment of the Break-Up Fee
by White Cap to LGP, such Break-Up Fee shall represent the sole remedy for
any breach of this letter agreement and shall constitute liquidated damages
agreed upon in light of the difficulty of measuring the damage to LGP, and
the unjust enrichment to White Cap, in the event of any such breach of this
letter agreement.
It should be clearly understood that except as expressly set forth in
this letter agreement, there is no legally binding agreement between us at this
time for the consummation of the Transaction or otherwise, and no such agreement
shall exist until we have entered into a definitive written agreement.
If the foregoing is in accordance with your understanding, please sign
this letter agreement in the space provided below. This letter agreement may be
signed in counterpart, each of which will be considered an original.
Very truly yours,
LEONARD GREEN & PARTNERS, L.P.
By: LGP Management, Inc.
Its General Partner
By:
--------------------
Name:
--------------
Title:
-------------
AGREED TO AND ACCEPTED:
- -----------------------
WHITE CAP INDUSTRIES, INC.
By:
-----------------------
Name:
----------------
Title:
---------------
<PAGE>
Donaldson, Lufkin & Jenrette
Donaldson, Lufkin & Jenrette Securities Corporation
2121 Avenue of the Stars, Suite 3000,
Los Angeles, CA 90067-5014 - (310) 282-6161
CONFIDENTIAL
July 20, 1999
Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Attention: Mr. Peter Nolan
Re: FINANCING FACILITIES FOR THE RECAPITALIZATION OF WHITE CAP INDUSTRIES,
INC.
Ladies and Gentlemen:
You have advised DLJ Bridge Finance, Inc. ("DLJ BRIDGE"), DLJ Capital
Funding, Inc. ("DLJ CAPITAL FUNDING") and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC" and, together with DLJ Capital Funding and DLJ
Bridge, the "DLJ FINANCE PARTIES") that Leonard Green & Partners, L.P. ("LGP,
L.P.") and certain of its affiliates, including WC Recapitalization Corp., a
newly formed corporation ("MERGERSUB"), which will be wholly owned by LGP, L.P.,
its affiliates and certain other equity investors (collectively, "LGP"), it
being understood that LGP, L.P. and its affiliates will own at closing a
majority of the fully diluted capital stock of MergerSub and its successors, and
White Cap Industries, Inc. (the "COMPANY") and certain of its affiliates,
including White Cap Industries, Corp. ("OPCO"), which is wholly owned by the
Company, are contemplating a recapitalization of the Company (the
"RECAPITALIZATION"). We understand that the Recapitalization will be
accomplished through a merger (the "MERGER") of MergerSub with and into the
Company, with the result that all of the shares of the Company's common stock
(the "SHARES") (including stock options) will be converted to cash at a price
not to exceed $16.50 per Share, except for 971,445 Shares that will be retained
by management of the Company (the "RETAINED SHARES"). Following completion of
the Merger, all of the obligations under the Credit Facilities (as defined
below) will be assumed by OpCo. You have also advised us that certain of OpCo's
existing indebtedness will be refinanced (the "REFINANCING") in the aggregate
principal amount of approximately $50.4 million, plus accrued and unpaid
interest thereon. In
<PAGE>
addition, up to approximately $17.5 million in expenses will be paid in
connection with the Recapitalization. In connection with the foregoing, LGP
will invest $84.5 million in exchange for newly issued capital stock of
MergerSub (the "LGP EQUITY CONTRIBUTION"), not less than $29.8 million of
which will consist of common stock and the balance of which may be in common
or preferred stock. Upon consummation of the Merger, the capital stock of
MergerSub will be converted into corresponding capital stock of the Company.
Upon consummation of the Recapitalization, OpCo will be controlled, through
the Company, by LGP. The Recapitalization, the Merger, the Refinancing, the
LGP Equity Contribution and all related transactions are herein collectively
referred to as the "TRANSACTION". Furthermore, as used herein, the term
"CREDIT GROUP" shall refer, collectively, to MergerSub and its subsidiaries,
and the Company and its subsidiaries, including OpCo, after giving effect to
the Transaction.
We understand that the total cash proceeds required by you to consummate
the Transaction will be $238.8 million, which will be financed with the proceeds
of the following: (i) proceeds from the issuance by the Company, for cash, of
$120.0 million of senior subordinated debt securities (the "SENIOR SUBORDINATED
SECURITIES") in a public offering or a Rule 144A private placement, (ii) the
issuance by MergerSub to LGP or other institutional investors of not less than
$30.0 million of zero-coupon notes (the "MERGERSUB ZERO COUPON NOTES"), and
(iii) not less than $84.5 million in cash proceeds of the LGP Equity
Contribution. You have further advised us that a senior revolving credit
facility of up to $100.0 million with sublimits in amounts to be determined for
letters of credit (the "PERMANENT REVOLVING CREDIT FACILITY") will be used to
provide for the working capital requirements and other corporate purposes of the
Company or OpCo after consummation of the Transaction, except that up to
$10 million may be used to fund the Transaction.
We further understand that in the event that it is impracticable for the
Company to issue the Senior Subordinated Securities at or prior to the
consummation of the Transaction, the proceeds described in the foregoing clause
(i) will be provided as follows: (i) borrowings by the Company of $70.0 million
under senior secured credit facilities, comprised of tranche A term loans of
$30.0 million (the "TRANCHE A TERM LOANS") and tranche B term loans of
$40.0 million (the "TRANCHE B TERM LOANS" and together with the Tranche A Term
Loans, "THE TERM LOAN FACILITY"); and (ii) $50.0 million of senior subordinated
increasing rate notes (the "BRIDGE NOTES"). In addition, we understand that in
such case, the Permanent Revolving Credit Facility will not be established;
instead, a senior revolving credit facility of up to $30 million with sublimits
in amounts to be determined for letters of credit (the "BRIDGE REVOLVING CREDIT
FACILITY"; the Bridge Revolving Credit Facility and the Term Loan Facility are
collectively hereinafter referred to as the "BRIDGE SENIOR FACILITIES") will be
used to provide for the working capital requirements and other corporate
purposes of the Company or OpCo after consummation of the Transaction.
2
<PAGE>
DLJ Capital Funding is pleased to inform you that it hereby commits to
provide the entire amount of the Permanent Revolving Credit Facility, if the
Company is able to issue the Senior Subordinated Securities at or prior to the
consummation of the Transaction, and in the alternative that it hereby commits
to provide the entire amount of the Bridge Senior Facilities if it is
impracticable for the Company to issue the Senior Subordinated Securities at or
prior to the consummation of the Transaction. DLJ Bridge is pleased to inform
you that it hereby commits that it or one of its affiliates will purchase at the
request of the Company the entire amount of the Bridge Notes if it is
impracticable for the Company to issue the Senior Subordinated Securities at or
prior to the consummation of the Transaction. Such commitments of DLJ Bridge
and DLJ Capital Funding are referred to herein as the "COMMITMENTS". As used
herein, (i) the term "SENIOR FACILITIES" shall refer to the Permanent Revolving
Credit Facility or the Bridge Senior Facilities, as applicable; (ii) the term
"REVOLVING CREDIT FACILITY" shall refer to the Permanent Revolving Credit
Facility or the Bridge Revolving Credit Facility, as applicable; and (iii) the
term "CREDIT FACILITIES" shall refer, collectively, to the Senior Facilities and
the Bridge Notes, if applicable. Annex I hereto sets forth in further detail
the sources and uses of proceeds required in connection with the Transaction.
DLJ Capital Funding will act as the sole and exclusive advisor, lead
arranger and sole book runner in respect of the Senior Facilities (the "LEAD
ARRANGER"). DLJ Bridge will act as the sole and exclusive advisor and arranger
in respect of the Bridge Notes (the "BRIDGE ARRANGER" and, collectively with the
Lead Arranger, the "ARRANGERS"). Each of DLJ Capital Funding and DLJ Bridge, as
Lead Arranger and Bridge Arranger, respectively, intends to attempt to arrange a
syndicate of other financial institutions that will, together with DLJ Capital
Funding and DLJ Bridge, participate in the Credit Facilities. The financial
institutions (including DLJ Capital Funding and DLJ Bridge) that participate in
the Credit Facilities are referred to herein as the "LENDERS". It is the intent
of the Arrangers to solicit commitments from prospective Lenders promptly
following the execution of this commitment letter. Nonetheless, our commitments
are not subject to syndication of the Credit Facilities. The Arrangers, in
consultation with the Company, will manage all aspects of the syndication, if
any, including decisions as to the selection of institutions to be approached
and when they will be approached, when their commitments will be accepted, which
institutions will participate, the allocations of the commitments among
potential Lenders and the amounts, allocation and distribution of fees among the
Lenders. You agree that no other agents, co-agents or arrangers will be
appointed, no other titles will be awarded and no compensation (other than that
expressly set forth in this
3
<PAGE>
Commitment Letter and in the Fee Letter (as defined below)) will be paid in
connection with the Credit Facilities unless you and we shall so agree. You
agree to actively assist the Arrangers in completing a syndication of the Credit
Facilities that is satisfactory to the Arrangers. Such assistance shall include
(i) your using your best efforts to ensure that the syndication efforts benefit
from the existing lending relationships of the Credit Group and LGP, (ii) your
using all reasonable efforts to make certain members of the management of the
Credit Group, as well as its consultants and advisors, available during regular
business hours to answer questions regarding the Credit Facilities and to
participate in information meetings for prospective Lenders, (iii) assistance by
the Credit Group in the preparation of a confidential information memorandum to
be used in connection with the syndication and (iv) the hosting by the Credit
Group of meetings with prospective Lenders at such times and places as the
Arrangers may reasonably request.
You further agree to cause the Credit Group to refrain, from conducting
or arranging, or initiating or engaging in preparations with financial
institutions (other than the DLJ Finance Parties) during the period beginning on
the date of this Commitment Letter and ending on that date that is 120 days
after the closing of the Senior Facilities.
The DLJ Finance Parties shall be entitled at any time, after consultation
with you, to change the structure, terms, pricing or amounts of the Credit
Facilities as set forth in Exhibit A hereto if they determine that such changes
are advisable in order to ensure a successful syndication of the Credit
Facilities by the Closing Date; PROVIDED that (i) the interest rate on the
Credit Facilities shall not be increased by more than 50 basis points, unless
the Closing Date occurs more than 90 days from the date of this letter, in which
case such interest rate shall not be increased by more than 75 basis points,
(ii) the fees payable pursuant to the letter (the "FEE LETTER") dated as of even
date herewith concerning compensation for certain services rendered by the DLJ
Finance Parties in connection with the Credit Facilities shall not be increased,
(iii) the aggregate amount of commitments in respect of the Credit Facilities
and the aggregate amount to be funded on the closing date remain unchanged and
(iv) any other changes to the structure of the Credit Facilities shall be
reasonably consistent with comparable syndications occurring then in the market.
