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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
------------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 27, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22989
WHITE CAP INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 84-1380403
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION
ORGANIZATION) NO.)
</TABLE>
<TABLE>
<S> <C>
3120 AIRWAY AVENUE, COSTA MESA, CALIFORNIA 92626
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (714) 850-0900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01
(Title of class)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Common Stock, $.01 par value, outstanding as of May 28, 1999: 10,725,188
shares.
Aggregate market value of voting stock held by non-affiliates of the
registrant computed at the NASDAQ closing price of $13.50 as of May 28, 1999,
was $108,344,236.
DOCUMENTS INCORPORATED BY REFERENCE
None.
This Amendment No. 1 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended March 27, 1999 is filed to modify Note 12 to the Consolidated
Financial Statements included in Item 8 of Part II in its entirety and Items 10
through 13 of Part III in their entirety. This Amendment No. 1 also includes
Exhibit 10.9.
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PART I
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
12. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company has entered into operating leases that expire at various dates
through 2007. Total rental expense under these operating leases was
approximately $1,868,000, $3,252,000, and $4,864,000 for the years ended March
31, 1997 and 1998, and March 27, 1999, respectively. Future minimum rentals on
these operating leases are as follows (in thousands):
<TABLE>
<S> <C>
YEAR ENDING MARCH:
2000...................................................... $ 5,187
2001...................................................... 4,110
2002...................................................... 3,254
2003...................................................... 2,151
2004...................................................... 1,458
Thereafter................................................ 2,077
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$18,237
=======
</TABLE>
Employment Agreements/Bonus Plans
The Company entered into employment agreements with certain key management
employees with a minimum term of 5 years. These agreements specify annual base
salary levels, incentive bonuses which are payable if the Company attains
certain earnings goals, as defined, and severance provisions that range from
zero to three years of base compensation. The Company accrues for these bonuses
based on management's estimates of achieving such performance goals and has
included these amounts in accrued liabilities at March 27, 1999.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
COMPOSITION OF BOARD
The Company's Board of Directors consists of such number of Directors as
may be determined by the Board of Directors from time to time. All Directors are
elected annually by the stockholders, each to hold office until his successor is
elected and qualified or until his earlier resignation, death or removal.
INFORMATION CONCERNING DIRECTORS
The following sets forth certain information with respect to the Directors
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Greg Grosch 52 Chairman of the Board of Directors, Chief Executive
Officer and President
Dan Tsujioka 50 Executive Vice President -- Merchandising, Secretary and
Director
Chris Lane 38 Chief Financial Officer and Director
Mark King 39 Director
James Johnson 61 Director
Charles Hamilton 50 Director
Doug Jacobs 58 Director
Don Koll 66 Director
</TABLE>
GREG GROSCH, 52, is Chairman, Chief Executive Officer and President of the
Company and has 25 years experience in retailing. In 1976, Mr. Grosch formed
White Cap Industries, Inc. and since then has directed and been directly
involved in all aspects of the business and implementation of the Company's
growth strategy. Prior to joining the Company, Mr. Grosch held sales and
marketing positions with a major regional grocery chain and a national oil
company. Mr. Grosch holds a Bachelor's Degree in Marketing from California State
University, Northridge. Mr. Grosch has served on the Board of Directors since
the Company's inception.
DAN TSUJIOKA, 50, joined the Company in November 1996 as Executive Vice
President and was elected Director in February 1997. In July 1997, Mr. Tsujioka
was appointed Executive Vice President -- Merchandising, with responsibility for
Company-wide merchandising. Mr. Tsujioka was a member of the original founding
group and the first general manager of Home Depot, Inc., where he started the
first prototype warehouse for Home Improvement Supplies (the predecessor to Home
Depot). Mr. Tsujioka was with Home Depot and its predecessors from 1980 to 1989.
From 1994 to 1995, Mr. Tsujioka served as Vice President of Special Projects for
Home Depot training store managers and district managers in a "back to basics"
training program. From 1995 to 1996, Mr. Tsujioka was Vice President of
Merchandising for Home Depot. From 1989 to 1993, Mr. Tsujioka was retired.
