<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
SHELTER COMPONENTS CORPORATION
(NAME OF SUBJECT COMPANY [ISSUER])
SCC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
KEVCO, INC.
(BIDDERS)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
822835104
(CUSIP NUMBER OF CLASS OF SECURITIES)
COPY TO:
JERRY E. KIMMEL RICHARD TUCKER
CHAIRMAN OF THE BOARD, JACKSON WALKER L.L.P.
PRESIDENT AND CHIEF EXECUTIVE 777 MAIN STREET, SUITE 1800
OFFICER FORT WORTH, TEXAS 76102
KEVCO, INC. (817) 334-7200
UNIVERSITY CENTRE I
1300 S. UNIVERSITY DRIVE, SUITE
200
FORT WORTH, TEXAS 76107
(817) 332-2758
(NAME, ADDRESS, AND TELEPHONE NUMBERS OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
CALCULATION OF FILING FEE
Transaction valuation* Amount of filing fee
$142,458,242.50 $28,491.65
* For the purpose of calculating the fee only, this amount assumes the
purchase of 8,140,471 shares of Common Stock of Shelter Components
Corporation at $17.50 per share. Such number of shares includes all
outstanding shares as of October 24, 1997, and assumes the exercise of all
stock options to purchase shares of Common Stock issued by Shelter
Components Corporation which were outstanding as of October 24, 1997.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: not applicable Filing Party: not applicable
Form or Registration No. not applicable Date Filed: not applicable
- - -------------------------------------------------------------------------------
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<PAGE>
CUSIP NO. 822835 10 4 14D-1 Page 1 of 3 Pages
<TABLE>
<C> <S>
NAMES OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KEVCO, INC. 75-2666013
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - --------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK
- - --------------------------------------------------------------------------
<CAPTION>
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f). [_]
- - --------------------------------------------------------------------------
<C> <S>
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- - --------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,091,113
- - --------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES [_]
- - --------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
14%
- - --------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
</TABLE>
1
<PAGE>
CUSIP NO. 822835 10 4 14D-1 Page 2 of 3 Pages
<TABLE>
<C> <S>
NAMES OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JERRY E. KIMMEL ###-##-####
- - --------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - --------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK
- - --------------------------------------------------------------------------
<CAPTION>
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f). [_]
- - --------------------------------------------------------------------------
<C> <S>
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- - --------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,091,113
- - --------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES [_]
- - --------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
14%
- - --------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
IN
</TABLE>
2
<PAGE>
CUSIP NO. 822835 10 4 14D-1 Page 3 of 3 Pages
<TABLE>
<C> <S>
NAMES OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ELLIS L. MCKINLEY, JR. ###-##-####
- - --------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - --------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK
- - --------------------------------------------------------------------------
<CAPTION>
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f). [_]
- - --------------------------------------------------------------------------
<C> <S>
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- - --------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,091,113
- - --------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN
SHARES [_]
- - --------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
14%
- - --------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
IN
</TABLE>
3
<PAGE>
This Statement relates to a tender offer by SCC Acquisition Corp., an
Indiana corporation (the "Offeror") and wholly-owned subsidiary of Kevco,
Inc., a Texas corporation (the "Parent"), to purchase all outstanding shares
of common stock, par value $.01 per share (the "Shares"), of Shelter
Components Corporation, an Indiana corporation (the "Company"), at a purchase
price of $17.50 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated October 28, 1997 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer"), copies
of which are filed as Exhibits (a)(1) and (a)(2) hereof, respectively, and
which are incorporated herein by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Shelter Components Corporation. The
address of the principal executive offices of the Company is 2831 Dexter
Drive, Elkhart, Indiana 46514.
(b) The exact title of the class of equity securities being sought in the
Offer is the Common Stock, par value $.01 per share. The information set forth
in the Introduction to the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) The information set forth in the Introduction and Section 9
("Certain Information Concerning Parent and the Offeror") of the Offer to
Purchase, and in Annex I thereto, is incorporated herein by reference.
(e) and (f) Neither the Offeror nor the Parent nor, to the best of their
knowledge, any of the persons listed in Annex I of the Offer to Purchase, has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in the Introduction and Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with
the Company") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with
the Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") and Section 13 ("The Merger Agreement") of the Offer to Purchase is
incorporated herein by reference.
4
<PAGE>
(f) and (g) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction, Section 9
("Certain Information Concerning Parent and the Offeror") and Section 13 ("The
Merger Agreement") of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") and
Section 13 ("The Merger Agreement") of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning
Parent and the Offeror") of the Offer to Purchase is incorporated herein by
reference.
The incorporation by reference herein of the above-mentioned financial
information does not constitute an admission that such information is material
to a decision by a security holder of the Company as whether to sell, tender
or hold Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) and (c) The information set forth in Section 16 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated October 28, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Letter from Rauscher Pierce Refsnes, Inc., as Dealer Manager, to
Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees to Clients.
5
<PAGE>
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Announcement, dated October 28, 1997.
(a)(8) Press Release issued by Parent and Company on October 22, 1997.
(a)(9) Press Release issued by the Company on October 22, 1997.
(b) Senior Commitment Letter dated October 27, 1997 from NationsBank of
Texas, N.A. and NationsBanc Montgomery Securities, Inc.
(c)(1) Agreement and Plan of Merger, dated as of October 21, 1997, between
Parent, Offeror and the Company.
(c)(2) Confidentiality Agreement dated as of August 25, 1997, between Parent
and the Company.
(c)(3) Shareholders Agreement dated as of October 21, 1997, between Parent,
Offeror and certain Shareholders of the Company.
(d) Not applicable.
(e) Not applicable.
(f) None.
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Kevco, Inc.
/s/ Ellis L. McKinley, Jr.
By: _________________________________
Ellis L. McKinley, Jr.,
Vice President and Chief Financial
Officer
SCC Acquisition Corp.
/s/ Ellis L. McKinley, Jr.
By: _________________________________
Ellis L. McKinley, Jr.,
Vice President and Treasurer
/s/ Jerry E. Kimmel
__________________________________
Jerry E. Kimmel
/s/ Ellis L. McKinley, Jr.
__________________________________
Ellis L. McKinley, Jr.
Dated: October 28, 1997
7
<PAGE>
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHELTER COMPONENTS CORPORATION
AT
$17.50 NET PER SHARE
BY
SCC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
KEVCO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
THIS OFFER (THE "OFFER") IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE
BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER
SUCH NUMBER OF OUTSTANDING SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE
(THE "SHARES"), OF SHELTER COMPONENTS CORPORATION ("SHELTER" OR THE
"COMPANY"), THAT CONSTITUTE ON A FULLY-DILUTED BASIS A MAJORITY OF THE
SHARES, (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED
(THE "HSR ACT"), (III) KEVCO, INC. ("KEVCO" OR "PARENT") OBTAINING, PRIOR TO
THE EXPIRATION OF THE OFFER, SUFFICIENT FINANCING, ON TERMS ACCEPTABLE TO
PARENT, TO ENABLE THE CONSUMMATION OF THE OFFER AND THE MERGER (AS DEFINED
HEREIN) AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS.
SEE SECTION 15.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER,
DATED AS OF OCTOBER 21, 1997 (THE "MERGER AGREEMENT"), AMONG KEVCO, SCC
ACQUISITION CORP. ("OFFEROR"), AND SHELTER. THE BOARD OF DIRECTORS OF THE
COMPANY, BY THE UNANIMOUS VOTE OF ALL DIRECTORS PRESENT AT A MEETING DULY
CALLED AND HELD IN WHICH A QUORUM OF DIRECTORS WAS PRESENT, HAS APPROVED
THE OFFER, THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT, IN THE
OPINION OF THE BOARD OF DIRECTORS OF THE COMPANY, THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND
RECOMMENDS THAT HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
IMPORTANT
Any shareholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the Depositary
(as defined herein) or follow the procedure for book-entry transfer set forth
in Section 3 or (ii) request such shareholder's broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for the
shareholder. Shareholders having Shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such
person if they desire to tender their Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis or who cannot
deliver all required documents to the Depositary, in each case prior to the
expiration of the Offer, must tender such Shares pursuant to the guaranteed
delivery procedure set forth in Section 3.
Questions and requests for assistance may be directed to Rauscher Pierce
Refsnes, Inc., the Dealer Manager, or to MacKenzie Partners, Inc., the
Information Agent, at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be obtained from the Information
Agent or from brokers, dealers, commercial banks and trust companies.