The Commitments, undertakings and agreements of the DLJ Finance Parties are
subject to and contingent upon your agreements set forth in this commitment
letter, including, without limitation, the agreements in this paragraph. It is
understood that (i) a successful syndication of the Commitments to the Senior
Facilities will only have been achieved if the Commitments of DLJ Capital
Funding shall have been reduced to $20 million or less not later than the
Closing Date, and (ii) rights of the DLJ Finance Parties under this paragraph
shall terminate at the Closing Date so long as they shall have
4
<PAGE>
had a reasonable and customary period of time to achieve a successful
syndication of the relevant Credit Facilities.
We have reviewed certain historical and pro forma financial statements of
the Company and its subsidiaries and have met with representatives of management
of the Company regarding the transactions contemplated hereby, and we are
pleased to advise you that the results of our due diligence investigations of
the Company and its subsidiaries to date are satisfactory. The Commitments set
forth herein are subject to (1) there being no material adverse change in the
business, assets, properties (including intangible properties), condition
(financial or otherwise), results of operations, prospects or liabilities of the
Company and its subsidiaries taken as a whole, (2) the accuracy and completeness
of the Information and the Projections described in the immediately succeeding
paragraph and (3) satisfaction of the due diligence condition set forth on
Exhibit C hereto. The Commitments are also subject expressly to (i) the terms
and conditions set forth in this commitment letter, and the respective summaries
of terms and conditions and other provisions set forth as Exhibits A through E
hereto (collectively, the "COMMITMENT LETTER") and the fee letter (the "FEE
LETTER") executed by the parties hereto on the date hereof and (ii) the
execution and delivery of definitive documentation, including without limitation
one or more definitive securities purchase agreements, satisfactory to us and
covering the matters expressly referred to herein and such other customary
matters as we may reasonably request (collectively, the "DEFINITIVE
DOCUMENTATION"). In the event that any of the foregoing conditions are not
satisfied for any reason other than a default or breach by the DLJ Finance
Parties in the fulfillment of any of their obligations thereunder, the DLJ
Finance Parties reserve the right to either terminate their respective
Commitments (and thereafter the DLJ Finance Parties shall have no other or
further obligations hereunder or in connection with the Transaction) or to
propose alternative financing amounts or structures that assure adequate
protection for the DLJ Finance Parties and the Lenders.
You hereby represent that, to the best of your knowledge, (a) all factual
information (the "INFORMATION") which has been or is hereafter made available to
the DLJ Finance Parties by LGP or any of the Credit Group or any of their
representatives in connection with the transactions contemplated hereby is or
will be when furnished, taken as a whole, complete and correct in all material
respects and does not or will not, when furnished, taken as a whole, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made, and (b) all
financial projections of the Credit Group that have been or are hereafter made
available to the DLJ Finance Parties by LGP or the Credit Group or any of its
representatives in connection with the transactions contemplated hereby (the
"PROJECTIONS") have
5
<PAGE>
been or will be prepared in good faith. In arranging and syndicating the Senior
Facilities and in purchasing the Bridge Notes, the DLJ Finance Parties will be
using and relying on the Information and the Projections without independent
verification thereof. You agree to supplement the Information and Projections
from time to time until the closing of the Transaction so that the
representation and warranty in the preceding sentence is correct on the closing
date. The representations and covenants contained in this paragraph shall
remain effective until Definitive Documentation is executed and thereafter the
disclosure representations contained herein shall be superseded by those
contained in such Definitive Documentation.
By your signature below you hereby agree to indemnify and hold harmless
each of the Indemnified Parties, as defined in Exhibit D hereto, and agree to
promptly pay all of the fees and expenses, in each case following demand, as set
forth in Exhibit D hereto (with the terms and provisions of such Exhibit D being
incorporated herein by this reference). Neither you (except as specifically
provided herein), nor any of the DLJ Finance Parties, nor any agent nor any
Lender shall be responsible or liable to any other party or any other person for
consequential damages which may be alleged as a result of this letter.
The Commitments are not assignable by you except to one or more
affiliated funds. Nothing in this Commitment Letter, expressed or implied,
shall give any person, other than the parties hereto, any beneficial or legal
right, remedy or claim hereunder.
If you accept this Commitment Letter and the Fee Letter and you have
entered into a definitive agreement with the Company for the Transaction, the
DLJ Finance Parties agree not to provide financing with respect to any competing
proposals for the recapitalization or acquisition of the Company, unless
(i) your role in the Transaction has terminated voluntarily, (ii) LGP or any of
the Credit Group has commenced the marketing of any securities or the
arrangement of any other financing relating to the Transaction (other than
marketing of equity securities of MergerSub and MergerSub Zero Coupon Notes) for
which DLJSC or one of its affiliates is not sole manager or sole agent, or in
the case of any bank style financing, syndication agent or lead arranger, as the
case may be; or (iii) the closing of the Merger has not occurred by 5:00 PM New
York City time on January 31, 2000.
Each of this Commitment Letter and the Fee Letter is confidential and
shall not be disclosed by any of the parties hereto to any person other than
such party 's accountants, attorneys and other advisors, and, in the case of the
DLJ Finance Parties, their affiliates and prospective Lenders, purchasers or
assignees, and then only on a confidential basis and in connection with the
Transaction and
6
<PAGE>
the related transactions contemplated herein. Any disclosure to an advisor may
be made for the sole purpose of evaluating and advising on the offer of
financing made in this letter and may not be used by such advisor in formulating
any offer of financing by such advisor or an affiliate. Additionally, any party
hereto may make such disclosures of this letter as are required by regulatory
authority, law or judicial process or as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation to
which such person is a party; PROVIDED that such party will use its commercially
reasonable efforts to notify the other parties hereto of any such disclosure
prior to making such disclosure. The DLJ Finance Parties hereby consent to your
disclosure of this Commitment Letter (but not the Fee Letter) on a confidential
basis to (i) potential equity investors and potential purchasers of MergerSub
Zero Coupon Notes, and (ii) the Company and its financial and legal advisors for
their use in connection with their evaluation of your proposal for the
Recapitalization. Notwithstanding the foregoing, (i) this Commitment Letter
(but not the Fee Letter or its contents) may be summarized or otherwise
described in any disclosure document relating to the Transaction that is
furnished to stockholders of the Credit Group or potential investors in the
Transaction, and copies hereof may be filed with the Securities and Exchange
Commission or any other regulatory authority with whom, in the opinion of your
counsel or counsel to the Company, such filing is required by law and
(ii) amounts payable under the Fee Letter may be included in fees and expenses
payable in connection with the Transaction in any disclosure document to the
extent, in the opinion of your counsel or counsel to the Company, required by
law.
This Commitment Letter and the Fee Letter set forth the entire
understanding of the parties as to the scope of the Commitments and obligations
of the DLJ Finance Parties hereunder. The Commitments will expire at 9:30 AM
Eastern Daylight Time on July 23, 1999 unless this Commitment Letter and the Fee
Letter shall have been accepted by you prior to such time. The Commitments will
also expire at the earliest of (i) the termination of the definitive agreement
relating to the Recapitalization; (ii) the closing of the Transaction without
the funding of the Commitments; (iii) the commencement by LGP or any of the
Credit Group of the marketing of any securities or the arrangement of any other
financing relating to the Transaction (other than marketing of equity securities
of MergerSub and MergerSub Zero Coupon Notes) for which DLJSC or one of its
affiliates is not sole manager or sole agent, or in the case of any bank style
financing, syndication agent or lead arranger, as the case may be; or (iv) 5:00
PM New York City time on January 31, 2000 if the closing of the Merger has not
occurred by such time; PROVIDED, HOWEVER, that any term or provision hereof to
the contrary notwithstanding, all obligations hereunder in respect of
indemnification, confidentiality and fee and expense reimbursement shall survive
any termination of the Commitments, and shall be binding regardless of whether
Definitive Documentation is signed; provided further that such obligations with
respect to
7
<PAGE>
indemnification and fee and expense reimbursement shall be superseded by the
Definitive Documentation when signed.
This Commitment Letter may not be amended or waived except by an
instrument in writing signed by each signatory hereto.
This Commitment Letter and the Fee Letter shall be governed by, and
construed in accordance with, the laws of the State of New York. To the fullest
extent permitted by applicable law, each of the parties hereto hereby
irrevocably submits to the jurisdiction of the United States District Court for
the Southern District of New York or any New York State court sitting in the
Borough of Manhattan in New York City in respect of any suit, action or
proceeding arising out of or relating to the provisions of this Commitment
Letter or the Fee Letter or the transactions contemplated hereby and irrevocably
agrees that all claims in respect of any such suit, action or proceeding may be
heard and determined in any such court. Each of the parties hereto waives to
the fullest extent permitted by applicable law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum
and any right to trial by jury in any such suit, action or proceeding.
This letter agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
We appreciate having been given the opportunity to be involved in this
transaction.
Very truly yours,
DLJ CAPITAL FUNDING, INC.
By:
-----------------------
Title:
--------------------
DLJ BRIDGE FINANCE, INC.
By:
-----------------------
Title:
--------------------
8
<PAGE>
ACCEPTED AND AGREED TO
this day of , 1999
-- ----
LEONARD GREEN & PARTNERS, L.P.
By:
-----------------------
Title:
--------------------
Encl.: Annex I - Sources and Uses of Funds
Exhibit A - Senior Facilities Term Sheet
Exhibit B - Bridge Notes Term Sheet
Exhibit C - Conditions to Closing
Exhibit D - Indemnification
Exhibit E - Subordination Provisions
9
<PAGE>
ANNEX I
SOURCES AND USES OF FUNDS
($ IN MILLIONS)
<TABLE>
<CAPTION>
SOURCES USES
------- ----
<S> <C> <C> <C>
Permanent Revolving Credit Facility $4.3 Purchase of shares $170.9
Senior Subordinated Notes $120.0 Refinancing of existing Debt $50.4
Holdco Zero Coupon Notes $30.0 Fees & expenses $17.5
Equity Contribution by LGP $84.5
Total Sources $238.8 Total Uses $238.8
</TABLE>
In the event the Company is unable to issue the Senior Subordinated
Securities at or prior to the consummation of the Transaction, the Sources and
Uses of Funds shall be as follows:
<TABLE>
<CAPTION>
SOURCES USES
------- ----
<S> <C> <C> <C>
Bridge Revolving Credit Facility $4.3 Purchase of shares $170.9
Term Loan Facility $70.0 Refinancing of existing Debt $50.4
Bridge Notes $50.0 Fees & expenses $17.5
Holdco Zero Coupon Notes $30.0
Equity Contribution by LGP $84.5
Total Sources $238.8 Total Uses $238.8
</TABLE>
<PAGE>
EXHIBIT A
WHITE CAP INDUSTRIES, INC.