CHRIS LANE, 38, has been a Director of the Company since February 1997 and
has been a consultant to the Company since 1995. Mr. Lane was appointed Chief
Financial Officer of the Company in April 1997. From 1992 to 1997, Mr. Lane
performed merger and acquisition and litigation support services as a partner
with the Orange County, California accounting firm of Kieckhafer, Lane &
Schiffer LLP. From 1986 to 1992, Mr. Lane was with Arthur Andersen LLP. He was
an Audit Manager when he left the firm in 1992. In June 1997, Mr. Lane entered
into an agreement with KRG Capital agreeing to act as a Director of KRG Capital.
Mr. Lane holds a Bachelor's Degree in Economics and an MBA in Management from
the University of California, Irvine.
MARK M. KING, 39, has been a Director of the Company since February 1997.
Mr. King is the founder and a Managing Director of KRG Capital. Mr. King has 14
years experience as a senior executive, an investment banker, and the lead
principal in the completion of 29 strategic acquisitions involving middle market
companies. From September 1994 to January 1996, Mr. King served as Vice
President of LM Capital
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Corporation, a registered investment advisor specializing in private and public
equity investments and strategic acquisitions. From 1988 to 1992, Mr. King was
the Co-Founder, President, and Vice Chairman of Industrial Services
Technologies, Inc. ("IST"), a provider of maintenance services to the refinery,
fertilizer and chemical industries and from 1992 to the present, he has served
as Vice Chairman of IST. Mr. King serves as a director of various private
companies.
JAMES A. JOHNSON, 61, has been a Director of the Company since February
1997. Mr. Johnson is the co-founder of and has been a Managing General Partner
of Apex Investment Partners, a Chicago based manager of investment funds, since
1988. Prior to founding Apex, from 1986 to 1988, Mr. Johnson was the co-founder
and general partner of Knightsbridge Partners, an investment banking firm. From
1974 to 1986, Mr. Johnson served in various positions, including Senior Vice
President, with Beatrice Companies. From 1965 to 1974, Mr. Johnson held various
positions, including Senior Manager, with KPMG Peat Marwick. Mr. Johnson serves
as a director of various private companies.
CHARLES A. HAMILTON, 50, has been a Director of the Company since February
1997. Mr. Hamilton has over 27 years of investment experience in the fields of
security analysis, corporate finance and venture capital. He is currently a
principal in the private equity group at Robertson, Stephens Funds, which has
been a wholly-owned subsidiary of BancAmerica since October 1997. He had
previously served as managing director of Robertson, Stephens & Company since
1981. Mr. Hamilton has served as a director of numerous venture-financed
companies in recent years and he is presently on the board of ten private
companies.
DOUGLAS C. JACOBS, 58, has been a Director of the Company since September
1998. Mr. Jacobs currently serves as Chief Financial Officer of the Cleveland
Browns. Mr. Jacobs served as Executive Vice President of Gucci Timepieces
(America), Inc. from 1997 to 1998. Mr. Jacobs served as President of The Severin
Group (exclusive manufacturer and distributor of Gucci timepieces) from 1996 to
1997. Mr. Jacobs was with Arthur Andersen & Company from 1963 to 1996 and was a
partner from 1972 to 1996. He served as a Regional Managing Partner from 1990 to
1996 and an Office Managing Partner from 1977 to 1996. From 1961 to 1963 Mr.
Jacobs served as a Lieutenant in the U.S. Navy. Mr. Jacobs also serves on the
Board of Directors of Standard Pacific Corporation. He earned a B.S. in Business
and an MBA from Case Western University.
DONALD M. KOLL, 66, has been a Director of the Company since September
1998. Mr. Koll is the Chairman and Chief Executive Officer of the Koll
Companies, he directs the full scope of development and acquisition services
delivered by the organization he founded in 1962. Koll Development is one of the
nations leading real estate development companies involved in joint-venture
partnerships with major financial institutions REIT's, endowment funds, pension
fund advisors, high net-worth individuals and real estate opportunity funds.