---------------
The Dealer Manager for the Offer is:
RAUSCHER PIERCE REFSNES, INC.
---------------
October 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<S> <C>
Introduction........................................................... 1
The Offer
1. Terms of the Offer................................................ 2
2. Acceptance for Payment and Payment for Shares..................... 4
3. Procedure for Tendering Shares.................................... 5
4. Withdrawal Rights................................................. 8
5. Certain Federal Income Tax Consequences........................... 8
6. Price Range of Shares; Dividends.................................. 9
7. Certain Effects of the Transaction................................ 10
8. Certain Information Concerning the Company........................ 11
9. Certain Information Concerning Parent and the Offeror............. 14
10. Source and Amount of Funds........................................ 16
11. Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company......................................... 17
12. Purpose of the Offer and the Merger; Plans for the Company........ 20
13. The Merger Agreement.............................................. 21
14. Dividends and Distributions....................................... 30
15. Certain Conditions of the Offeror................................. 30
16. Certain Legal Matters and Regulatory Approvals.................... 32
17. Fees and Expenses................................................. 33
18. Miscellaneous..................................................... 34
Annex I.--Certain Information Concerning the Directors and Executive
Officers of Parent and the Offeror....................................... I-1
</TABLE>
<PAGE>
To The Holders of Shares of Common Stock of Shelter Components Corporation:
INTRODUCTION
SCC Acquisition Corporation, an Indiana corporation (the "Offeror") and a
wholly-owned subsidiary of Kevco, Inc., a Texas corporation ("Parent" or
"Kevco"), hereby offers to purchase all outstanding shares of Common Stock,
$.01 par value per share (the "Shares"), of Shelter Components Corporation, an
Indiana corporation ("Shelter" or the "Company"), at a purchase price of
$17.50 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). Tendering
holders of Shares will not be obligated to pay brokerage fees or commissions
or, except as set forth in the Letter of Transmittal, any stock transfer taxes
on the purchase of Shares by the Offeror pursuant to the Offer. The Offeror
will pay all charges and expenses of Rauscher Pierce Refsnes, Inc. (the
"Dealer Manager"), ChaseMellon Shareholder Services, L.L.C. (the "Depositary")
and MacKenzie Partners, Inc. (the "Information Agent") in connection with the
Offer.
THE BOARD OF DIRECTORS OF THE COMPANY, BY THE UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT AT A MEETING DULY CALLED AND HELD IN WHICH A QUORUM OF
DIRECTORS WAS PRESENT, HAS APPROVED THE OFFER, THE MERGER (AS DEFINED HEREIN),
AND THE MERGER AGREEMENT (AS DEFINED HEREIN), HAS DETERMINED THAT, IN THE
OPINION OF THE BOARD OF DIRECTORS OF THE COMPANY, THE OFFER AND THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS AND
RECOMMENDS THAT THE HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
The Company has advised the Offeror that SBC Warburg Dillon Read Inc., the
Company's financial advisor, has delivered to the Company's Board of Directors
its written opinion that, as of the date of the Merger Agreement, the $17.50
per Share cash consideration to be offered to the Company's shareholders
pursuant to the Offer and the Merger is fair, from a financial point of view,
to such shareholders. A copy of such opinion is set forth in full as Annex A
to the Company's Solicitation/Recommendation Statement on Schedule 14D-9,
which is being mailed to the Company's shareholders with this Offer to
Purchase, and such shareholders are urged to read the opinion in its entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES THAT CONSTITUTE, ON A FULLY-DILUTED BASIS, A MAJORITY OF THE SHARES
(THE "MINIMUM CONDITION"), (II) THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE WAITING PERIOD UNDER THE HSR ACT (THE "HSR ACT CONDITION"), (III)
PARENT OBTAINING, PRIOR TO THE EXPIRATION OF THE OFFER, SUFFICIENT FINANCING
ON TERMS ACCEPTABLE TO PARENT, TO ENABLE CONSUMMATION OF THE OFFER AND THE
MERGER (THE "FINANCING CONDITION") AND (IV) THE SATISFACTION OF CERTAIN OTHER
TERMS AND CONDITIONS. SEE SECTION 15.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of October 21, 1997 (the "Merger Agreement"), among Parent, the Offeror and
the Company. The Merger Agreement provides that, among other things, after the
purchase of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement, including that there be no
material adverse change in the Company, the Company's business, assets,
results of operations or financial condition of the Company's business or any
material portion thereof since September 30, 1997, and in accordance with the
relevant provisions of the Business Corporation Law of the State of Indiana,
as amended (the "IBCL"), the Offeror will be merged with and into the Company
(the "Merger"). If the Offeror acquires at least 90% of the outstanding Shares
pursuant to the Offer, the Offeror may effect the Merger pursuant to the
"short-form" merger provisions of Section 23-1-40-4 of the IBCL, without prior
notice to, or any action by, any shareholder of the Company. See Section 12.
Following consummation of the Merger, the Company will continue as the
surviving corporation (the "Surviving Corporation") and will be a wholly-owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share that is issued and outstanding (other than Shares owned by
the Company, any
1
<PAGE>
subsidiary of the Company, Parent, the Offeror, any other subsidiary of Parent
or by shareholders, if any, who are entitled to and who properly exercise
appraisal rights under the IBCL to the extent available) will be canceled and
become the right to receive from the Surviving Corporation $17.50 (or any
higher price that may be paid for each Share pursuant to the Offer) in cash,
without interest thereon (the "Offer Price" or "Merger Consideration"). See
Section 5 for a description of certain tax consequences of the Offer and the
Merger.
The Merger Agreement provides that, promptly after the Offeror purchases
Shares pursuant to the Offer (but subject to the satisfaction of the Minimum
Condition), the Offeror will be entitled, to the fullest extent permitted by
law, to designate at its option up to that number of directors, rounded to the
nearest whole number, of the Board of Directors of the Company as will make
the percentage of the Company's directors designated by the Offeror equal to
the aggregate voting power of the Shares held by Parent. However, at the
request of Parent the Company shall have two directors who were directors on
the date of the Merger Agreement and who are not officers or affiliates of
either the Company or Parent. The Company has agreed, at the option of Parent,
to the fullest extent permitted by law, either to increase the size of the
Board of Directors of the Company and/or request the resignation of such
number of directors as is necessary to enable the Offeror's designees to be
elected or appointed to the Board. The Merger Agreement is more fully
described in Section 13. All of the directors of the Company have indicated to
the Parent that, if the offer is consummated, each director intends to
immediately resign as a director of the Company.
The Company has advised the Offeror that as of October 24, 1997, there were
7,770,783 Shares issued and outstanding, and as of such date there were
outstanding options to acquire 369,688 Shares. As of the date hereof, neither
the Offeror nor Parent beneficially owns any Shares. Based upon the foregoing,
the Offeror believes that if the Offeror acquires at least 4,070,236 Shares in
the Offer, it will control a majority of the outstanding Shares on a fully-
diluted basis. Accordingly, pursuant to the ICBL, the Offeror would have
sufficient voting power to approve the Merger without the affirmative vote of
any other shareholder.
As of October 21, 1997, the Parent and the Offeror entered into a
Shareholders Agreement with officers and directors of the Company pursuant to
which such officers and directors granted to Parent an irrevocable proxy to
vote their Shares in favor of the transactions contemplated by the Merger
Agreement, agreed to validly tender their shares in accordance with the Offer,
and agreed to vote their Shares in favor of the Merger and against actions
interfering with or adversely affecting the Merger. The Shareholders Agreement
remains effective for six months unless terminated earlier by certain events,
including the acquisition of the Shares by Parent or Offeror pursuant to the
Offer. The Shareholders Agreement is applicable to 1,091,113 Shares held by
such officers and directors as of the date of the Shareholders Agreement,
along with any Shares acquired by such officers and directors after the date
of the Shareholders Agreement.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and
conditions of any extension or amendment), the Offeror will accept for payment
and pay for all Shares validly tendered prior to the Expiration Date and not
theretofore withdrawn in accordance with Section 4. The term "Expiration Date"
means 12:00 Midnight, New York City time, on Monday, December 1, 1997, unless
the Offeror shall have extended the period of time for which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by the Offeror, shall expire. The
Merger Agreement provides that without the prior written consent of the
Company the offer shall not be extended beyond December 31, 1997. If the
Offeror shall decide, in its sole discretion, to increase the consideration
offered in the Offer to holders of Shares and if, at the time that notice of
such increase is first published, sent or given to holders of Shares in the
manner specified below, the Offer is scheduled to expire at any time earlier
than the expiration of a period ending on the tenth business day from, and
including, the date that such notice is first so published, sent or given,
then the Offer will be extended until the expiration of such period of ten
business days. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or a federal holiday and consists of the time period
from 12:01 a.m. through 12:00 Midnight, New York City time.