SUMMARY OF TERMS
SENIOR FACILITIES
(All terms defined in the Commitment Letter to which this Summary of Terms is
attached and not otherwise defined herein shall have the same meanings when
used herein. Certain conditions to the Senior Facilities are set forth in
Exhibit C.)
I. PARTIES
BORROWER: The Senior Facilities will be made available to
MergerSub and its successors, including,
sequentially, the Company and OpCo (the "BORROWER")
for partial funding of the Transaction and for
working capital requirements and general corporate
purposes.
LEAD ARRANGER AND BOOK DLJ Capital Funding, Inc. ("DLJ") or one or more of
RUNNER: its affiliates (in such capacity, the "LEAD
ARRANGER").
SYNDICATION AGENT: DLJ or one or more of its affiliates (in such
capacity, the "SYNDICATION AGENT").
ADMINISTRATIVE AGENT: A financial institution to be agreed upon by the
Lead Arranger, the Syndication Agent and the
Borrower (in such capacity, the "ADMINISTRATIVE
AGENT").
LENDERS: DLJ and a syndicate of banks, financial
institutions and, other than with respect to the
Revolving Credit Facility, other accredited
investors (the "LENDERS").
A-1
<PAGE>
II. PERMANENT REVOLVING CREDIT FACILITY
DESCRIPTION OF PERMANENT A senior revolving credit facility of up to
REVOLVING CREDIT $100.0 million (the "PERMANENT REVOLVING CREDIT
FACILITY: FACILITY"), The Permanent Revolving Credit Facility
will terminate five years after the Closing Date.
After the Closing Date, revolving loans (whether
pursuant to the Permanent Revolving Credit Facility
or the Bridge Revolving Credit Facility described
below, "REVOLVING LOANS") may be made under the
Permanent Revolving Credit Facility to provide for
the working capital requirements and general
corporate purposes of the Borrower and its
subsidiaries, including permitted acquisitions, and
commercial and standby letters of credit (whether
pursuant to the Permanent Revolving Credit Facility
or the Bridge Revolving Credit Facility described
below, "LETTERS OF CREDIT") may be issued up to a
sublimit to be agreed upon. Each issuance of a
Letter of Credit will constitute usage under the
Permanent Revolving Credit Facility. Letters of
Credit must expire on the earlier of (i) one year
from the date of issuance (subject, in certain
cases, to customary "evergreen" provisions) or
(ii) the fifth anniversary of the Closing Date. A
portion of the Permanent Revolving Credit Facility
in an amount to be agreed upon shall be made
available as a swingline facility. Advances under
the swingline facility will constitute usage under
the Permanent Revolving Credit Facility (except for
purposes of calculating the commitment fee).
USE OF PROCEEDS: Up to $10 million of the Permanent Revolving Credit
Facility may be drawn to fund the Transaction.
After the Closing Date, the Permanent Revolving
Credit Facility will be available as set forth
under "DESCRIPTION OF PERMANENT REVOLVING CREDIT
FACILITY" above.
VOLUNTARY PREPAYMENTS AND The Permanent Revolving Credit Facility may be
COMMITMENT REDUCTIONS: prepaid in whole or in part without premium or
penalty (LIBOR Loans prepayable only upon payment
of any LIBOR breakage costs) and the Lenders'
commitments relative thereto reduced or terminated
upon such notice and in such amounts as may be
agreed upon.
A-2
<PAGE>
MANDATORY PREPAYMENTS AND The Borrower shall prepay the loans under the
COMMITMENT REDUCTIONS: Permanent Revolving Credit Facility and the
commitments thereunder shall be reduced (subject to
certain exceptions to be agreed upon) in amounts
equal to:
ASSET SALE PROCEEDS: 100% of the net after-tax
cash proceeds of the sale or other disposition of
any property or assets of MergerSub or any of its
subsidiaries, subject to such thresholds as may be
agreed upon, other than (a) net cash proceeds of
sales or other dispositions of inventory in the
ordinary course of business, (b) if no default or
event of default has occurred and is continuing,
proceeds (not to exceed an amount to be agreed)
reinvested in assets of the Borrower and its
subsidiaries within 365 days of receipt thereof,
and (c) certain other exceptions to be negotiated;
PROCEEDS OF EQUITY OFFERINGS: 50% of the net cash
proceeds received from the public offering of
equity securities of the Company or any of its
subsidiaries (other than (i) any such proceeds
which are applied to refinance the Bridge Notes and
(ii) preferred equity securities issued to finance
permitted acquisitions), in each case payable no
later than the first business day following the
date of receipt;
PROCEEDS OF DEBT ISSUANCES: 100% of the net cash
proceeds received from certain issuances of debt
securities by the Company or any of its
subsidiaries (other than any such proceeds applied
to refinance the Bridge Notes), in each case
payable no later than the first business day
following the date of receipt;
PROVIDED that at such time as the Borrower's ratio
of total debt to consolidated EBITDA (the "TOTAL
LEVERAGE RATIO") is less than or equal to 3.5x,
prepayments from the proceeds of equity issuances
will no longer be required.
A-3
<PAGE>
III. TERM LOAN FACILITY
DESCRIPTION OF TERM LOAN The Term Loan Facility of $70 million shall consist
FACILITY: of two tranches:
TRANCHE A TERM LOANS: The Tranche A Term Loans of
$30 million will have a final maturity date of five
years after the Closing Date. Quarterly
amortization will be required commencing in the
second year resulting in aggregate annual
amortization payments of $7.5 million per year.
TRANCHE B TERM LOANS: The Tranche B Term Loans of
$40 million will have a final maturity date of
seven years after the Closing Date. Quarterly
amortization will be required resulting in
aggregate annual amounts, expressed as a percentage
of the original aggregate principal amount of the
Tranche B Term Loans, as follows:
YEAR AGGREGATE ANNUAL AMORTIZATION
---- -----------------------------
1 1%
2 1%
3 1%
4 1%
5 1%
6 1%
7 94%
USE OF PROCEEDS: In the event that it is impracticable for the
Borrower to issue the Senior Subordinated
Securities at or prior to the consummation of the
Transaction, the cash proceeds of the Term Loan
Facility, together with $50 million in cash
proceeds from the Bridge Notes, shall be made
available and used to fund the Transaction.
A-4
<PAGE>
VOLUNTARY PREPAYMENTS: The Term Loan Facility may be prepaid in whole or
in part without premium or penalty (LIBOR Loans
prepayable only upon payment of any LIBOR breakage
costs) upon such notice and in such amounts as may
be agreed upon. Voluntary prepayments of the Term
Loan Facility shall be applied ratably between the
Tranche A Term Loans and the Tranche B Term Loans
and shall be applied to the next two scheduled
quarterly amortization payments and, thereafter, to
the remaining scheduled installments thereof on a
pro rata basis.
MANDATORY PREPAYMENTS: The Borrower shall prepay the loans under the Term
Loan Facility (subject to certain exceptions to be
agreed upon) in amounts equal to:
ASSET SALE PROCEEDS: 100% of the net after-tax
cash proceeds of the sale or other disposition of
any property or assets of MergerSub or any of its
subsidiaries, subject to such thresholds as may be
agreed upon, other than (a) net cash proceeds of
sales or other dispositions of inventory in the
ordinary course of business, (b) if no default or
event of default has occurred and is continuing,
proceeds (not to exceed an amount to be agreed)
reinvested in assets of the Borrower and its
subsidiaries within 365 days of receipt thereof,
and (c) certain other exceptions to be negotiated;
PROCEEDS OF EQUITY OFFERINGS: 50% of the net cash
proceeds received from the issuance of equity
securities of MergerSub or any of its subsidiaries
(other than (i) any such proceeds which are applied
to refinance the Bridge Notes and (ii) preferred
equity securities issued to finance permitted
acquisitions), in each case payable no later than
the first business day following the date of
receipt; and
PROCEEDS OF DEBT ISSUANCES: 100% of the net cash
proceeds received from certain issuances of debt
securities by MergerSub or any of its subsidiaries
(other than any such proceeds applied to refinance
the Bridge Notes), in each case payable no later
than the first business day following the date of
receipt;
EXCESS CASH FLOW: 50% of excess cash flow for each
fiscal year payable within 90 days after the end of
the applicable fiscal year.
A-5
<PAGE>
PROVIDED, that at such time as the Borrower's ratio
of total debt to consolidated EBITDA (the "TOTAL
LEVERAGE RATIO") is less than or equal to 3.0x,
prepayments from the proceeds of equity issuances
and excess cash flow will no longer be required.
All such mandatory prepayments shall be applied
ratably between the Tranche A Term Loans and the
Tranche B Term Loans and, shall be applied to the
next two scheduled quarterly amortization payments
and, thereafter, to the remaining scheduled
installments thereof on a pro rata basis.
IV. THE BRIDGE REVOLVING CREDIT FACILITY
DESCRIPTION OF BRIDGE The terms of the Bridge Revolving Credit Facility
REVOLVING CREDIT FACILITY: will be identical to the terms of the Permanent
Revolving Credit Facility described above, except
that (i) the amount of the Bridge Revolving Credit
Facility will be $30.0 million and (ii) mandatory
prepayments and commitment reductions will apply to
the Bridge Revolving Credit Facility only after the
Term Loan Facility has been repaid in full.
A-6
<PAGE>
V. COMMON TERMS OF THE SENIOR FACILITIES
CLOSING DATE: Not later than January 31, 2000.
GUARANTORS: The Senior Facilities will be guaranteed by all
direct and indirect domestic subsidiaries of
Borrower.
SECURITY: The Senior Facilities (and all existing and future
interest rate hedging arrangements provided by the
Lenders and their affiliates) will be secured by
first priority perfected liens on substantially all
existing and after-acquired property (tangible and
intangible), the Borrower and its guarantor
subsidiaries, including without limitation all
accounts receivable, inventory, equipment,
intellectual property and other personal property
and a pledge of the capital stock of all
subsidiaries of the Borrower; PROVIDED, HOWEVER,
that no more than 65% of the equity interests of
non-U.S. subsidiaries will be required to be
pledged as security.