Under Mr. Kolls direction, the company has developed more than 60 million square
feet of office, industrial and retail space throughout the United States, Mexico
and the Pacific Rim. Mr. Koll is also a Partner in Koll Bren Realty Advisors,
which serves as asset manager for $2.5 billion in pension funds to invest in
real estate. Mr. Koll currently serves on the Board of Directors of The Irvine
Company, CB Richard Ellis, and Fidelity National Title. He previously served on
the board of Grubb & Ellis and Wells Fargo Bank. Mr. Koll is also a presidential
appointee to the Aerospace Museum in Washington D.C. and the board of trustees
of the John F. Kennedy Center for the Performing Arts. Mr. Koll earned his
bachelor" degree in Economics from Stanford University and served as a pilot in
the U.S. Air Force.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
The Committees of the Board of Directors consist of an Audit Committee and
a Compensation Committee. The Board of Directors held 5 meetings during the
fiscal year ended March 27, 1999. During the fiscal year, all Directors attended
100% of the total meetings of the Board of Directors and Committees of the Board
of Directors on which they served. Members of the Company's Board of Directors
serve without cash compensation.
Audit Committee. The members of the Audit Committee are Messrs. Jacobs,
Johnson and King. The Audit Committee oversees actions taken by the Company's
independent auditors, recommends the engage-
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ment of auditors and reviews the Company's internal accounting policies and
practices. Mr. Johnson chairs the Audit Committee.
Compensation Committee. The members of the Compensation Committee are
Messrs. King, Johnson and Hamilton. The Compensation Committee approves the
compensation of executives of the Company, makes recommendations to the Board of
Directors with respect to standards for setting compensation levels and
administers the Company's incentive plans. Mr. King chairs the Compensation
Committee.
ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended March 27, 1999 and March 31, 1998 and 1997, of those persons
who are the Company's Chief Executive Officer and four other most highly
compensated officers (collectively referred to as the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
MARCH --------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ENDED SALARY($) BONUS($) OPTIONS(#) ($)(A)
--------------------------- ---------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Greg Grosch........................ 99 400,000 -- 10,000 7,580
Chairman, President and 98 300,000 56,585 -- 17,175
Chief Executive Officer 97 408,763 -- -- 33,419
Dan Tsujioka....................... 99 200,000 -- 10,000 468
Executive Vice President -- 98 190,976 -- -- 104
Merchandising 97 54,788 -- 38,019 --
Chris Lane......................... 99 310,194 -- 10,000 158
Chief Financial Officer, Senior 98 177,615 -- -- 21
Vice President Finance
Richard Gagnon..................... 99 210,725 71,212 10,000 4,046
Senior Vice President and 98 194,005 1,060,000 -- 33,728
National Sales Manager 97 190,649 121,507 -- 5,218
Jack Karg.......................... 99 158,086 -- 7,500 411
Vice President and Chief 98 134,450 -- -- 540
Operations Officer 97 97,731 30,000 24,795 --
</TABLE>
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(a) Amounts shown include the Company's contribution to the named individuals'
401(k) plan, life insurance and additional disability and unemployment
policies.
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OPTION GRANTS IN LAST FISCAL YEAR
The following options were granted to the Named Executive Officers during
the fiscal year ended March 27, 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------------- ------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OF BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Greg Grosch...................... 10,000 7.1% 7.88 10/07/08 94,320 196,835
Dan Tsujioka..................... 10,000 7.1% 7.88 10/07/08 94,320 196,835
Chris Lane....................... 10,000 7.1% 7.88 10/07/08 94,320 196,835
Richard Gagnon................... 10,000 7.1% 7.88 10/07/08 94,320 196,835
Jack Karg........................ 7,500 5.4% 7.88 10/07/08 70,740 147,626
</TABLE>
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* These amounts represent assumed rates of appreciation only. Actual gains, if
any, on stock option exercises are dependent on the future performance of our
stock. There can be no assurance that the amounts reflected in these columns
will be achieved, or if achieved, will exist at the time of any option
exercise.
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
The following table sets forth information concerning the aggregate number
of options exercised during the fiscal year ended March 27, 1999, by each of the
Named Executive Officers of the Company and outstanding options held by each
such office at March 27, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
NUMBER OF MARCH 27, 1999 March 27, 1999 (a)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Greg Grosch................. -- -- -- 10,000 -- $ 27,500
Dan Tsujioka................ -- -- 15,208 32,811 $123,869 213,296
Chris Lane.................. -- -- -- 10,000 -- 27,500
Richard Gagnon.............. -- -- -- 10,000 -- 27,500
Jack Karg................... -- -- 9,918 22,377 80,782 141,798
</TABLE>
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(a) Value is determined by subtracting the exercise price from the fair market
value (the closing price for the Common Stock as reported by the Nasdaq
National Market) as of March 27, 1999 ($10.38) and multiplying the resulting
number by the number of underlying shares of Common Stock.