2
<PAGE>
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, THE HSR
ACT CONDITION, THE FINANCING CONDITION AND CERTAIN OTHER TERMS AND CONDITIONS.
SEE SECTION 15. THE MERGER AGREEMENT AND THE OFFER MAY BE TERMINATED BY THE
OFFEROR AND PARENT IF CERTAIN EVENTS OCCUR. The Offeror reserves the right
(but shall not be obligated), in accordance with applicable rules and
regulations of the United States Securities and Exchange Commission (the
"Commission"), subject to the limitations set forth in the Merger Agreement
and described below, to waive in whole or in part any of the conditions set
forth in Section 15; provided that, without the prior written consent of the
Company, Offeror shall not waive the Minimum Condition. If the Minimum
Condition or any condition set forth in Section 15 has not been satisfied by
12:00 Midnight, New York City time, on Monday, December 1, 1997 (or any other
time then set as the Expiration Date), the Offeror may, subject to the terms
of the Merger Agreement as described below, elect to (1) extend the Offer and,
subject to applicable withdrawal rights, retain all tendered Shares until the
expiration of the Offer, as extended, (2) subject to complying with applicable
rules and regulations of the Commission, accept for payment all Shares so
tendered and not extend the Offer or (3) terminate the Offer and not accept
for payment any Shares and return all tendered Shares to tendering
shareholders.
Under the terms of the Merger Agreement, the Offeror may not, without the
consent of the Company, reduce the number of Shares to be purchased in the
Offer, reduce the Offer Price, modify or add to the conditions to the Offer as
set forth in Section 15 (other than to waive any such conditions to the extent
permitted by the Merger Agreement), except as described in the next sentence,
extend the Offer, change the form of consideration payable in the Offer or
make any other change or modification in any of the terms of the Offer in any
manner that could reasonably be expected to be adverse to the holders of
Shares. Notwithstanding the foregoing, the Offeror may, without the consent of
the Company, extend the Offer (i) if at the scheduled or extended Expiration
Date of the Offer, any of the conditions to the Offer shall not have been
satisfied or waived, until such time as such conditions are satisfied or
waived but in any event, Offeror shall not, without the prior written consent
of the Company, extend the Offer beyond December 31, 1997, (ii) for any period
required by any rule, regulation, interpretation or position of the Commission
or the staff thereof applicable to the Offer, or (iii) for a period of up to
five business days, if on any scheduled Expiration Date of the Offer on which
the conditions to the Offer shall have been satisfied or waived, the number of
Shares that have been validly tendered and not withdrawn represent more than
50% of the aggregate outstanding Shares (assuming the exercise of all options
to purchase, and the conversion or exchange of all securities convertible or
exchangeable into, Shares outstanding at the Expiration Date of the Offer),
but less than 90% of the then issued and outstanding Shares.
Subject to the limitations set forth in this Offer and the Merger Agreement,
the Offeror reserves the right (but will not be obligated), at any time or
from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. Except to
the extent required by the Merger Agreement, there can be no assurance that
the Offeror will exercise its right to extend the Offer. See Section 13.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and
not accept for payment or pay for any Shares not theretofore accepted for
payment or paid for, upon the occurrence of any of the conditions set forth in
Section 15, by giving oral or written notice of such delay or termination to
the Depositary and by making a public announcement, and (ii) at any time or
from time to time, to amend the Offer in any respect. The Offeror's right to
delay payment for any Shares or not to pay for any Shares theretofore accepted
for payment is subject to the applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), relating to the Offeror's obligation to pay
for or return tendered Shares promptly after the termination or withdrawal of
the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will
be followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00
a.m., New York City
3
<PAGE>
time, on the next business day after the previously scheduled Expiration Date
in accordance with the public announcement requirements of Rules 14d-4(c) and
14e-1(d) under the Exchange Act. Without limiting the obligation of the
Offeror under such rules or the manner in which the Offeror may choose to make
any public announcement, the Offeror currently intends to make announcements
by issuing a press release to the Dow Jones News Service and making any
appropriate filing with the Commission.
If, subject to the terms of the Merger Agreement, the Offeror makes a
material change in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer (including, with the
consent of the Company, a waiver of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if and to
the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act or otherwise. The minimum period during which a tender offer must remain
open following material changes in the terms of the offer or the information
concerning the offer, other than a change in price or a change in percentage
of securities sought, will depend upon the facts and circumstances, including
the relative materiality of the terms or information changes. With respect to
a change in price or a change in percentage of securities sought, a minimum
ten business day period is generally required to allow for adequate
dissemination to shareholders and investor response.
The Company has provided the Offeror with the Company's list of shareholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on
the Company's shareholder list and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the shareholder list or, if applicable, who
are listed as participants in a clearing agency's security position listing
for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Offeror will accept for payment and will pay for all Shares validly tendered
prior to the Expiration Date and not theretofore withdrawn in accordance with
Section 4 promptly after the later to occur of (a) the Expiration Date and (b)
the satisfaction or waiver of the conditions set forth in Section 15 related
to regulatory matters. Subject to compliance with Rule 14e-1(c) under the
Exchange Act and any other applicable rules of the Commission, the Offeror
expressly reserves the right to delay acceptance for payment and payment for
Shares in order to comply in whole or in part with any applicable law. See
Sections 1 and 16. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or Philadelphia
Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"),
pursuant to the procedures set forth in Section 3, (ii) a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof) with all required signature guarantees or, in the case of a book-
entry transfer, an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as,
if and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment pursuant to the Offer. In all
cases, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Offeror
and transmitting such payment to tendering shareholders. If, for any reason
whatsoever, acceptance for payment of
4
<PAGE>
any Shares tendered pursuant to the Offer is delayed, or the Offeror is unable
to accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to the Offeror's rights under Section 1, the Depositary may,
nevertheless, on behalf of the Offeror, retain tendered Shares, and such
Shares may not be withdrawn, except to the extent that the tendering
shareholders are entitled to withdrawal rights as described in Section 4 below
and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID BY THE OFFEROR BECAUSE OF ANY DELAY IN
MAKING ANY PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
for more Shares than are tendered, certificates for such unpurchased or
untendered Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares delivered by book-entry transfer to a
Book-Entry Transfer Facility, such Shares will be credited to an account
maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all shareholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
Subject to the terms of the Merger Agreement, the Offeror reserves the right
to transfer or assign, in whole or from time to time in part, to one or more
of its affiliates, the right to purchase Shares tendered pursuant to the
Offer, but any such transfer or assignment will not relieve the Offeror of its
obligations under the Offer or prejudice the rights of tendering shareholders
to receive payment for Shares validly tendered and accepted for payment.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer,
either a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents, must be received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date or the tendering shareholder must comply with the guaranteed delivery
procedure set forth below. In addition, either (i) certificates representing
such Shares must be received by the Depositary along with the Letter of
Transmittal or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
the guaranteed delivery procedures set forth below must be complied with.
Offeror is not required to accept any alternative, conditional or contingent
tenders. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may
be effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer,
and any other required documents, must, in any case, be transmitted to and
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase or (ii) the guaranteed delivery procedures described
below must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program, the Stock Exchange Medallion Program, or by any other bank, broker,
dealer,
5
<PAGE>
credit union, savings association or other entity that is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Exchange Act (each of the foregoing being referred to as an "Eligible
Institution" and, collectively, as "Eligible Institutions"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Delivery Instructions" or the box
labeled "Special Payment Instructions" on the Letter of Transmittal or (ii)
for the account of any Eligible Institution. If the certificates evidencing
Shares are registered in the name of a person or persons other than the signer
of the Letter of Transmittal, or if payment is to be made, or delivered to, or
certificates for unpurchased Shares are to be issued or returned to, a person
other than the registered owner or owners, then the tendered certificates must
be endorsed or accompanied by duly executed stock powers, in either case
signed exactly as the name or names of the registered owner or owners appear
on the certificates, with the signatures on the certificates or stock powers
guaranteed by an Eligible Institution as provided in the Letter of
Transmittal. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Offeror, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal are received by the Depositary within three trading
days after the date of such Notice of Guaranteed Delivery. The term
"trading day" is any day on which the New York Stock Exchange ("NYSE") is
open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL
BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING,
IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with all required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
OFFEROR, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING ANY
PAYMENT.