To effect such liens securing the Senior
Facilities, the Borrower and the guarantors shall
execute and deliver to the Administrative Agent all
security agreements, pledge agreements, financing
statements and other documents and instruments as
are necessary to grant a first priority perfected
security interest in and lien upon all such
property of the Borrower and the guarantors,
subject to customary permitted liens to be agreed
upon.
Negative pledge on all assets of the Credit Group,
subject to exceptions for certain permitted liens
to be agreed upon.
A-7
<PAGE>
INTEREST RATES: All amounts outstanding under the Senior Facilities
shall bear interest, at the Borrower's option, at
the Base Rate or the reserve-adjusted LIBOR plus,
in each case, an applicable margin as set forth on
Schedule I annexed hereto.
As used herein, the terms "Base Rate" and "reserve
adjusted LIBOR" shall have meanings customary and
appropriate for financings of this type, and the
basis for calculating accrued interest and the
interest periods for loans bearing interest at the
reserve adjusted LIBOR ("LIBOR LOANS") shall be
customary and appropriate for financings of this
type.
INTEREST PAYMENTS: Quarterly for Base Rate Loans; on the last day of
selected interest periods (which shall be 1, 2, 3
or 6 months) for LIBOR Loans (and at the end of
every three months, in the case of interest periods
of longer than three months); and upon prepayment,
in each case payable in arrears and computed on the
basis of a 365-day year for Base Rate Loans, or a
360-day year for LIBOR Loans.
LETTER OF CREDIT FEE: A letter of credit fee equal to the applicable
LIBOR margin for Revolving Loans then in effect
shall accrue on the daily average amount of all
outstanding Letters of Credit and shall be payable
quarterly in arrears to the Administrative Agent
for distribution to each Lender under the Revolving
Credit Facility. In addition, a fronting fee shall
be payable to the Lender issuing such Letter of
Credit for its own account in an amount to be
mutually agreed upon on the stated amount of the
applicable Letter of Credit quarterly in arrears.
In addition, customary administrative, amendment
and drawing fees shall be payable to such issuing
Issuer for its own account.
A-8
<PAGE>
COMMITMENT FEES: Commitment fees equal to a per annum percentage
(the "COMMITMENT FEE PERCENTAGE") as set forth on
Schedule I annexed hereto times the daily average
unused portion of the Revolving Credit Facility
shall accrue from the Closing Date and shall be
computed on the basis of a 360-day year and payable
quarterly in arrears and upon the maturity or
termination of such Revolving Credit Facility.
REPRESENTATIONS AND Customary and appropriate, including without
WARRANTIES: limitation due organization and authorization,
enforceability, financial condition, no material
adverse changes, title to properties, liens,
litigation, payment of taxes, no material adverse
agreements (except as disclosed), compliance with
laws, employee benefit liabilities, environmental
liabilities, perfection and priority of liens
securing the Senior Facilities, full disclosure,
year 2000 compliance and the accuracy of all
representations and warranties in the definitive
documents related to the Transaction.
COVENANTS: Customary and appropriate affirmative and negative
covenants, including but not limited to limitations
on other indebtedness, liens, investments,
contingent liabilities, restricted junior payments
(dividends on capital stock, redemptions and
payments on subordinated debt), mergers and
acquisitions, sales of assets, capital
expenditures, leases, sale/leasebacks, transactions
with affiliates, conduct of business, delivery of
covenant compliance certificates and other
provisions customary and appropriate for financings
of this type, including exceptions and baskets to
be mutually agreed upon. Acquisitions shall be
permitted subject to the following: (i) aggregate
consideration shall not exceed $25 million (or, if
the Total Leverage Ratio is less than 4.0x,
$50 million) for any single acquisition and shall
not exceed $50 million for any one-year period,
(ii) no potential default or Event of Default shall
exist after giving effect to the acquisition
(including pro forma financial covenant
compliance), (iii) the acquired company or assets
shall be in a line of business reasonably related,
complementary or ancillary to that of the Borrower
or a subsidiary and (iv) minimum liquidity under
the Senior Facilities of $10 million.
A-9
<PAGE>
Financial performance covenants will include a
minimum fixed charge coverage test, a maximum
secured leverage test, a maximum total leverage
test and a minimum asset coverage test. In the
event the Term Loan Facility is funded, additional
covenants will include further restrictions on
investments and acquisitions.
EVENTS OF DEFAULT: Customary and appropriate (subject to customary and
appropriate grace periods), including without
limitation failure to make payments when due,
defaults under other agreements or instruments of
indebtedness, noncompliance with covenants,
breaches of representations and warranties,
bankruptcy, unpaid judgments in excess of specified
amounts, invalidity of guaranties, impairment of
security interests in collateral, and "changes of
control" (to be defined in a mutually agreed upon
manner).
CONDITIONS TO ALL In addition to the conditions set forth in Exhibit
BORROWINGS: C, the conditions to all borrowings will include
requirements relating to prior written notice of
borrowing, the accuracy of representations and
warranties, and the absence of any default or
potential event of default.
VI. MISCELLANEOUS
SYNDICATION: A syndicate of financial institutions will be
arranged by the Lead Arranger. The Borrower will
cooperate with the Lead Arranger in the syndication
of the Senior Facilities (such cooperation to
include, without limitation, participating in
meetings with the Lenders and assisting in the
preparation of a Confidential Information
Memorandum and other materials to be used in
connection with such syndication) and will provide
or cause to be provided all information reasonably
deemed necessary by the Lead Arranger to
successfully complete such syndication. The
Borrower also agrees to coordinate any other
financings with the Lead Arranger's primary
syndication efforts relating to the Senior
Facilities.
A-10
<PAGE>
The Lenders may assign all or, in an amount of not
less than $5 million (or such lesser amount as may
constitute the assigning Lender's entire
commitment), any part of their shares of the Senior
Facilities to their affiliates, to other Lenders,
or to one or more banks or other entities that are
eligible assignees (to be defined in the Definitive
Documentation) which are acceptable to Borrower and
the Administrative Agent, such consent not to be
unreasonably withheld, and upon such assignment any
such affiliate, bank or entity shall become a
Lender for all purposes; PROVIDED that assignments
made to affiliates and other Lenders shall not be
subject to the $5 million minimum assignment
requirement. The Lenders will have the right to
sell participations, subject to customary
limitations on voting rights, in their shares of
the Senior Facilities.
REQUISITE LENDERS: Requisite Lenders shall mean Lenders holding in the
aggregate more than 50% of the commitments under
the Senior Facilities, except that the consent of
all the Lenders shall be required with respect to
certain customary issues.
TAXES, RESERVE All payments are to be made free and clear of any
REQUIREMENTS & present or future taxes (other than franchise taxes
INDEMNITIES: and taxes on overall net income), imposts,
assessments, withholdings, or other deductions
whatsoever. Foreign Lenders shall furnish to the
Administrative Agent (for delivery to the Borrower)
appropriate certificates or other evidence of
exemption from U.S. federal income tax withholding.
The Borrower shall indemnify the Lenders against
all increased costs of capital resulting from
reserve requirements or otherwise imposed, in each
case subject to customary increased costs, capital
adequacy and similar provisions.
GOVERNING LAW AND The Borrower will submit to the non-exclusive
JURISDICTION: jurisdiction and venue of the federal and state
courts of the State of New York and will waive any
right to trial by jury. New York law shall govern
the Definitive Documentation for the Senior
Facilities.
A-11
<PAGE>
COUNSEL TO THE LEAD Davis Polk & Wardwell
ARRANGER AND DLJSC:
The foregoing is intended as an outline only and does not purport to
summarize all the conditions, covenants, representations, warranties and other
provisions which would be contained in the Definitive Documentation for the
Senior Facilities. The commitments, undertakings and obligations described
herein will be subject to negotiation and execution of such Definitive
Documentation in form and substance satisfactory to DLJ, its legal counsel and
the Lenders.
A-12
<PAGE>
SCHEDULE I
Subject to the provisions of the Commitment Letter to which this Schedule
I is attached with respect to possible changes in structure, terms and pricing
to assure a successful syndication:
A. The applicable margin for LIBOR Loans and Base Rate Loans under
the Revolving Credit Facility and the Commitment Fee Percentage shall be as
follows:
1. Until the six-month anniversary of the Closing Date,
(i) the applicable margin for Permanent Revolving Loans shall be 2.50%
for LIBOR Loans and 1.50% for Base Rate Loans. After the six-month
anniversary of the Closing Date, the applicable margin for Permanent
Revolving Loans and the Commitment Fee Percentage shall be subject to
adjustment based on the Total Leverage Ratio of the Borrower and its
subsidiaries as follows:
LEVERAGE RATIO LIBOR RATE BASE RATE COMMITMENT FEE
greater than 4.0x 2.50% 1.50% .50%
3.5-4.0x 2.25% 1.25% .50%
3.0-3.5x 2.00% 1.00% .375%
less than 3.0x 1.75% 0.75% .375%
In the event that utilization of the Permanent Revolving Credit Facility is less
than 33%, then the Commitment Fee will increase by 0.25%.
3. The applicable margin for Bridge Revolving Loans shall be
2.75% for LIBOR Loans and 1.75% for Base Rate Loans, and (ii) the
Commitment Fee Percentage shall be 0.50% per annum.
Loans outstanding under the swingline facility shall bear interest at the rate
applicable to Revolving Loans which are Base Rate Loans MINUS the Commitment Fee
Percentage and
A-13
<PAGE>
such outstanding loans shall not constitute usage of the Revolving Credit
Facility for purposes of calculating the commitment fee.
B. The applicable margin for the Term Loan Facility shall be:
1. Tranche A Term Loans: the applicable margin for LIBOR
loans shall be 2.75% and for Base Rate Loans shall be 1.75%.
2. Tranche B Term Loans: the applicable margin for LIBOR
Loans shall be 3.25% and for Base Rate Loans shall be 2.25%
For loans under the Revolving Credit Facility or the Term Loan Facility,
after the occurrence and during the continuation of an event of default,
interest shall accrue at a rate equal to the rate on loans bearing interest at
the rate determined by reference to the Base Rate, plus an additional 2.00% per
annum and shall be payable on demand.
A-14
<PAGE>
EXHIBIT B
SUMMARY OF THE TERMS
OF THE
BRIDGE NOTES
Capitalized terms used herein and not otherwise defined have the meaning
set forth in the Commitment Letter to which this Summary of the Terms of the
Bridge Notes is attached and of which it forms a part. Certain conditions to
the Bridge Notes are set forth in Exhibit C.
SENIOR SUBORDINATED INCREASING RATE NOTES
ISSUER: MergerSub and its successors, including,
sequentially, the Company and OpCo (the
"BORROWER").