EMPLOYMENT AGREEMENTS
Grosch Employment Agreement. In November 1997, the Company and Mr. Grosch
entered into an amended employment agreement (the "Grosch Employment Agreement")
providing for Mr. Grosch's employment as Chairman, President and Chief Executive
Officer. The initial employment period expires March 2002 and will automatically
extend for successive one year periods thereafter unless the Company or Mr.
Grosch gives notice of intent not to renew.
The Grosch Employment Agreement provides for a base salary of $400,000 plus
(i) an annual incentive bonus based upon the Company's operating performance and
(ii) specified cost of living increases. In addition, the Company has taken out
a key man life insurance policy on Mr. Grosch's life payable to the Company.
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Upon termination by Mr. Grosch for good reason or termination by the
Company without cause, Mr. Grosch would be entitled to receive his base salary
during the period that is the lesser of (i) three years or (ii) the remainder of
the term, plus a supplemental severance payment. The Grosch Employment Agreement
also provides that the Company may terminate Mr. Grosch for cause, and in
addition to his base salary and prorated bonus accrued through the date of
termination, Mr. Grosch would be entitled to receive his base salary during the
period that is the lesser of (i) two years or (ii) the remainder of the term,
plus a maximum supplemental severance payment of $375,000. If Mr. Grosch's
employment by the Company is terminated due to permanent disability or
incapacity, Mr. Grosch shall be entitled to receive his base salary through the
date of termination plus 12 months severance of his then current base salary.
The Grosch Employment Agreement includes a confidentiality provision and a
non-solicitation provision.
Gagnon Employment Agreement. In February 1997, the Company and Mr. Gagnon
entered into an employment agreement (the "Gagnon Employment Agreement")
providing for Mr. Gagnon's employment as Senior Vice President and National
Sales Manager of the Company. The initial employment period expires February
2002 and shall automatically extend for successive one year periods thereafter
unless the Company or Mr. Gagnon gives notice of intent not to renew.
The Gagnon Employment Agreement provides for a base salary of approximately
$200,000 plus (i) an annual fixed bonus of approximately $100,000 based on the
Company's operating performance, (ii) an annual variable incentive bonus based
upon the Company's operating performance and (iii) specified cost of living
increases. An additional incentive bonus of $1,000,000 was paid to Mr. Gagnon
after the Company's initial public offering in October 1997.
Upon termination by Mr. Gagnon for good reason or termination by the
Company without cause, Mr. Gagnon would be entitled to receive (i) his base
salary during the period that is the lesser of twelve months or the remainder of
the term, and (ii) a prorated portion of any fixed or variable bonus earned
through the date of termination. The Gagnon Employment Agreement also provides
that if the Company terminates Mr. Gagnon for cause or if Mr. Gagnon employment
terminates as a result of voluntary resignation, he would be entitled to receive
his base salary only through the date of termination. If Mr. Gagnon's employment
is terminated as a result of permanent disability, incapacity or death, Mr.
Gagnon (or his beneficiaries, as applicable) shall be entitled to receive his
base salary through the date of termination plus 12 months severance of his then
current base salary.
The Gagnon Employment Agreement also includes a confidentiality provision,
a non-solicitation provision, and a nondisclosure and invention and copyright
assignment agreement.
Lane Employment Agreement. In April 1997, the Company and Mr. Lane entered
into an employment agreement (the "Lane Employment Agreement") providing for Mr.
Lane's employment as Chief Financial Officer and Senior Vice President of
Finance. The initial employment period expires April 2002 and will automatically
extend for successive one year periods thereafter unless the Company or Mr. Lane
gives notice of intent not to renew.