6
<PAGE>
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT 31% "BACKUP" FEDERAL
INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE OFFER PRICE OF SHARES
PURCHASED PURSUANT TO THE OFFER, EACH SHAREHOLDER MUST, SUBJECT TO CERTAIN
EXCEPTIONS, PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. FOREIGN HOLDERS MUST GENERALLY COMPLETE
FORM W-8 (OR A SUBSTANTIALLY SIMILAR FORM) TO AVOID 31% BACKUP WITHHOLDING.
THIS FORM MAY BE OBTAINED FROM THE DEPOSITARY. SEE INSTRUCTIONS 8 AND 9 SET
FORTH IN THE LETTER OF TRANSMITTAL.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties.
The Offeror reserves the absolute right to reject any or all tenders of any
Shares that are determined by it not to be in proper form or the acceptance of
or payment for which may, in the opinion of the Offeror, be unlawful. The
Offeror also reserves the absolute right to waive any of the conditions of the
Offer, subject to the limitations set forth in the Merger Agreement, or any
defect or irregularity in the tender of any Shares. The Offeror's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the Instructions to the Letter of Transmittal) will be
final and binding on all parties. No tender of Shares will be deemed to have
been validly made until all defects and irregularities have been cured or
waived. None of the Offeror, Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
shareholder irrevocably appoints designees of the Offeror as such
shareholder's attorneys-in-fact and proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the
full extent of such shareholder's right with respect to the Shares tendered by
such shareholder and accepted for payment by the Offeror (and any and all
other Shares or other securities issued or issuable in respect of such
Shares). All such powers of attorney and proxies shall be considered coupled
with an interest in the tendered Shares. This appointment is effective when,
and only to the extent that, the Offeror accepts for payment the Shares
deposited with the Depositary. Upon acceptance for payment, all prior powers
of attorney and proxies given by the shareholder with respect to such Shares
or other securities or rights will, without further action, be revoked and no
subsequent proxies may be given or written consent executed (and, if given or
executed, will not be deemed effective). The designees of the Offeror will,
with respect to the Shares and other securities or rights, be empowered to
exercise all voting and other rights of such shareholder as they in their sole
judgment deem proper in respect of any annual or special meeting of the
Company's shareholders, or any adjournment or postponement thereof, any
actions by written consent in lieu of any such meeting or otherwise. The
Offeror reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Offeror's payment for such Shares, the
Offeror must be able to exercise full voting and other rights with respect to
such Shares and the other securities or rights issued or issuable in respect
of such Shares, including voting at any meeting of shareholders (whether
annual or special or whether or not adjourned) in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering shareholder's acceptance of the terms and
conditions of the Offer, as well as the tendering shareholder's representation
and warranty that (i) such shareholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares), and
(ii) when the same are accepted for payment by the Offeror, the Offeror will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The Offeror's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering shareholder and the
Offeror upon the terms and subject to the conditions of the Offer.
7
<PAGE>
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration
Date and, unless theretofore accepted for payment pursuant to the Offer, may
also be withdrawn at any time after December 1, 1997. If purchase of or
payment for Shares is delayed for any reason or if the Offeror is unable to
purchase or pay for Shares for any reason, then, without prejudice to the
Offeror's rights under the Offer, tendered Shares may be retained by the
Depositary on behalf of the Offeror and may not be withdrawn except to the
extent that tendering shareholders are entitled to withdrawal rights as set
forth in this Section 4, subject to Rule 14e-1(c) under the Exchange Act,
which provides that no person who makes a tender offer shall fail to pay the
consideration offered or return the securities deposited by or on behalf of
security holders promptly after the termination or withdrawal of the Offer.
For a withdrawal of Shares tendered pursuant to the Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase. Any notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name in which the certificates
representing such Shares are registered, if different from that of the person
who tendered the Shares. If certificates for Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry transfer set forth in
Section 3, any notice of withdrawal must also specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including
time of receipt) of notices of withdrawal will be determined by the Offeror,
in its sole discretion, and its determination will be final and binding on all
parties. None of the Offeror, Parent, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of
certain United States federal income tax consequences of the Offer and the
Merger to beneficial owners of Shares whose Shares are purchased pursuant to
the Offer or whose Shares are converted to cash in the Merger. The discussion
is for general information only and does not purport to consider all aspects
of federal income taxation that might be relevant to beneficial owners of
Shares. The discussion is based on current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), existing, proposed and temporary
regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change. The discussion
applies only to beneficial owners of Shares in whose hands Shares are capital
assets within the meaning of Section 1221 of the Code, and may not apply to
Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to certain types of beneficial owners of Shares
(such as insurance companies, tax-exempt organizations and broker-dealers) who
may be subject to special rules. This discussion does not discuss the federal
income tax consequences to a beneficial owner of Shares who, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF SHARES
SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
8
<PAGE>
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes. In general, for federal
income tax purposes, a beneficial owner of Shares will recognize gain or loss
equal to the difference between the beneficial owner's adjusted tax basis in
the Shares sold pursuant to the Offer or converted to cash in the Merger and
the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in
a single transaction) sold pursuant to the Offer or converted to cash in the
Merger. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if the beneficial owner held the Shares for more than one
year as of the date of sale (in the case of the Offer) or the Effective Time
(in the case of the Merger). With respect to individuals who held the Shares
for more than one year but not more than eighteen months, long-term capital
gain will be taxed at a maximum rate of 28%. With respect to individuals who
held the Shares for more than eighteen months, long-term capital gain will be
taxed at a maximum rate of 20%.
In connection with the Offer and the Merger, federal income tax law requires
that a beneficial owner of Shares provide the applicable depository or
exchange agent with its correct taxpayer identification number, which, in the
case of a shareholder who is an individual, is his or her social security
number, or, in the alternative, establish a basis for exemption from backup
withholding. Exempt holders (including, among others, corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. Each beneficial owner of Shares should consult with its own tax
advisor to determine whether such beneficial owner meets the requirements for
exemption. If the correct taxpayer identification number or an adequate basis
for exemption is not provided, the beneficial owner will be subject to backup
withholding at the rate of 31% on the consideration to be received pursuant to
the Offer or the Merger and may be subject to certain penalties.
To prevent backup withholding, each beneficial owner of Shares must complete
and sign a Substitute Form W-9, certifying under penalties of perjury that (i)
the taxpayer identification number provided is correct (or that such
beneficial owner is awaiting a taxpayer identification number) and (ii) the
beneficial owner is not subject to backup withholding because (a) such
beneficial owner is exempt from backup withholding, (b) the beneficial owner
has not been notified by the Internal Revenue Service (the "Service") that
such beneficial owner is subject to backup withholding as a result of the
failure to report all interest or dividends, or (c) the Service has notified
such beneficial owner that it is no longer subject to backup withholding. A
beneficial owner tendering its Shares in the Offer may complete the Substitute
Form W-9 included in the Letter of Transmittal. A beneficial owner whose
Shares are converted into cash in the Merger may obtain a Substitute Form W-9
from the exchange agent and should return the completed Substitute Form W-9 to
such exchange agent. A beneficial owner that is a foreign individual must
generally complete Form W-8 (or a substantially similar form), attesting to
such beneficial owner's exempt status, to prevent backup withholding. This
form may be obtained from the applicable depository or exchange agent.
Backup withholding is not an additional tax. A beneficial owner subject to
backup withholding may reduce such beneficial owner's federal income tax
liability by the amount withheld. Additionally, if the backup withholding
results in an overpayment of taxes, the beneficial owner may obtain a refund.
Parent and the Offeror will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the Offer or the Merger Agreement
to any beneficial owner of Shares such amounts as Parent or the Offeror is
required to deduct and withhold with respect to the making of such payment. To
the extent that amounts are so withheld by Parent or the Offeror, such
withheld amounts shall be treated for all purposes of the Offer or the Merger
Agreement as having been paid to the beneficial owner of the Shares in respect
of which such deduction and withholding was made by Parent or the Offeror.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are traded on the American
Stock Exchange (the "AMEX"). The following table sets forth for the periods
indicated the high and low sales prices per Share on the AMEX as reported by
the Company in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (the "1996 10-K") with respect to the periods on and
before December 31, 1996 and as reported by published financial sources with
respect to periods after December 31, 1996.