ISSUE: Senior Subordinated Increasing Rate Notes (the
"BRIDGE NOTES"). At the option of the holders, the
Bridge Notes may be replaced by loans on identical
economic terms.
USE OF PROCEEDS: Proceeds will be used to finance in part the
consummation of the Transaction.
PRINCIPAL AMOUNT: Up to $50,000,000.
PRICE: 100% of principal amount.
SUBORDINATION: The Bridge Notes will be subordinated to the Senior
Facilities and refinancings thereof (collectively,
the "DESIGNATED SENIOR DEBT"). See Exhibit E to
the Commitment Letter.
GUARANTEES: Each member of the Credit Group that is a guarantor
of the Senior Facilities will issue a senior
subordinated guarantee in favor of the Bridge
Notes.
B-1
<PAGE>
INTEREST RATE: Interest shall be payable at the greater of the
following as of the date of original issuance of
the Bridge Notes (the "ISSUE DATE") and as of the
beginning of each subsequent quarterly period:
(i) LIBOR plus 675 basis points, increasing by an
additional 100 basis points at the end of the
initial six month period subsequent to the Issue
Date, and increasing by an additional 50 basis
points at the end of each subsequent three month
period for so long as the Bridge Notes are
outstanding; (ii) the Treasury Rate (as defined
below) plus 625 basis points, increasing by an
additional 100 basis points at the end of the
initial six month period subsequent to the Issue
Date, and increasing by an additional 50 basis
points at the end of each subsequent three month
period for so long as the Bridge Notes are
outstanding; (iii) the DLJ High Yield Index Rate
plus 75 basis points, increasing by an additional
100 basis points at the end of the initial six
month period subsequent to the Issue Date, and
increasing by an additional 50 basis points at the
end of each subsequent three month period for so
long as the Bridge Notes are outstanding; and
(iv) in the case of each subsequent quarterly
period (beginning with the period commencing six
months subsequent to the Issue Date) only, the rate
in effect during the prior quarterly period plus
100 basis points, and increasing by an additional
50 basis points at the end of each subsequent three
month period for so long as the Bridge Notes are
outstanding. For purposes of this Summary of the
Terms of the Bridge Notes, the "TREASURY RATE"
means the rate applicable to the most recent
auction of direct obligations of the United States
having a maturity closest to the Bridge Notes, as
published by the Board of Governors of the Federal
Reserve System. Notwithstanding anything to the
contrary set forth above, at no time shall the per
annum interest rate on the Bridge Notes exceed
seventeen percent (17.00%), nor shall the per annum
interest rate on the Bridge Notes be lower than
twelve percent (12.00%). In addition, that
portion, if any, of any interest payment
representing a per annum interest rate in excess of
fifteen percent (15.00%) may be paid by issuing
additional Bridge Notes with a principal amount
equal to such excess portion of interest.
B-2
<PAGE>
INTEREST PAYMENTS: Interest on the Bridge Notes will be payable in
cash, quarterly in arrears (except as provided
above).
MATURITY: The Bridge Notes will mature on the first
anniversary of the Issue Date (the "FIRST
ANNIVERSARY"), PROVIDED that the maturity of the
Bridge Notes will be automatically extended until
the date which is six (6) months after the date of
the original final stated maturity of the Senior
Facilities if, on the First Anniversary, the
following conditions are met: (i) there shall
exist no default under the Bridge Notes; (ii) there
shall exist no default under the Senior Facilities;
PROVIDED that if a default existing on the First
Anniversary is subject to an applicable grace
period, the Bridge Notes shall be extended if such
default is cured prior to the expiration of such
applicable grace period; and (iii) all fees and
expenses due to DLJ Bridge and DLJSC as of such
date shall have been paid in full.
EXTENSION FEE: On the First Anniversary (as defined below), the
Issuer shall pay to DLJ Bridge a cash duration fee
(the "EXTENSION FEE") in an amount equal to three
percent (3.00%) of the principal amount of Bridge
Notes outstanding on such date.
MANDATORY REDEMPTION: The Issuer will redeem the Bridge Notes with,
subject to certain agreed upon exceptions, (i) the
net proceeds from the issuance of any debt or
equity securities or other indebtedness (other than
indebtedness under the Senior Facilities or the
proceeds of the equity issued in connection with
the Transaction) by any member of the Credit Group
(the "PERMANENT FINANCING") or (ii) the net
proceeds from asset sales (to be defined) by any
member of the Credit Group in excess of the amount
thereof required to be paid to the lenders under
the Senior Facilities or permitted to be reinvested
under the terms of the Senior Facilities.
B-3
<PAGE>
OPTIONAL REDEMPTION: The Bridge Notes will be callable, in whole or in
part, upon not less than 10 days written notice, at
the option of the Issuer at any time.
REDEMPTION PRICE; FEE: The redemption price of the Bridge Notes will be
par plus accrued interest, PROVIDED that a
redemption fee shall be payable by the Issuer to
DLJ Bridge in an amount equal to three percent
(3.00%) of the principal amount of the Bridge Notes
redeemed (whether by mandatory or optional
redemption) if the Bridge Notes are redeemed with
or in anticipation of funds raised by any means
other than a transaction in which DLJSC has acted
as sole underwriter, or sole agent, to the Credit
Group or, in the case of any bank-style senior
financing, sole arranger; PROVIDED FURTHER, that
after the First Anniversary, no redemption fee
shall be payable to DLJ Bridge unless the Issuer
and DLJSC have agreed in their reasonable judgment
that no Bona Fide Proposal (as defined below) could
be made prior to such time.
BONA FIDE PROPOSAL: If DLJSC delivers to a member of the Credit Group a
proposal to market securities of a member of the
Credit Group to one or more institutional investors
(or to underwrite the public sale of such
securities on a firm commitment basis), on
financial and other terms and conditions no less
favorable to the issuer than those generally
available in the United States capital markets to
issuers of securities having a creditworthiness
comparable to that of such issuer, in an amount up
to $120,000,000 and in any event sufficient to
redeem all the outstanding Bridge Notes (a "BONA
FIDE PROPOSAL"), the Company shall use its
reasonable best efforts to enable DLJSC to execute
such Bona Fide Proposal. A Bona Fide Proposal may
include provisions for issuance to investors of up
to the full amount of Escrowed Warrants, but not
before 90 days after the Closing Date.
B-4
<PAGE>
REGISTRATION RIGHTS: The Issuer will either (1) file, and will use its
best efforts to cause to become effective, a
"shelf" registration statement with respect to the
Bridge Notes as soon as practicable after the First
Anniversary or (2) provide for an exchange of the
Bridge Notes. The Issuer will keep the
registration statement for the Bridge Notes
effective until all of the Bridge Notes have been
redeemed or sold. If such exchange offer has not
been effected within 180 days after the First
Anniversary or a "shelf" registration statement for
the Bridge Notes has either (i) not been filed
within 60 days after the First Anniversary, or
(ii) not been declared effective 120 days after the
First Anniversary, the interest rate on the Bridge
Notes shall be increased by 50 basis points until
such time as such registration statement has become
effective provided that the interest rate on any
Bridge Notes may be no greater than seventeen
percent (17.00%) and the cash interest rate shall
be no greater than fifteen percent (15.00%). The
interest rate on the Bridge Notes shall also be
increased by 50 basis points for any period of time
following the effectiveness of such registration
statement that the registration statement is not
available for resales thereunder provided that the
interest rate on any Bridge Notes may be no greater
than seventeen percent (17.00%) and the cash
interest rate shall be no greater than fifteen
percent (15.00%). All payments made as a result of
an increase in the interest rate pursuant to this
section shall be deemed to be liquidated damages
and shall be paid on the relevant interest payment
date thereafter. In addition, the holders of the
Bridge Notes will have the right to "piggy-back" in
the registration of any debt or equity securities
that are registered by the Issuer unless all of the
Bridge Notes will be redeemed from the proceeds of
such securities.
RIGHT TO RESELL BRIDGE DLJ Bridge shall have the absolute and
NOTES: unconditional right to resell or assign the Bridge
Notes held by it in compliance with applicable law
to any third party at any time.
B-5
<PAGE>
Commencing on the First Anniversary, the Bridge
Notes may be sold to bona fide third party
purchasers on a fixed rate basis. In the event
that DLJ Bridge elects to proceed with such fixed
rate sale, the interest rate on any Bridge Notes so
sold may be no greater than seventeen percent
(17.00%) and the cash interest rate on any such
Bridge Notes shall be no greater than fifteen
percent (15.00%). In such event, the redemption
price (whether mandatory or optional) for any
Bridge Notes sold on a fixed rate basis will
include a make whole premium calculated on the
basis of a discount rate equal to the then Treasury
Rate plus one half percent (0.50%). DLJ Bridge
shall give the Company at least ten days prior
notice of its intention to make fixed rate sales.
In conjunction with such fixed rate sale, and in
any case on and after the First Anniversary, the
Company shall make available to DLJ Bridge such of
the Escrowed Warrants (as defined below) as are
needed to facilitate the resale of the Bridge Notes
to third parties on market terms; PROVIDED that DLJ
Bridge shall not retain any such equity provided
specifically to facilitate the resale of the Bridge
Notes as set forth in this provision.
REPRESENTATIONS AND The Definitive Documentation will contain
WARRANTIES: representations and warranties that are usual and
customary for transactions of this nature or
required by DLJ Bridge in its reasonable discretion
for this Transaction in particular, including but
not limited to (i) Corporate Existence and Power;
(ii) Authorization, Execution and Enforceability of
Material Agreements; (iii) Governmental
Authorization; (iv) Non-Contravention of Laws or
Material Agreements; (v) Financial Information;
(vi) Litigation; (vii) Taxes; (viii) Subsidiaries;
(ix) Not an Investment Company; (x) ERISA;
(xi) Environmental; (xii) Permits;
B-6
<PAGE>
(xiii) Leases; (xiv) Full Disclosure;
(xv) Capitalization; (xvi) Solicitation; Access to
Information; (xvii) Absence of Any Undisclosed
Liabilities; (xviii) Historical and Pro Forma
Financial Statements; (xix) No Material Adverse
Change; and (xx) Governmental Regulations.