The Lane Employment Agreement provides for a base salary of $300,000 plus
specified cost of living increases. Upon termination by Mr. Lane for good reason
or termination by the Company without cause, Mr. Lane would be entitled to
receive his base salary during the period that is the lesser of (i) twelve
months or (ii) the remainder of the term. The Lane Employment Agreement includes
a confidentiality provision and a non-solicitation provision. If Mr. Lanes'
employment is terminated as a result of permanent disability, incapacity or
death, Mr. Lane (or his beneficiaries, as applicable) shall be entitled to
receive his base salary through the date of termination plus 6 months severance
of his then current base salary.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of July 1, 1999, by (i)
each person (or group of affiliated persons) who is known by the
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Company to own beneficially more than 5% of the Company's Common Stock, (ii)
each of the Company's directors and Named Executive Officers, and (iii) all
directors and Named Executive Officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF SHARES OF
SHARES OF COMMON STOCK
NAME COMMON STOCK BENEFICIALLY OWNED
---- ------------ -----------------------
<S> <C> <C>
Greg Grosch...................................... 2,699,689(a) 25.2%
Dan Tsujioka..................................... 193,655(b) 1.8
Chris Lane....................................... 157,760(c) 1.5
Richard Gagnon................................... 174,000(d) 1.6
Jack Karg........................................ 14,877(e) *
Brian Etter...................................... 9,374(f) *
Mark M. King..................................... 937,994(g) 8.7
James A. Johnson................................. 555,351(h) 5.2
Charles A. Hamilton.............................. 192,509(i) 1.8
Donald M. Koll................................... -- --
Douglas C. Jacobs................................ -- --
Apex Investment Fund III, L.P. and affiliate..... 555,351(h) 5.2
KRG Capital Partners, LLC........................ 937,994(g) 8.7
All Named Executive Officers and Directors as a
Group (9 Persons).............................. 4,935,209 45.8
</TABLE>
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* Indicates less than 1%.
(a) Includes 269,967 shares held by trusts for the benefit of Mr. Grosch's
children. Mr. Grosch's business address is 3120 Airway Avenue, Costa Mesa,
CA 92626.
(b) Includes (i) 8,874 shares held by trusts for the benefit of Mr. Tsujioka's
children; (ii) 15,208 shares subject to options that are currently
exercisable; and (iii) 7,604 shares subject to options which will become
exercisable on September 30, 1999.
(c) Includes 21,750 shares held by Mr. Lane's wife.
(d) All of the shares held by Mr. Gagnon were purchased from Mr. Grosch
effective February 25, 1997 but 139,200 of such shares remain subject to
repurchase by Mr. Grosch in the event Mr. Gagnon leaves the Company prior to
February 25, 2001. Twenty-five percent of the remaining 139,200 shares vest
each year which commenced on February 25, 1998 and vested shares are no
longer subject to the repurchase right of Mr. Grosch.
(e) Includes 9,918 shares subject to options that are currently exercisable and
4,959 shares subject to options which will become exercisable on September
30, 1999.
(f) Includes 5,916 shares subject to options that are currently exercisable and
2,958 shares subject to options which will become exercisable on September
30, 1999.
(g) Includes 937,994 shares held by certain members of KRG Capital Investments
II, LLC, an investment limited liability company ("KRG II") of which KRG
Capital is the manager. The managing directors of KRG Capital are Mark M.
King, Bruce L. Rogers and Charles R. Gwirtsman. All the shares held by such
members of KRG II are subject to a voting agreement providing KRG Capital
the right to vote all of such shares. Mr. King is a Managing Director and
the founder of KRG Capital and as a result may be deemed to share beneficial
ownership of all such shares covered by the voting agreement. Mr. King
disclaims beneficial ownership of all shares covered by the voting
agreement, other than 283,223 shares held directly by Mr. King, his wife,
and a trust formed for the benefit of their children. KRG Capital is located
at 1515 Arapahoe Street, Tower 1, Suite 1500, Denver, CO 80202.
(h) Includes 515,778 shares held by Apex Investment Fund III, L.P. and 39,573
shares held by Apex Strategic Partners LLC. Mr. Johnson is the President of
Stellar Investment Co., a managing member of Apex Management III, LLC, which
is the sole general partner of Apex Investment Fund III, L.P. and the
Manager of Apex Strategic Partners, LLC. As a result, Mr. Johnson may be
deemed to share beneficial
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ownership of such shares, although he disclaims such beneficial ownership. Apex
Management III, LLC is located at 233 South Wacker Drive, Suite 9500, Chicago,
IL 60606
(i) Includes 192,509 shares held by Bayview Investors, L.P. Mr. Hamilton was a
managing director of BancBoston Robertson Stephens, the general partner of
Bayview Investors, Ltd.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTION ADVISORY AGREEMENT
KRG Capital and the Company are parties to a transaction advisory agreement
pursuant to which the Company pays to KRG Capital transaction advisory fees
based on the completion of additional acquisitions by the Company. The
transaction advisory fee is $200,000 payable on the first acquisition closing
each year, and (i) $50,000 for any transactions where the aggregate transaction
value is $20 million or less, unless the Board of Directors determines the
transaction presents unusual complexities in which case the fee may be adjusted
upward upon approval of the Board of Directors, and (ii) an amount to be agreed
upon and approved by the Board of Directors, but in no event less than $50,000,
for any transaction where the aggregate transaction value exceeds $20 million.