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<TABLE>
<CAPTION>
HIGH LOW
YEAR ENDED DECEMBER 31, 1995: ---- ----
<S> <C> <C>
First Quarter.............................................. $11 5/8 $ 8 3/4
Second Quarter............................................. 11 8 1/4
Third Quarter.............................................. 11 7/8 9
Fourth Quarter............................................. 13 3/4 11 1/4
YEAR ENDED DECEMBER 31, 1996:
First Quarter.............................................. $13 1/8 $ 9 3/4
Second Quarter............................................. 13 5/8 9 7/8
Third Quarter.............................................. 14 1/4 10 7/8
Fourth Quarter............................................. 14 1/2 11 1/2
YEAR ENDED DECEMBER 31, 1997:
First Quarter.............................................. $12 3/8 $10 1/4
Second Quarter............................................. 12 3/8 9 7/8
Third Quarter.............................................. 15 5/8 11 5/8
Fourth Quarter (through October 21, 1997).................. 14 15/16 13 3/4
</TABLE>
On October 21, 1997, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing price per
Share as reported on the AMEX was $14 15/16. On October 27, 1997, the last
full day of trading prior to the commencement of the Offer, the closing price
per Share as reported on the AMEX was $17 1/8. SHAREHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
According to the 1996 10-K and the Company's Quarterly Report on Form 10-Q
for the quarterly periods ended June 30, 1997, 1997, 1996 and 1995 dividends
per Share were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
DIVIDENDS DECLARED IN ------ ------ ------
<S> <C> <C> <C>
June................................................. $0.030 $0.024 $0.024
December............................................. 0.030 0.024
------ ------
Total................................................ $0.054 $0.048
</TABLE>
Pursuant to the Merger Agreement, the Company has agreed with the Parent not
to pay any dividends on any of the Company's capital stock until termination
of the Merger Agreement.
7. CERTAIN EFFECTS OF THE TRANSACTION. The purchase of the Shares by the
Offeror pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and will reduce the number of holders of Shares,
which will adversely affect the liquidity and market value of the remaining
Shares held by shareholders other than the Offeror. The Company has advised
the Offeror that, as of April 17, 1997, there were approximately 361 holders
of record and Parent believes that as of April 17, 1997 there were
approximately 2,100 beneficial owners of the Shares.
Market for Shares. Depending upon the number of Shares purchased pursuant to
the Offer, after consummation of the Offer, the Shares may no longer meet the
standards for continued inclusion on the AMEX. According to the AMEX's
published guidelines, the AMEX would consider delisting such Shares if, among
other things, the number of public holders of such Shares were to fall below
300, the number of publicly-held Shares (exclusive of holdings of officers,
directors, their immediate families and other concentrated holdings of 10% or
more ("AMEX Excluded Holdings")) were to fall below 200,000 or the aggregate
market value of publicly held Shares (exclusive of AMEX Excluded Holdings)
were to fall below $1,000,000. If as a result of the purchase of the Shares
pursuant to the Offer or otherwise, the Shares no longer meet the requirements
of the AMEX for continued listing and the Shares are no longer listed, the
market for the Shares would be adversely affected.
In the event that the Shares were no longer listed or traded on the AMEX, it
is possible that such Shares would continue to trade in the over-the-counter
market and that price quotations would be reported by other sources. The
extent of the public market for such Shares and the availability of such
quotations would, however, depend upon the number of holders of such Shares
remaining at such time, the interest in maintaining a market in Shares on the
part of securities firms, the possible termination of registration of such
Shares under the Exchange Act, as described below, and other factors.
10
<PAGE>
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if there are fewer than 300 record holders of such
Shares. If such registration were terminated, the Company would no longer
legally be required to disclose publicly in proxy materials distributed to
shareholders the information that it now must provide under the Exchange Act
or to make public disclosure of financial and other information in annual,
quarterly and other reports required to be filed with the Commission under the
Exchange Act; the Company would no longer be subject to Rule 13e-3 under the
Exchange Act relating to "going private" transactions; and the officers,
directors and 10% shareholders of the Company would no longer be subject to
the "short-swing" insider trading reporting and profit recovery provisions of
the Exchange Act. Furthermore, if such registration were terminated, persons
holding "restricted securities" of the Company may be deprived of their
ability to dispose of such securities under Rule 144 or Rule 144A promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
If the shares are not delisted from the AMEX and registration of the Shares
is not terminated prior to the Merger, then the Shares will be delisted from
the AMEX and the registration of the Shares under the Exchange Act will be
terminated following the consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of such Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers. If registration of Shares under the
Exchange Act were terminated, such Shares would no longer be "margin
securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company
or has been taken from or based upon publicly available documents and records
on file with the Commission and other public sources. Although neither the
Offeror nor Parent has any knowledge that would indicate that statements
contained herein based upon such documents are untrue, none of the Offeror,
Parent and the Dealer Manager assume any responsibility for the accuracy or
completeness of the information concerning the Company or for any failure by
the Company to disclose events that may have occurred or may affect the
significance or accuracy of any such information but that are unknown to the
Offeror, Parent or the Dealer Manager.
The Company is an Indiana corporation with its principal executive offices
located at 2831 Dexter Dr., Elkhart, Indiana 46514. The Company is primarily a
supplier of products to the manufactured housing, modular housing and
recreational vehicle industries, including laminated wallboard products and
thermoformed plastic bathroom products that are manufactured by wholly-owned
subsidiaries. To a lesser extent, the Company distributes products to other
industries within the Company's geographic territories.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in
the 1996 10-K, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 and the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary
is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein. Such reports and other documents should be available for
inspection and copies thereof should be obtainable in the manner set forth
below.
11
<PAGE>
SHELTER COMPONENTS CORPORATION SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN
THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- ---------------------------
1997 1996 1996 1995 1994
------------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales................. $357,879 $397,065 $ 521,022 $462,323 $333,104
Operating income.......... 11,237 15,052 15,586 18,844 15,271
Net income................ 6,900(a) 8,391 11,698(b) 10,038 8,697
Earnings per common share
and common equivalent
share.................... 0.89(a) 1.08 1.51(b) 1.31 1.19
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C> <C> <C>
-------- ------------------
Balance Sheet Data:
Current assets............ $ 92,477 $ 90,697 $ 77,394
Property, plant and
equipment, net........... 25,929 19,381 17,587
Total assets.............. 132,854 120,910 107,414
Total shareholders'
equity................... 70,290 62,780 51,168
</TABLE>
- - --------
(a) 1997 Net Income includes $270,000 ($.03 per share) of gains on sales of
certain real estate.
(b) 1996 Net Income includes a $3.2 million gain ($.41 per share) on the sale
of the Company's carpet manufacturing and yarn processing operations.
All per share data have been adjusted for stock splits.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interests of such persons in transactions with the Company. Such reports,
proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web
site on the internet at http://www.sec.gov that contains reports and other
information regarding registrants that file electronically with the
Commission. Such material may also be inspected at the offices of AMEX, 8
Trinity Place, New York, New York 10006.
Certain Company Projections. To the knowledge of Parent and the Offeror, the
Company does not as a matter of course make public forecasts as to its future
financial performance. However, in connection with the preliminary discussions
concerning the feasibility of the Offer and the Merger, the Company prepared
and furnished Parent with certain projected financial information. The Company
was the sole preparer of the projected financial information set forth herein
(the "Projections"), which were prepared as of October 9, 1997. The Company
has indicated to the Parent that the Projections reflect the Company's
estimated results of operations for the Company under the hypothetical
assumptions described after the Projections. Neither the Company, the Parent
nor the Offeror intends to update or otherwise revise the Projections to
reflect events or circumstances existing or arising after the date hereof to
reflect the occurrence of unanticipated events, even if any or all of the
underlying assumptions do not prove to be valid. Further, neither the Company,
the Parent nor the Offeror intends to update or revise the Projections to
reflect changes in general economic industry conditions.
12
<PAGE>
The Projections set forth below are derived or excerpted from information
provided by the Company and are based on numerous assumptions concerning
future events. The Projections have not been adjusted to reflect the effects
of the Offer or the Merger or the incurrence of indebtedness in connection
therewith. The Projections are qualified in their entirety should be read
together with the other financial information contained in this Section 8.
Neither the independent auditors of the Company nor any other firm has
reviewed, examined, or provided any assurances regarding the Projections.
Projection Period Presented. The Company's Projections are for 1997 through
2000.