COVENANTS: The Definitive Documentation will contain covenants
that are usual and customary for transactions of
this nature or required by DLJ Bridge in its
reasonable discretion for this Transaction in
particular, including but not limited to covenants
with respect to (i) Furnishing of Information;
(ii) Use of Proceeds; (iii) Wholly Owned
Subsidiaries; (iv) Compliance with Laws;
(v) Insurance; (vi) Restrictions on Indebtedness;
(vii) Restrictions on Dividends and Redemptions and
Repayment of Subordinated Debt or PARI PASSU Debt;
(viii) Restrictions on the Sale of Assets;
(ix) Restrictions on Business Activities;
(x) Restrictions on Transactions with Affiliates;
(xi) Restrictions on Merger or Consolidation;
(xii) Change of Control; (xiii) Restrictions on
Liens; (xiv) Restrictions on Investments and
Acquisitions; and (xv) Additional Covenants which
will not include any financial maintenance
covenants other than a leverage ratio.
B-7
<PAGE>
EVENT OF DEFAULT: Events of Default as defined for the Bridge Notes
will include but not be limited to: (i) the
failure of the Issuer to pay principal on the
Bridge Notes when due; (ii) the failure of the
Issuer to pay interest or fees on the Bridge Notes
and the continuance of such failure for 5 days;
(iii) the failure of any member of the Credit Group
to comply with any other provision, condition,
covenant, warranty or representation in the
Definitive Documentation or the Bridge Notes,
provided that in certain cases such failure
continues for 30 days after notice; (iv) a default
under any instrument or instruments governing
indebtedness of any member of the Credit Group when
such default causes such indebtedness to become due
prior to its stated maturity or failure to pay any
such indebtedness at its stated maturity in an
aggregate principal amount exceeding a threshold
amount to be agreed; (v) final judgments
aggregating in excess of a threshold amount to be
agreed rendered against any member of the Credit
Group and not paid or otherwise discharged or
stayed within 60 days; (vi) certain events of
bankruptcy, insolvency or reorganization with
respect to any member of the Credit Group;
(vii) material misrepresentations in the Definitive
Bridge Financing Documents; (viii) unenforceability
of any Guarantee; (ix) certain ERISA defaults;
(x) breach in the payment of fees to DLJ Bridge or
DLJSC described in the Fee Letter; or (xi) Change
of Control of any member of the Credit Group. In
case an Event of Default shall occur and be
continuing, the holders of at least 33 1/3% (a
majority where DLJ Bridge, or its affiliates, hold
a majority of the aggregate principal amount of the
Bridge Notes) in aggregate principal amount of the
Bridge Notes then outstanding, by notice in writing
to the Issuer and the agent banks or lenders under
the Senior Facilities may declare the principal of
and all accrued interest on all Bridge Notes to be
due and payable immediately. If an
B-8
<PAGE>
Event of Default specified in clause (vi) occurs,
the principal of and accrued interest on the Bridge
Notes will be immediately due and payable without
any notice, declaration or other act on the part of
the holders of the Bridge Notes. An acceleration
notice may be annulled and past defaults (except
for monetary defaults not yet cured) may be waived
by the holders of a majority in aggregate principal
amount of the Bridge Notes.
If an Event of Default shall occur and for as long
as such Event of Default shall be continuing, DLJ
Bridge shall have the right to appoint one (1)
representative to sit on the Issuer's Board of
Directors provided, however, that such right shall
terminate if DLJ Bridge no longer retains at least
50% of the outstanding Bridge Notes.
EQUITY AMOUNT ESCROWED: On the Issue Date, warrants (the "ESCROWED
WARRANTS") representing five percent (5%) of the
fully diluted preferred and common equity
securities of the Company as determined in
accordance with GAAP will be placed in an escrow
account.
The Escrowed Warrants will be exercisable at a
price equal to $0.01 per share for a period of
seven (7) years from the date such Escrowed
Warrants are released from escrow and will have
customary anti dilution provisions, tag along
rights (and will be subject to drag-along
obligations) and "piggy back" registration rights.
If the refinancing of 100% of the Bridge Notes is
not completed within the periods following the
Closing Date set forth in Column A below, Escrowed
Warrants exercisable into the percentage of the
Company's fully diluted preferred and common equity
securities set forth in Column B shall be released
from escrow to the holders of the Bridge Notes pro
rata in accordance with the principal amount of
Bridge Notes held by each such holder and such
holders shall be entitled to retain such released
Escrowed Warrants.
B-9
<PAGE>
A B
--------- ------
12 months 1.25%
15 months 1.25%
18 months 1.25%
21 months 1.25%
5.000%
------
------
Any Escrowed Warrants to which DLJ Bridge is not
entitled as set forth above shall be returned to
the Company for cancellation.
ESCROW: The Escrowed Warrants will be held, undated, in
escrow by Snoga, Inc., an affiliate of DLJ Bridge,
from the Issue Date.
DEFEASANCE PROVISIONS: None.
GOVERNING LAW: New York.
COUNSEL TO DLJ BRIDGE AND Davis Polk & Wardwell
DLJSC:
The foregoing is a summary of certain of the material terms of the Bridge Notes
and the Definitive Bridge Financing Documents. Such summary is intended merely
as an outline, and does not include descriptions of all of the terms, conditions
and other provisions that are to be contained in the Definitive Bridge Financing
Documents.
B-10
<PAGE>
EXHIBIT C
CONDITIONS TO CLOSING
All terms defined in the Commitment Letter (including Exhibits A and B
hereto) to which this Exhibit C is attached shall have the same meanings when
used herein. The respective Commitments of DLJ Bridge and DLJ Capital Funding
are subject to the execution of the Definitive Documentation and to satisfaction
on the date of the initial funding under the Credit Facilities (the "CLOSING
DATE") of the conditions precedent reasonably deemed appropriate by the DLJ
Finance Parties for leveraged financings generally and for this Transaction in
particular including, without limitation, the following:
(i) TRANSACTION DOCUMENTATION; CONSUMMATION OF TRANSACTION. The
Transaction shall have been consummated in accordance with the definitive
agreement entered into in connection with the Recapitalization (the
"RECAPITALIZATION AGREEMENT") and any material related documentation, including
without limitation employment agreements with key personnel and any such
documentation related to the Merger (together, the "DEFINITIVE RECAPITALIZATION
DOCUMENTS"), all of which shall be in full force and effect and shall be
reasonably satisfactory in form and substance to the DLJ Finance Parties. The
structure utilized to consummate the Recapitalization (including the Merger)
shall be in form and substance reasonably satisfactory to the DLJ Finance
Parties. The Transaction and the financing thereof shall be consummated in
compliance with all applicable laws and regulations. There shall not be any
amendment, modification or waiver of any of the terms or conditions of the
Definitive Recapitalization Documents without the prior written consent of the
DLJ Finance Parties, which shall not unreasonably be withheld.
(ii) CREDIT FACILITIES DOCUMENTATION. The definitive documentation
including credit, guarantee, security, intercreditor and other related
documentation evidencing the Senior Facilities (the "DEFINITIVE SENIOR
FACILITIES FINANCING DOCUMENTS") shall be prepared by counsel to DLJ Capital
Funding and shall be documentation typically used in financings similar to
the Senior Facilities in form and substance satisfactory to the DLJ Finance
Parties. The definitive documentation evidencing the Bridge Notes (the
"DEFINITIVE BRIDGE FINANCING DOCUMENTS") shall be prepared by counsel to DLJ
Bridge and shall be documentation typically used in financings similar to the
Bridge Financing in form and substance satisfactory to the DLJ Finance
Parties. The Definitive Senior Facilities Financing Documents and the
Definitive Bridge Financing Documents are sometimes collectively referred to
as the "DEFINITIVE FINANCING DOCUMENTS".
(iii) NEW COMMON EQUITY AND PREFERRED EQUITY. On or prior to the
Closing Date, MergerSub shall have received not less than approximately
$84.5 million in the LGP Equity Contribution, not less than $29.8 million of
which shall take the form of common stock, and all terms and conditions of such
transactions shall be satisfactory to the DLJ Finance Parties.
C-1
<PAGE>
(iv) EXISTING DEBT. The Credit Group shall have no indebtedness for
borrowed money other than existing indebtedness to be refinanced on the Closing
Date, the Senior Facilities, the Senior Subordinated Securities, or in lieu
thereof, the Bridge Notes, the MergerSub Zero Coupon Notes, and up to $5 million
in existing indebtedness comprised primarily of capital leases to be assumed by
MergerSub in connection with the Transaction; all liens or security interests
related to any existing debt which is prepaid shall have been terminated or
released and all commitments related thereto terminated.
(v) RECEIPT OF PROCEEDS OF FINANCINGS:
CONDITION TO REVOLVING CREDIT FACILITY. On the Closing Date,
(i) the Company shall have received the proceeds of subordinated capital
consisting of the Senior Subordinated Securities, or in lieu thereof, the Term
Loan Facility and the Bridge Notes, in each case underwritten or placed by DLJSC
or DLJ Capital Funding (or one of their affiliates) as sole book runner or Lead
Arranger, respectively, and (ii) LGP (or other institutional investors) shall
have provided and MergerSub shall have received the proceeds of the MergerSub
Zero Coupon Notes. The Term Loan Facility and the Bridge Notes shall have the
terms substantially as set forth on Exhibits A and B, respectively. The Senior
Subordinated Securities shall be unsecured and shall have no scheduled principal
payments payable prior to the tenth anniversary of the Closing Date. In
addition, the interest rate, covenants, defaults, subordination provisions,
remedies and all other terms of the Senior Subordinated Securities and the
MergerSub Zero Coupon Notes shall be satisfactory to the Lead Arranger. All
such negative covenants and defaults shall be less restrictive than those
contained in the Revolving Credit Facility.
CONDITION TO BRIDGE NOTES. On the Closing Date, the Revolving
Credit Facility shall be available and undrawn, except that any amount up to
$10 million may be drawn on the Revolving Credit Facility for purposes of
financing the Transaction. The Revolving Credit Facility shall have the terms
substantially as set forth on Exhibit A and shall have been arranged by DLJ
Capital Funding as Lead Arranger.
(vi) DUE DILIGENCE. The DLJ Finance Parties are satisfied with the
results of their diligence investigations of the Credit Group and the
Transaction to date. Upon satisfactory review and completion of confirmatory
tax, legal, accounting and environmental due diligence investigations, which
shall be completed no later than July 31, 1999, and at that date this condition
will be deemed satisfied unless the DLJ Finance Parties notify LGP in writing to
the contrary, this condition is deemed satisfied or waived unless any additional
information is disclosed to or discovered by the DLJ Finance Parties that is
inconsistent with the information heretofore provided to the DLJ Finance Parties
and which the DLJ Finance Parties reasonably deem materially adverse in respect
of the business, assets, liabilities, results of operations, financial
condition, properties or prospects of the Credit Group or the consummation of
the Transaction.