If the transaction advisory agreement is terminated by the Company prior to the
end of the term of the agreement, at the time of such termination, KRG Capital
shall be entitled to receive its annual transaction fees for the period that is
the lesser of (i) three years or (ii) the remainder of the term of the
transaction advisory agreement (including any extensions thereto).
STOCKHOLDER AGREEMENT
The Company, KRG Capital, Mr. Grosch and certain affiliates of KRG Capital
are parties to an Amended and Restated Stockholders Agreement (the "Stockholders
Agreement"). The Stockholders Agreement has a term of ten years. The
Stockholders Agreement provides that so long as Mr. Grosch or parties related to
KRG Capital hold at least 5% of the issued and outstanding Common Stock, (i) Mr.
Grosch and KRG Capital each are entitled to designate one director, (ii) the
stockholder parties will vote all of their shares for such designees and (iii)
KRG Capital is entitled to have one additional KRG Capital principal attend all
board meetings as a non-voting observer. Each of Mr. Grosch and Mr. King are the
designated directors of Mr. Grosch and KRG Capital, respectively.
LEASES
The Company leases a property located in Las Vegas, Nevada, from Greg
Grosch and his wife. The lease was entered into in May 1994 and is a six year
lease renewable for 4 successive five year terms at the Company's option.
Monthly rent under the lease is $5,761 for the Las Vegas property. The terms of
the lease are to be renegotiated upon renewal. Payments under the Las Vegas
lease totaled $69,469 in the fiscal year ended March 27, 1999.
The Company also leases a property in Riverside, California from Black
Marlin Investment Company and the Nuttal Trust (the "Landlord"). Black Marlin
Investment Company is wholly owned by Mr. and Mrs. Grosch. The Riverside lease
has a term of six years expiring in 2002. Monthly rent under the Riverside lease
is $7,403. Payments under the Riverside lease to the Landlord totaled $88,843 in
the fiscal year ended March 27, 1999.
The Company is a guarantor of certain indebtedness of Greg Grosch, his wife
and the Landlord secured by mortgages on the two properties described above. The
Company believes that the terms of the leases described above are no less
favorable to the Company than terms that could be obtained with unaffiliated
third parties in arms-length transactions.
CERTAIN STOCKHOLDERS
Apex Investment Fund III, L.P., Apex Strategic Partners LLC and Argentum
Capital Partners, L.P. combined own more than 10% of the common equity of the
Company.
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CREDIT AGREEMENT
An affiliate of BancBoston Robertson Stephens is a lender under the
Company's existing credit agreement. Mr. Hamilton, a Director of the Company,
was a Managing Director of BancBoston Robertson Stephens.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
("Exchange Act") requires the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("Commission") and the National Association of Securities
Dealers, Inc. Directors, officers and greater than 10% stockholders are required
by the Commission to furnish the Company with copies of the reports they file.
Based solely on its review of the copies of such reports and written
representations from certain reporting persons that certain reports were not
required to be filed by such persons, the Company believes that all of its
directors, officers and greater than 10% beneficial owners complied with all
filing requirements applicable to them with respect to transactions during the
fiscal year ended March 27, 1999.
9
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WHITE CAP INDUSTRIES, INC.