The following table sets forth the Company's Projections and other data for
1997 through 2000.
SHELTER COMPONENTS CORPORATION
SUMMARY PROJECTIONS OF FUTURE ANNUAL OPERATING RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FORECASTED
YEAR ENDED DECEMBER 31,
-----------------------------------
INCOME STATEMENT DATA 1997 1998 1999 2000
- - --------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales................................... $477,600 $541,300 $576,400 $620,500
Gross Profit(1)............................. 67,700 81,200 86,300 92,100
Operating Income............................ 14,500 19,500 21,500 24,000
Net Income.................................. 8,900 10,800 11,700 12,900
Earnings Per Share(2)....................... $ 1.14 $ 1.38 $ 1.49 $ 1.66
</TABLE>
- - --------
(1) Gross Profit excludes depreciation charges
(2) Earnings Per Share based on 7.8 million shares outstanding
Assumptions. In developing the Projections, the Company indicated to Parent
that the Company made certain assumptions. The major assumptions, which
pertain to its markets, sales, strategy and costs, operating expenses,
interest expense, taxes and capital expenditures, are outlined below. In
addition, the Company did not take into account when formulating the
Projections the effect of unforseeable events such as labor disputes, new
technologies or competitors, material changes in political or economic
conditions, changes in legislation or regulations, or any changes in generally
accepted accounting principles, the result of any of which alone or in the
aggregate may have a material effect on the Company's business, financial
condition, results of operations or prospects.
Taken as a whole, economic growth was generally assumed to be from zero to
2% per annum. The balance of the anticipated growth in sales is derived from
expectations for continued success in market penetration strategies and full
realization of the business potential from introductions of new products, as
described below.
Projected 1997 Results. The Company's projected results for 1997 are based
on unaudited reported results for the nine months ended September 30, 1997 as
reported on Form 10-Q, coupled with the Company's forecast for the fourth
quarter of 1997 based on current business conditions and historical results
for comparable periods.
Projected Results Through 2000. Net sales are expected to increase to $541.3
million in 1998, representing a 13.3% increase over 1997 sales. This growth is
largely projected to be driven by the introduction of new products in early
1998 to the Manufactured Housing and Recreational Vehicle ("RV") industries
coupled with increased penetration with the largest manufacturers of
manufactured homes and RV's. Further sales gains are projected to be derived
from the acquisition of distribution rights to certain products that the
Company expects to acquire in December 1997. Net sales are projected to
increase at a more modest rate of 6.5% in 1999 over projected 1998 net sales
to $576 million. This growth continues to reflect little to no growth in
demand for the
13
<PAGE>
Company's products by the Manufactured Housing and RV industries, but assumes
a continued aggressive marketing strategy with the large national producers of
Manufactured Homes and RV's and the growth in recent acquisitions. In the year
2000, net sales are projected to grow by 7.6% over projected 1999 sales to
$620.5 million, reflecting, again, little to no growth in demand for product
in the Company's core markets. This projected growth of $44 million in the
year 2000 is expected to be derived from accelerated market penetration of
existing markets with new products to be introduced and prototyped in early
1998 and further developed in 1999, coupled with continued penetration of
national accounts with existing product lines.
Operating income was projected to reach $19.5 million in 1998, reflecting a
34% increase over forecasted 1997 operating income of $14.5 million. Projected
gains in profitability are expected to be derived principally from increased
sales volumes, higher margins for new product introductions, improved
manufacturing efficiencies from capital investments made during 1997, and a
reduction of operating costs as a percentage of net sales. The Company
recently realigned its sales and marketing resources to increase its focus on
the largest manufacturers of manufactured homes and RV's to increase
penetration with these customers. Additionally, the Company plans to further
consolidate its distribution operations to eliminate duplicative fixed costs,
particularly in Elkhart, Indiana where several distribution centers are
currently maintained. The Projections reflect operating income improving from
3.0% of projected net sales in 1997 to 3.6% in 1998 and 1999, as the Company
expects to be able to increase net sales at a faster rate than it increases
its operating expenses. In the year 2000, operating income is projected to be
3.8% of net sales.
Interest expense (net of interest income) is projected to be $.6 million,
$1.9 million, $2.4 million, and $2.8 million for the years ended December 31,
1997, 1998, 1999, and 2000, respectively, reflecting expected increases in
working capital and capital investments required to support the aggressive
sales and operations growth described above.
State and federal income taxes as a percentage of income before income taxes
are projected to be 39% for all periods presented, which approximates the
Company's historical combined effective income tax rate.
Capital expenditures are projected to be approximately $7.5 million, $4.3
million, $3.5 million, and $3.3 million for the years ended December 31, 1997,
1998, 1999, and 2000, respectively, as the Company expects to invest in
additional manufacturing equipment, tooling, and management information
systems and programs necessary to achieve the revenue growth and operating
margin improvements forecasted for the periods.
14
<PAGE>
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH
INFORMATION WAS PROVIDED TO PARENT. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE PROJECTIONS. THE PROJECTIONS REFLECT NUMEROUS
ASSUMPTIONS, ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY
PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND
OTHER MATTERS INCLUDING ASSUMED INTEREST EXPENSE AND EFFECTIVE TAX RATES
CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT
TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH
WERE SUBJECT TO APPROVAL BY PARENT OR THE OFFEROR. ACCORDINGLY, THERE CAN BE
NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE
ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY DIFFERENT FROM THOSE CONTAINED
IN THE PROJECTIONS. NEITHER PARENT, THE OFFEROR, THE COMPANY NOR ANY OF THEIR
FINANCIAL ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON
REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM
INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES
EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE
EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE
PROJECTIONS ARE SHOWN TO BE IN ERROR.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE OFFEROR. The Offeror is a
newly incorporated Indiana corporation. To date, the Offeror has not conducted
any business other than that incident to its formation, the execution and
delivery of the Merger Agreement and the commencement of the Offer.
Accordingly, no meaningful financial information with respect to the Offeror
is available. The Offeror is a wholly-owned subsidiary of Parent. The
principal executive office of the Offeror is located at 1300 S. University
Dr., Suite 200, Fort Worth, Texas 76107.
Parent, a Texas corporation, has its principal executive office at 1300 S.
University Dr., Suite 200, Fort Worth, Texas 76107. Parent is a national
wholesale distributor of building products to the manufactured housing and
recreational vehicle industries. Parent primarily distributes a full line of
plumbing fixtures and supplies as well as other building products, including
insulation, roof shingles, patio doors, aluminum and wood windows, vinyl
siding, fireplaces and electrical products.
Set forth below are certain summary consolidated financial data with respect
to Parent excerpted or derived from financial information contained in
Parent's Annual Report on Form 10-K for the year ended December 31, 1996 and
Parent's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997. More comprehensive financial information is included in such reports and
other documents filed by Parent with the Commission, and the following summary
is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein.
15
<PAGE>
KEVCO, INC.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net Sales....................... $271,957 205,048 $267,344 $182,519 $99,279
Operating Income................ 12,494 12,444 16,353 8,363 4,779
Net Income...................... 6,084 10,788 12,988 6,981 5,247
Proforma Net Income(1).......... 6,707 8,863 4,286 3,232
Proforma Earnings Per Share(2).. 1.32 1.60 0.87 0.65
Earnings Per Share.............. 0.88
Balance Sheet Data (at period
end):
Working Capital................. $ 35,403 $ 17,014 $ 23,959 $ 18,926 $ 4,496
Total Assets.................... 114,743 61,057 55,004 54,851 17,485
Total Debt...................... 45,849 25,428 9,831 31,263 6,385
Shareholders' Equity............ 40,642 14,313 33,651 8,738 5,512
</TABLE>
- - --------
(1) Prior to its initial public offering on November 1, 1996, Parent had
elected to be treated as an S corporation under the provisions of
Subchapter S of the Code. As an S corporation, Parent was not subject to
federal and certain state income taxes. The pro forma data give effect to
the income taxes that would have been recorded had Parent been taxed as a
C Corporation.
(2) Reflects the assumed issuance of shares of common stock at the initial
public offering at $12.00 per share, less underwriting discount, to
generate sufficient funds to pay an S corporation distribution in an
amount equal to undistributed earnings previously taxed at the shareholder
level.
Parent is subject to the informational requirements of the Exchange Act and
in accordance therewith files periodic reports and other information with the
Commission relating to its business, financial condition and other matters.
Such reports and other information are available for inspection and copying at
the offices of the Commission in the same manner as set forth with respect to
the Company in Section 8.