C-2
<PAGE>
(vii) CORPORATE STRUCTURE, OWNERSHIP, ETC. The corporate, tax, capital
and ownership structure and management of the Credit Group before and after the
Transaction shall be reasonably satisfactory to the DLJ Finance Parties.
(viii) SECURITY. The Administrative Agent, for the benefit of the
Lenders, shall have been granted on the closing date of the Merger first
priority perfected liens and guarantees to the extent required and described in
the Definitive Senior Facilities Financing Documents and shall have received
such other reports, documents and agreements as are customarily delivered in
connection with security interests in real property assets.
(ix) SOLVENCY. The DLJ Finance Parties shall have received a solvency
certificate, in form and substance satisfactory to the DLJ Finance Parties,
supporting the conclusions that, after giving effect to the Transaction and the
related transactions contemplated hereby, the Credit Group will not be insolvent
or be rendered insolvent by the indebtedness incurred in connection therewith,
or be left with unreasonably small capital with which to engage in its
businesses, or have incurred debts beyond its ability to pay such debts as they
mature.
(x) CERTAIN APPROVALS. Receipt and effectiveness of all material
governmental, shareholder and third party consents (including Hart-Scott-Rodino
clearance) and approvals necessary in connection with the Transaction, the
related financings, the continuing operation of the Credit Group businesses and
other transactions contemplated hereby and expiration of all applicable waiting
periods without any action being taken by any competent authority that could
restrain, prevent or impose any materially adverse conditions on the
Transaction.
(xi) FINANCIAL DATA. Receipt of (a) consolidated financial statements
of the Company including balance sheets and income and cash flow statements as
of the end of and for each of the last three fiscal years audited by independent
public accountants of recognized national standing and prepared in conformity
with GAAP, together with the report thereon; (b) unaudited selected financial
information of the Company meeting the requirements of Item 301(a) of Regulation
S-K for the two fiscal years immediately preceding the last three fiscal years;
(c) unaudited interim financial statements of the Company, prepared in each case
in the same manner as the historical audited statements for the most recently
ended quarterly period and for the same quarterly period during the most
recently ended fiscal year; (d) pro forma balance sheet of the Credit Group as
of the Closing Date after giving effect to the Transaction; and (e) projected
financial statements (including balance sheets and statements of operations,
stockholders' equity and cash flows of the Credit Group) for the six year period
after the Closing Date, which projected financial statements to the extent
delivered after the date of this letter are substantially consistent with the
projections delivered to the DLJ Finance Parties on or prior to the date hereof,
all of the foregoing to be in form reasonably satisfactory to the DLJ Finance
Parties.
(xii) NO MATERIAL ADVERSE CHANGE. Absence of any material adverse
change in the business, assets, operations, financial condition, properties or
prospects of the Credit Group taken as a whole since the end of the most
recently ended fiscal year for which audited
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financial statements of the Company have been provided to the DLJ Finance
Parties or in the facts and information as represented to date.
(xiii) LITIGATION. Absence of any action, suit, investigation,
litigation or proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality that purports to affect the
Transaction or the Senior Facilities or the Bridge Notes that could reasonably
be expected to have a material adverse effect on the Transaction, the Senior
Facilities, the Bridge Notes or any of the other transactions contemplated
hereby or on the business, assets, operations, financial condition, properties
or prospects of the Credit Group, taken as a whole.
(xiv) CLOSING DOCUMENTS. Each of the DLJ Finance Parties shall have
received reasonably satisfactory opinions of counsel to the Credit Group as to
the transactions contemplated hereby (including without limitation compliance
with the tax and corporate aspects thereof and with all applicable securities
laws), and such corporate resolutions, certificates and other documents as any
DLJ Finance Party shall reasonably request.
(xv) NO EVENT OF DEFAULT. Absence of any Event of Default under the
Definitive Documentation or event that, with notice and/or the passage of time,
would become an Event of Default and the accuracy of all representations and
warranties under the Definitive Documentation.
(xvi) FEES AND EXPENSES. All fees and expenses due to any DLJ Finance
Party as set forth in the Fee Letter or otherwise shall have been paid in full.
(xvii) NO DISRUPTION OF FINANCIAL AND CAPITAL MARKETS. Absence of any
material adverse change in current financial, banking or capital market
conditions or in the market for syndicated bank credits similar to those of the
Senior Facilities or new issuances of high yield securities which could
reasonably be expected to materially impair the satisfactory syndication of the
Senior Facilities or the purchase of the Bridge Notes or the refinancing
thereof.
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EXHIBIT D
INDEMNIFICATION
In consideration of the Commitments given by the DLJ Finance Parties with
respect to the Transaction involving LGP, L.P. (the "INDEMNIFYING PARTY")
pursuant to the Commitment Letter of which this Exhibit is a part, the
Indemnifying Party agrees to indemnify and hold harmless each of the DLJ Finance
Parties, their affiliates, and each person, if any, who controls a DLJ Finance
Party, or any of their affiliates, within the meaning of the Securities Act of
1933, as amended (the "ACT") or the Securities Exchange Act of 1934, as amended
(a "CONTROLLING PERSON"), and the respective partners, agents, employees,
officers and directors of each DLJ Finance Party, their affiliates, and any such
Controlling Person (each an "INDEMNIFIED PARTY" and collectively, the
"INDEMNIFIED PARTIES"), from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation and as incurred,
reasonable costs of investigating, preparing or defending any such claim or
action, whether or not the Indemnified Party is a party thereto) arising out of,
or in connection with any activities contemplated by, the Commitments or any
other services rendered in connection therewith, including, but not limited to,
losses, claims, damages, liabilities or expenses arising out of or based upon
any untrue statement or any alleged untrue statement of a material fact or any
omission or any alleged omission to state a material fact in any of the
disclosure or offering or confidential information documents (the "DISCLOSURE
DOCUMENTS") pertaining to any of the transactions or proposed transactions
contemplated by the Commitment Letter, including the syndication of the Senior
Facilities and any resale or refinancing of any of the Credit Facilities,
PROVIDED that the Indemnifying Party will not be responsible for any claims,
liabilities, losses, damages or expenses that are determined by final judgment
of a court of competent jurisdiction to result solely from the Indemnified
Party's gross negligence, willful misconduct or bad faith. The Indemnifying
Party also agrees that (a) no DLJ Finance Party shall have liability (except for
breach of provisions of the Commitment Letter) for claims, liabilities, damages,
losses or expenses, including legal fees, incurred by the Indemnifying Party
unless they are determined by final judgment of a court of competent
jurisdiction to result solely from such DLJ Finance Party's gross negligence,
willful misconduct or bad faith and (b) no DLJ Finance Party shall in any event
have any liability to the Indemnifying Party or to any member of the Credit
Group on any theory of liability for special, indirect, consequential or
punitive damages (as opposed to direct, actual damages) arising out of, in
connection with, or as a result of, the Commitment Letter.
In case any action shall be brought against any Indemnified Party with
respect to which indemnity may be sought against the Indemnifying Party under
this agreement, the Indemnified Party shall promptly notify the Indemnifying
Party in writing and the Indemnifying Party shall, if requested by the
Indemnified Party or if the Indemnifying Party desires to do so, assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the Indemnified Party and payment of all reasonable fees and expenses. The
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failure to so notify the Indemnifying Party shall not affect any obligations
the Indemnifying Party may have to the Indemnified Party under the Commitment
Letter or otherwise unless (and then only to the extent that) the
Indemnifying Party is materially adversely affected by such failure. The
Indemnified Party shall have the right to employ separate counsel in such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party, unless: (i)
the Indemnifying Party has failed to assume the defense and employ counsel
reasonably satisfactory to the Indemnified Party or (ii) the named parties to
any such action (including any impleaded parties) include the Indemnified
Party and the Indemnifying Party, and the Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses available to
it which are different from or additional to those available to the
Indemnifying Party, in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have
the right to assume the defense of such action or proceeding on behalf of
such Indemnified Party, PROVIDED, however, that the Indemnifying Party shall
not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
responsible hereunder for the reasonable fees and expenses of more than one
such firm of separate counsel, in addition to any local counsel, which
counsel shall be designated by the DLJ Finance Parties. The Indemnifying
Party shall not be liable for any settlement of any such action effected
without the written consent of the Indemnifying Party (which shall not be
unreasonably withheld) and the Indemnifying Party agrees to indemnify and
hold harmless the Indemnified Party from and against any loss or liability by
reason of settlement of any action effected with the consent of the
Indemnifying Party (subject to the proviso in the first sentence of the first
paragraph of this Exhibit D). In addition, the Indemnifying Party will not,
without the prior written consent of the DLJ Finance Parties, settle or
compromise or consent to the entry of any judgment in or otherwise seek to
terminate any pending or threatened action, claim, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not a DLJ Finance Party is a party thereto) unless such
settlement, compromise, consent or termination includes an express
unconditional release of the DLJ Finance Parties and the other Indemnified
Parties, satisfactory in form and substance to the DLJ Finance Parties, from
all liability arising out of such action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless, then
in lieu of indemnifying such Indemnified Party, the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such claims, liabilities, losses, damages, or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Indemnifying Party on the one hand and by the Indemnified Party on the other
from the Transaction or (ii) if the allocation provided by clause (i) is not
permitted under applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the Indemnifying Party on
the one hand and the Indemnified Party on the other, but also the relative
fault of the Indemnifying Party and the Indemnified Party as well as any
other
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relevant equitable considerations. Notwithstanding the provisions of this
Exhibit D, the aggregate contribution of all Indemnified Parties shall not
exceed the amount of fees actually received by the Indemnified Parties in
connection with the Transaction. It is hereby further agreed that the
relative benefits to the Indemnifying Party on the one hand and the
Indemnified Parties on the other with respect to the Transaction shall be
deemed to be in the same proportion as (i) the total value of the Transaction
bears to (ii) the fees paid to the Indemnified Parties with respect to such
Transaction. The relative fault of the Indemnifying Party on the one hand
and the Indemnified Parties on the other with respect to the Transaction
shall be determined by reference to, among other things, whether any untrue
or alleged untrue statement of material fact or the omission or alleged
omission to state a material fact related to information supplied by the
Indemnifying Party or by the Indemnified Parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. No Indemnified Party shall have any
liability to the Indemnifying Party or any other person in connection with
the services rendered pursuant to the Commitments except for the liability
for claims, liabilities, losses or damages finally determined by a court of
competent jurisdiction to have resulted from action taken or omitted to be
taken by such Indemnified Party in bad faith or to be due to such Indemnified
Party's willful misconduct or gross negligence and except to the extent
related to a wrongful breach by the Indemnified Party of its obligations
under the Commitment Letter and related documents. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
In addition, the Indemnifying Party shall pay all fees, costs and
expenses (including all out-of-pocket costs and expenses arising in
connection with the syndication of the Senior Facilities, the purchase of the
Bridge Notes and any due diligence investigation performed by the DLJ Finance
Parties, and the reasonable fees and expenses of legal counsel to the Lead
Arranger and the Agents, including any local or foreign legal counsel)
arising in connection with the negotiation, preparation, execution, delivery
or administration of the Commitment Letter and the Fee Letter and the
Definitive Financing Documents, and the Indemnifying Party shall be obligated
to pay such fees and expenses whether or not Definitive Financing Documents
are executed or delivered or the Transaction is consummated.