Date: /s/ GREG GROSCH
--------------------------------------
Greg Grosch
President/Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on July 23, 1999, by the following persons on behalf of
the registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
/s/ GREG GROSCH Chairman, Chief Executive Officer, President
- --------------------------------------------- and Director (principal executive officer)
Greg Grosch
/s/ CHRIS J. LANE Chief Financial Officer and Director
- --------------------------------------------- (principal accounting and financial officer)
Chris J. Lane
/s/ DAN TSUJIOKA Secretary and Director
- ---------------------------------------------
Dan Tsujioka
/s/ MARK M. KING Director
- ---------------------------------------------
Mark M. King
/s/ JAMES A. JOHNSON Director
- ---------------------------------------------
James A. Johnson
/s/ CHARLES A. HAMILTON Director
- ---------------------------------------------
Charles A. Hamilton
/s/ DOUGLAS C. JACOBS Director
- ---------------------------------------------
Douglas C. Jacobs
/s/ DONALD M. KOLL Director
- ---------------------------------------------
Donald M. Koll
</TABLE>
10
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION AND REFERENCE PAGE
- ------- ------------------------- ------------
<C> <S> <C>
10.9 Amended and Restated Transaction Advisory Agreement by and
among the Company, White Cap Industries, Corp. and KRG
Capital Partners, LLC dated March 31, 1998.
</TABLE>
<PAGE> 1
EXHIBIT 10.9
FIRST AMENDMENT TO
TRANSACTION ADVISORY AGREEMENT
THIS FIRST AMENDMENT TO TRANSACTION ADVISORY AGREEMENT is made
effective as of March 31, 1998, by and between KRG Capital Partners, L.L.C., a
Colorado limited liability company ("KRG"), White Cap Industries, Corp., a
California corporation ("WCI"), and White Cap Industries, Inc., a Delaware
corporation ("WCII").
BACKGROUND
KRG, WCI and WCII have previously entered into that certain Transaction
Advisory Agreement dated October 24, 1997 (the "Initial Agreement").
KRG, WCI and WCII desire to amend certain provisions of the Initial
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, KRG and the Company hereby agree as follows:
Section 3 (Compensation) of the Initial Agreement is hereby amended in
its entirety effective as of the date of the Initial Agreement as follows:
3. COMPENSATION
WCI and WCII jointly and severally agree to pay to KRG as compensation
for services to be rendered by KRG hereunder in connection with add-on
acquisitions a success fee equal to $200,000 (the "Base Transaction Fee"),
payable upon the first closing in each year of this agreement (measured from the
date of the Initial Agreement) of any add-on acquisitions of contractor supply
businesses. In addition to the Base Transaction Fee, the Company agrees to pay
to KRG, as compensation for services rendered to the Company with respect to the
consummation of any acquisition which transaction closes after the date hereof,
an additional transaction closing fee (the "Transaction Closing Fee") equal to:
(i) $50,000 for any transaction where the aggregate Transaction Value is $20
million or less, provided such fee may be adjusted upward if the Board of
Directors determines such transaction presented unusual complexities, and (ii)
an amount to be agreed upon by the parties hereto and approved by the Board of
Directors, but in no event less than $50,000, for any transaction where the
aggregate Transaction Value exceeds $20 million. "Transaction Value" shall mean
the aggregate of cash and non-cash consideration paid to the sellers of the
company or business being acquired and the value of all interest bearing debt
assumed by WCI or WCII. Any non-cash consideration shall be valued at fair
market value and the value of any equity securities issued shall be fair market
value on the date of issuance assuming such equity securities are fully vested
on such date. KRG may, in its sole discretion, agree to payment by WCI and WCII
of the Base Transaction Fee or Transaction Closing Fees in installments. The
amounts and timing of the installment payments shall be as agreed upon by KRG,
WCI and WCII. Notwithstanding the foregoing, in the event of a termination of
this agreement pursuant to Section 4 (including any deemed or effective
<PAGE> 2
termination as a result of KRG no longer being the primary provider of services
described in clause 2 above following a sale of WCI or WCII or other change in
control event) the success fee described above shall be deemed fully earned
for the period described in Section 4.
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment to Transaction Advisory Agreement as of the date written above.
KRG CAPITAL PARTNERS, L.L.C.
By: /s/ MARK M. KING
---------------------------------
Mark M. King
Managing Director
WHITE CAP INDUSTRIES, CORP.
By: /s/ GREGORY GROSCH
---------------------------------
Gregory Grosch
President
WHITE CAP INDUSTRIES, INC.
By: /s/ GREGORY GROSCH
---------------------------------
Gregory Grosch
President
-2-