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors
and executive officers of Parent and the Offeror are set forth in Annex I to
this Offer to Purchase. Except as described in this Offer to Purchase, none of
the Offeror, Parent, or to the best knowledge of the Offeror or Parent, any of
the persons listed in Annex I hereto, owns or has any right to acquire any
Shares and none of them has effected any transaction in the Shares during the
past 60 days.
Except as set forth in this Offer to Purchase and the Shareholders Agreement
entered into pursuant to the Merger Agreement, none of the Offeror, Parent or,
to the best knowledge of the Offeror or Parent, any of the persons listed in
Annex I hereto, has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or the giving or withholding of proxies. Except
as described in this Offer to Purchase, there have been no contacts,
negotiations or transactions between the Offeror or Parent, or, to the best of
their knowledge, any of the persons listed in Annex I hereto, on the one hand,
and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets. Except as described in this Offer to Purchase, none of the
Offeror, Parent or, to the
16
<PAGE>
best knowledge of Parent or the Offeror, any of the persons listed in Annex I
hereto, has had any transaction with the Company or any of its executive
officers, directors or affiliates that would require disclosure under the
rules and regulations of the Commission applicable to the Offer.
10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Offeror to purchase a majority of the outstanding Shares (assuming that all
options have been terminated in exchange for a cash payment as contemplated by
the Merger Agreement) is estimated, as of the date hereof, not to exceed $70
million. The total amount of funds required by the Offeror to consummate the
Offer and the Merger is expected to be approximately $138.8 million, which
amount excludes related fees and expenses and the amounts necessary to
refinance existing indebtedness of the Company and Parent. Offeror will obtain
all such funds through a capital contribution from Parent. Parent plans to
obtain the necessary funds under the financings described below.
Parent has received a written financing commitment (the "Senior Commitment
Letter") from NationsBank of Texas, N.A. ("Lender") to provide senior credit
facilities in the aggregate principal amount of up to $130 million (the
"Senior Credit Facilities"). The terms of the definitive agreement providing
for the Senior Credit Facilities (the "Loan Agreement") have not yet been
finalized. The following is a summary of the anticipated principal terms of
the Senior Credit Facilities based upon the Senior Commitment Letter. This
summary is subject to finalizing the Loan Agreement and is qualified in its
entirety by reference to the Senior Commitment Letter, which is filed as an
exhibit to the Schedule 14D-1 of which this Offer to Purchase is an exhibit.
The Senior Credit Facilities will consist of (a) a $35 million revolving
loan facility which will include a $5 million sub-limit for the issuance of
standby and commercial letters of credit, and under which loans may be
borrowed, repaid and reborrowed by Parent (and certain of its subsidiaries)
from time to time for the purpose of providing funds to consummate the Offer
and the Merger, to refinance certain indebtedness, to pay certain fees and
expenses incurred in connection with the Offer and the Merger and to provide
working capital and for other general corporate purposes, and (b) up to a $95
million term loan facility comprised of a $40 million tranche term loan and up
to a $55 million tranche term loan, which will be available for drawing in
connection with the Offer and the Merger. The Senior Credit Facilities will be
secured by substantially all of the assets of Parent and its subsidiaries as
well as the capital stock of domestic subsidiaries. The Senior Credit
Facilities will be guaranteed by all domestic subsidiaries of the Parent,
including the Company and its subsidiaries after the Merger.
The revolving facility will mature six years from December 31, 1997. The
revolving facility will have no scheduled amortization. Assuming a $95 million
term loan facility, the term loan facility will require principal repayments
of $0.55 million in 1998, $5.55 million in 1999, $8.05 million in 2000, $8.05
million in 2001, $10.55 million in 2002, $10.55 million in 2003, and $51.7
million in 2004.
Borrowings under the Senior Credit Facilities will bear interest at a
floating rate based upon, at the borrower's option, (i) the higher of Lender's
prime rate and the federal funds rate plus 0.50% per annum, or (ii) the London
Interbank Offered Rate ("LIBOR") adjusted for reserves, in each case plus a
margin based on operating statistics of Parent. Parent will also pay
administration fees, reimburse certain expenses and provide certain
indemnities, all of which Parent believes to be customary for commitments of
this type.
The Loan Agreement will contain conditions precedent, representations and
warranties, covenants (including financial covenants), events of default and
other provisions customary for such financings.
Lender's commitment to provide the Senior Credit Facilities is conditioned
on, among other things, the following: the negotiation, execution and delivery
of the Loan Agreement; receipt of all necessary or desirable governmental,
shareholder and third party consents; the absence of a material adverse change
in the business, assets, operations, condition (financial or otherwise), or
prospects of Parent and its subsidiaries on a consolidated basis and the
Company and its subsidiaries on a consolidated basis; the execution of
definitive agreements relating to the Merger and the Offer and the Parent's
purchase of a majority of the Shares pursuant to the Offer; and after
consummation of the transactions at closing, (i) Parent shall have issued at
least $100 million of subordinated debt, (ii) total debt of Parent and its
subsidiaries plus the unfunded purchase price of all of the common stock of
the Company not tendered pursuant to the Offer, shall not exceed $215 million
in the aggregate, and (iii) Parent shall have unused availability under the
Senior Credit Facilities of not less than $15 million plus the unfunded
purchase price of the Company's Shares not tendered pursuant to the Offer.
17
<PAGE>
In addition to the funds available under the Senior Credit Facilities,
Parent will seek to issue senior subordinated notes due 2007 in the aggregate
principal amount of at least $100 million (the "Senior Subordinated Notes") in
a private placement exempt from registration under the Securities Act of 1933.
The Senior Credit Facilities will then be reduced by the amount of senior
subordinated notes exceeding $100 million. The Senior Subordinated Notes will
be general, unsecured obligations of the Parent, subordinated in right of
payment to senior debt and will be guaranteed by certain subsidiaries of
Parent.
Although Parent believes that it will be successful in issuing the Senior
Subordinated Notes on terms and conditions satisfactory to Parent, there can
be no assurance that Parent will be able to issue such notes on satisfactory
terms and conditions. If the Parent fails to complete the placement of the
Senior Subordinated Notes, Parent will not have met one of the conditions
precedent to Lender's commitment to provide the Senior Credit Facilities.
Assuming that Parent is unable to make alternative financing arrangements,
Parent will not have available to it the funds necessary to consummate the
Offer and the Merger. In the event the Offer is not consummated by December
31, 1997 only because Parent was unable to obtain sufficient financing on
terms and conditions satisfactory to Parent to enable consummation of the
Offer and the Merger, Parent is obligated to pay the Company a fee as more
fully described in Section 13, below.
It is anticipated that the indebtedness incurred through borrowings under
the Senior Credit Facilities and the Senior Subordinated Notes will be repaid
from funds generated internally by Parent and its subsidiaries, including the
Company and its subsidiaries, and from other sources that may include the
proceeds of the private or public sale of debt or equity securities. No final
decisions have been made concerning the method Parent will employ to repay
such indebtedness. Such decisions when made will be based on Parent's review
from time to time of the advisability of particular actions, as well as on
prevailing interest rates and financial and other economic conditions.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE COMPANY. In June 1996, Jerry Kimmel, the Chairman of the Board of
Kevco, approached Larry Renbarger, Chief Executive Officer of the Company,
regarding a possible business combination of the Company and Kevco. In June
1996, Mr. Kimmel presented an overview to the Company's Board of Directors
regarding a business combination in which Kevco would be merged into the
Company. The material terms of Kevco's proposal included a stock for stock
transaction. The Company's Board of Directors declined to pursue the business
combination with Kevco at that time because the parties could not agree on an
acceptable exchange ratio.
In March 1997, Mr. Kimmel telephoned Mr. Renbarger and requested an
opportunity to meet again and discuss a possible combination between Kevco and
the Company. On March 20, 1997 and April 18, 1997, Mr. Kimmel met with Mr.
Renbarger and indicated that Kevco desired to pursue a possible combination
between Kevco and the Company. Following additional conversations between the
two individuals, on May 9, 1997, Mr. Kimmel delivered to Mr. Renbarger a
letter containing an offer by Kevco to purchase all of the outstanding shares
of the Company for $12.50 per share. The closing price of the Shares, on May
9, 1997, as reported on the AMEX was $10.375. On May 22, 1997, at the annual
meeting of the Company's Board of Directors, the Board of Directors of the
Company considered Kevco's offer of $12.50 per share and determined that
Kevco's offer of $12.50 per share was inadequate. The closing price of the
Shares, on May 22, 1997, as reported on the AMEX was $12.00 per share.