The indemnity, contribution and expense reimbursement obligations set
forth herein (i) shall be in addition to any liability the Indemnifying Party
may have to any Indemnified Party at common law or otherwise, (ii) shall
survive the termination of the Commitments and (iii) shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Party.
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EXHIBIT E
SUBORDINATION PROVISIONS
Set forth below is substantially the form of subordination provisions for
the Bridge Notes (the "FINANCING") which will be set forth in the Definitive
Bridge Financing Documents, subject to conforming changes.
(a) NOTES SUBORDINATED TO DESIGNATED SENIOR DEBT. The Issuer for
itself and its successors, and each holder of the Bridge Notes
(each, a "HOLDER"), by its acceptance of the Financing, agrees
that the payment of the Subordinated Obligations (to be defined to
mean principal and interest (including post-petition interest as
provided below) on the Bridge Notes and any claim for rescission
or damages in respect thereof under any applicable law) by the
Issuer is subordinated, to the extent and in the manner provided
in this Section, to the prior payment of Designated Senior Debt;
provided that the provisions of this Section do not apply to, and
the Financing is not subordinated in respect of, the proceeds of
the Permanent Financing.
This Section will constitute a continuing offer to all persons
who, in reliance upon its provisions, become holders of, or
continue to hold, Designated Senior Debt, and such provisions are
made for the benefit of the holders of Designated Senior Debt, and
such holders are made obligees under this Section and they and/or
each of them may enforce its provisions.
(b) NO PAYMENT ON BRIDGE NOTES IN CERTAIN CIRCUMSTANCES.
(i) No payment will be made on account of the Subordinated
Obligations, or to acquire any of the Bridge Notes for cash
or property other than capital stock of the Issuer, or on
account of the redemption provisions of the Bridge Notes
(x) upon the maturity of any Designated Senior Debt by
lapse of time, acceleration or otherwise, unless and until
all such Designated Senior Debt shall first be paid in full
or provided for in cash or cash equivalents or such payment
duly provided for or (y) in the event that the Issuer
defaults in the payment of any principal of or interest on
or any other amounts payable on, or due in connection with
any Designated Senior Debt when it becomes due and payable,
whether at maturity or at a date fixed for prepayment or by
declaration or otherwise, unless and until such default has
been cured or waived in writing.
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(ii) Upon the happening of any event of default (or if an event
of default would result upon any payment with respect to
the Subordinated Obligations) with respect to any
Designated Senior Debt, as such event of default is defined
in the instruments evidencing such Designated Senior Debt
or under which it is outstanding, permitting the holders to
accelerate its maturity (if the default is other than
default in payment of the principal of or interest on or
any other amount due in connection with such Designated
Senior Debt) upon written notice of the event of default
given to the Issuer by the holders of such Designated
Senior Debt, then, unless and until such event of default
has been cured or waived in writing, no payment will be
made by the Issuer with respect to the Subordinated
Obligations or to acquire any of the Bridge Notes for cash,
property or securities; provided that this
paragraph (ii) will not prevent the making of any payment
for a period of more than 179 days after the date the
written notice of the default is given unless such
Designated Senior Debt in respect of which such event of
default exists has been declared due and payable in its
entirety within that period, and that declaration has not
been rescinded. If such Designated Senior Debt is not
declared due and payable within 179 days after the written
notice of the default is given, promptly after the end of
the 179-day period the Issuer will pay all sums not paid
during the 179-day period because of this
paragraph (ii) unless paragraph (i) above is then
applicable. During any 360-day consecutive period only one
such period during which payment of principal of, or
interest on, the Bridge Notes may not be made may commence
and the duration of such period may not exceed 179 days.
(iii) If any payment or distribution of assets of the Issuer is
received by any Holder in respect of the Subordinated
Obligations at a time when that payment or distribution
should not have been made because of paragraph (i) or (ii),
such payment or distribution will be received and held in
trust for and will be paid over to the holders of
Designated Senior Debt which is due and payable and remains
unpaid or unprovided for (pro rata as to each of such
holders on the basis of the respective amounts of
Designated Senior Debt which is due and payable held by
them) until all such Designated Senior Debt has been paid
in full or provided for in cash or cash equivalents, after
giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Designated Senior
Debt.
(c) BRIDGE NOTES SUBORDINATED TO PRIOR PAYMENT OF ALL DESIGNATED
SENIOR DEBT ON DISSOLUTION, LIQUIDATION OR REORGANIZATION. Upon
any distribution of assets of the Issuer upon any dissolution,
winding up, liquidation or reorganization of the Issuer (whether
in bankruptcy, insolvency, receivership or similar
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proceeding related to the Issuer or its property or upon an assignment for the
benefit of creditors or otherwise):
(i) the holders of all Designated Senior Debt will first be
entitled to receive payment in full or provision for
payment in full in cash or cash equivalents of the
principal of and interest due on Designated Senior Debt and
other amounts due in connection with Designated Senior Debt
(including interest accruing subsequent to an event
specified in Sections _____ [certain bankruptcy events] and
____________ [winding up] at the rate provided for in the
documents governing such Designated Senior Debt, whether or
not such interest is an allowed claim enforceable against
the debtor in a Bankruptcy case under Title 11 of the
United States Code), before the Holders are entitled to
receive any payment on account of the principal of or
interest on the Bridge Notes;
(ii) any payment or distribution of assets of the Issuer of any
kind or character, whether in cash, property or securities,
to which the Holders would be entitled except for the
provisions of this Section will be paid by the liquidating
trustee or agent or other person making such a payment or
distribution directly to the holders of Designated Senior
Debt or their representatives to the extent necessary to
make payment in full or provision for payment in full in
cash or cash equivalents of all Designated Senior Debt
remaining unpaid, after giving effect to any concurrent
payment or distribution or provision therefor to the
holders of such Designated Senior Debt; and
(iii) if, notwithstanding the foregoing, any payment or
distribution of assets of the Issuer of any kind or
character, whether in cash, property or securities is
received by the Holders on account of the Subordinated
Obligations before all Designated Senior Debt is paid in
full or provided for in cash or cash equivalents, such
payment or distribution will be received and held in trust
for and will be paid over to the holders of the Designated
Senior Debt remaining unpaid or unprovided for or their
representatives for application to the payment of such
Designated Senior Debt until all such Designated Senior
Debt has been paid in full or provided for in cash or cash
equivalents, after giving effect to any concurrent payment
or distribution or provision therefor to the holders of
such Designated Senior Debt.
The Issuer will give prompt written notice to the Holders
of any dissolution, winding up, liquidation or
reorganization of it or any assignment for the benefit of
its creditors and of any event of default in respect of
Designated Senior Debt.
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(d) For purposes of this Section, the words "cash, property or
securities" shall not be deemed to include (x) shares of capital
stock of the Issuer as reorganized or readjusted, (y) securities
of the Issuer or any other corporation provided for by a plan of
reorganization or readjustment which are subordinated, to at least
the same extent as the Bridge Notes, to the payment of all
Designated Senior Debt then outstanding or (z) any payment or
distribution of securities of the Issuer or any other corporation
authorized by an order or decree giving effect, and stating in
such order or decree that effect has been given, to subordination
of the Financing to Designated Senior Debt and made by a court of
competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy, insolvency or similar law. For purposes of
this Section, "payment on the account of the Subordinated
Obligations" shall not include the Warrants, any shares issued
upon exercise of the Warrants or any sale or transfer of any of
the foregoing.
(e) HOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF DESIGNATED SENIOR
DEBT. Following the payment in full or provision for payment in
full of all Designated Senior Debt, the Holders will be subrogated
to the rights of the holders of Designated Senior Debt to receive
payments or distributions of assets of the Issuer applicable to
the Designated Senior Debt until all Subordinated Obligations have
been paid in full, and for the purpose of such subrogation no such
payments or distributions to the holders of Designated Senior Debt
by or on behalf of the Issuer or by or on behalf of the Holders by
virtue of this Section which otherwise would have been made to the
Holders will, as between the Issuer and the Holders, be deemed to
be payment by the Issuer to or on account of the Designated Senior
Debt, it being understood that the provisions of this Section are
and are intended solely for the purpose of defining the relative
rights of the Holders, on the one hand, and the holders of
Designated Senior Debt, on the other hand.
(f) OBLIGATIONS OF THE ISSUER UNCONDITIONAL. Nothing contained in
this Section or elsewhere in the Bridge Notes is intended to or
will impair, as between the Issuer and the Holders, the
obligations of the Issuer, which are absolute and unconditional,
to pay to the Holders the Subordinated Obligations as and when
they become due and payable in accordance with their terms, or is
intended to or will affect the relative rights of the Holders and
creditors of the Issuer other than the holders of the Designated
Senior Debt, nor will anything herein or therein prevent any
Holder from exercising all remedies otherwise permitted by
applicable law upon default under the Bridge Notes, subject to the
rights, if any, under this Section of the holders of Designated
Senior Debt in respect of cash, property or securities of the
Issuer received upon the exercise of any such remedy.
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(g) SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE
ISSUER OR HOLDERS OF DESIGNATED SENIOR DEBT. No right of any
present or future holders of any Designated Senior Debt to enforce
subordination as provided herein will at any time or in any way be
prejudiced or impaired by any act or failure to act on the part of
the Issuer or by any act or failure to act by any such Holder, or
by any noncompliance by the Issuer with the terms of the Bridge
Notes regardless of any knowledge thereof which any such Holder
may have or otherwise be charged with. The holders of Designated
Senior Debt may extend, renew, modify or amend the terms of the
Designated Senior Debt or any security therefor and release, sell
or exchange such security and otherwise deal freely with the
Issuer, all without affecting the liabilities and obligations of
the parties to the document or the Holders. No amendment to these
provisions will be effective against the holders of the Designated
Senior Debt who have not consented thereto in writing.
(h) NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a payment
on account of the Subordinated Obligations by reason of any
provision of this Section will not be construed as preventing the
occurrence of an Event of Default.
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