In July 1997, Mr. Kimmel called Mr. Renbarger and indicated he would like to
renew discussions regarding a possible combination of the two companies. On
July 16, 1997, Mr. Renbarger and Ray Stults, the President of the Company,
flew to Dallas, Texas to meet with Mr. Kimmel and Richard Nevins, a member of
Kevco's Board of Directors. Mr. Kimmel said that Kevco was prepared to make an
offer in excess of $12.50 per share but below $16.00 per share.
On August 19, 1997 the Company's Board of Directors held a regularly
scheduled meeting at which the potential transaction with Kevco was discussed.
The Company's Board of Directors approved continued discussions with Kevco
about a potential transaction and approved entering into a confidentiality
agreement with Kevco.
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On August 25, 1997, Mr. William Harper, Chairman of the Board of Directors
of the Company, Mr. Renbarger and Mr. Stults again met with Mr. Kimmel and Mr.
Nevins in Chicago, Illinois. Specific terms of a possible transaction were
discussed. The Kevco representatives requested and received from management of
the
Company additional information regarding the Company, and the parties
discussed potential synergies of a transaction. At the conclusion of the
meeting, the Kevco representatives indicated that Kevco was willing to proceed
with negotiations at a price of $17.50 per share if the transaction were
subject to a financing condition and the Company immediately entered to a
confidentiality agreement which contained a 60 day non-solicitation provision.
The closing price of the Shares, on August 25, 1997, as reported on the
American Stock Exchange was $12.25 per share.
A confidentiality agreement (the "Confidentiality Agreement") was entered
into by Kevco and the Company on August 25, 1997 and required that for a 60-
day period, the Company would not solicit any prospective purchasers of all or
substantially all of the assets of the Company or of equity interests in the
Company; provided however, the Company was permitted to respond to any
unsolicited third-party proposals or inquiries. Kevco agreed that for a period
of 18 months from the date of the Confidentiality Agreement it would not,
without the prior written consent of the Company, acquire, directly or
indirectly any additional shares or take certain other actions in regard to
the Company.
On August 26, 1997, a special telephonic meeting of the Company's Board of
Directors was held to discuss the Kevco offer of $17.50 per share. The
Company's Board of Directors concluded that it could not fully evaluate the
Kevco proposal until it had an opportunity to review the specific terms and
conditions of the proposed Kevco offer. The Company's Board of Directors
requested that Mr. Renbarger obtain from Kevco a more detailed explanation of
the acquisition proposal or a draft of a Merger Agreement. The Board approved
of continued negotiations with Kevco.
Mr. Kimmel informed Mr. Renbarger in a phone conversation on September 2,
1997 that Kevco was preparing a draft merger agreement and proceeding with due
diligence of the Company. Shortly thereafter, the Company received a draft of
the Merger Agreement and Kevco's due diligence request list and began
preparing the requested items for review. On September 22, 1997, the Company
engaged SBC Warburg Dillon Read Inc. to act as financial advisor to the
Company. On September 24, 1997, Mr. Renbarger, Mr. Stults, Mr. Kimmel, Mr.
Nevins, other members of management of Kevco and the Company, and legal and
financial advisors for both parties met in Fort Worth, Texas to discuss
various due diligence matters and to specifically address certain terms and
conditions of the draft Merger Agreement.
On October 3, 1997, representatives of Kevco and the Company, together with
their respective legal and financial advisors, met in Chicago, Illinois and
conducted extensive negotiations of the terms and conditions of the Merger
Agreement. The principal points at issue were the price per share, the level
or type of financing commitment, the circumstances in which termination fees
would be payable and the amount of such termination fees.
On October 8, 1997, the Company's Board of Directors held a meeting during
which it considered Kevco's proposal, discussed the business and prospects of
the Company and alternatives to the proposed transaction with Kevco. At this
meeting, SBC Warburg Dillon Read Inc. also made an extensive financial
presentation, including background information and various financial analyses.
After discussion of such factors, including economic and other uncertainties
inherent in the Company's business, the Board of Directors of the Company
approved continuing negotiations with Kevco.
Representatives of Kevco and the Company, together with their respective
legal and financial advisors, continued extensive negotiations of the terms
and conditions of the Merger Agreement and the related financing terms,
conditions and documentation.
On October 21, 1997, the Board of Directors of Kevco held a meeting during
which it reviewed and approved the Offer and the Merger Agreement. On October
21, 1997, the Board of Directors of the Company met to consider Kevco's
proposal and the Merger Agreement. During such meeting, the Board of Directors
of
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the Company reviewed in detail the Merger Agreement and received the opinion
of SBC Warburg Dillon Read Inc. to the effect that, as of the date of such
opinion, the per Share consideration to be offered to the Company's
shareholders in the Offer and the Merger is fair, from a financial point of
view, to such shareholders. The full text of SBC Warburg Dillon Read Inc.'s
opinion, dated October 21, 1997, which sets forth the procedures followed,
assumptions and qualifications made, matters considered and limitations of the
review undertaken, is included as Annex A hereto and should be read in its
entirety. The Company's Board considered reports from the Company's legal
advisors, including input as to provisions relating to the ability of the
Company to consider unsolicited third party proposals and to terminate the
Merger Agreement, under certain circumstances consistent with the fiduciary
responsibilities of the Board of Directors. After discussion and analysis, the
Board of Directors of the Company approved the Merger Agreement and
recommended to the Company's Shareholders acceptance of the Offer. The
Company, Kevco and Offeror executed the Merger Agreement as of October 21,
1997, and a public announcement of the transaction was made before the United
States trading markets opened on October 22, 1997. The closing price of the
Shares, on October 21, 1997, as reported on the AMEX was $14.9375 per share.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. The purpose
of the Offer, the Merger, the Merger Agreement and the other transactions
contemplated thereby, is to enable Parent to acquire control of, and the
entire equity interest in, the Company.
Pursuant to the IBCL and the Restated Articles of Incorporation, as amended
(the "Charter") of the Company, adoption by the Board of Directors of the
Company and the affirmative vote of the holders of a majority of the
outstanding Shares of the Company entitled to vote thereon and, if a class or
series is entitled to vote as a class, the affirmative vote of the holders of
a majority of the outstanding shares of the class or series, is required to
approve the Merger Agreement. The Board of Directors of the Company, by the
affirmative vote of all directors present at a meeting duly called and held in
which a quorum of directors was present, has unanimously approved the Offer,
the Merger and the Merger Agreement, and, unless the Merger is consummated
pursuant to the short-form merger provisions under the IBCL as described
below, the only remaining required corporate action of the Company is the
approval of the Merger Agreement by the affirmative vote of the holders of a
majority of the outstanding Shares. If the Minimum Condition is satisfied, the
Offeror will have sufficient voting power to cause the approval of the Merger
without the affirmative vote of any other shareholders.
In the Merger Agreement, the Company has agreed that, if approval of the
Merger by shareholders of the Company is required by law, the Company shall as
soon as practicable following expiration of the Offer in accordance with the
Merger Agreement, so long as permitted by law, duly call, give notice of,
convene and hold a meeting of its shareholders for the purpose of obtaining
the shareholders' approval. Parent has agreed that all Shares owned by Parent,
the Offeror or any other subsidiary of Parent will be voted in favor of
approval of the Merger Agreement. The shareholders meeting shall be held as
soon as practicable following the purchase of Shares pursuant to the Offer.
Short Form Merger. Under the IBCL, if the Offeror acquires at least 90% of
the outstanding Shares, the Offeror will be able to approve the Merger without
a vote of the Company's shareholders. In such event, the Offeror anticipates
that it will take all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after such acquisition
without a meeting of the Company's shareholders. Under the IBCL, the Offeror
is required to mail a copy or a summary of the Merger Agreement to each
shareholder of the Company and cannot consummate the Merger until at least 30
days after such mailing. If the conditions to the Offeror's obligation to
purchase Shares in the Offer are satisfied prior to the tender of 90% of the
outstanding Shares being tendered in the Offer, the Offeror may, subject to
certain limitations set forth in the Merger Agreement, delay its purchase of
the Shares tendered to it in the Offer. See Section 1. If the Offeror does not
acquire at least 90% of the outstanding Shares pursuant to the Offer or
otherwise, a significantly longer period of time may be required to effect the
Merger, because a vote of the Company's shareholders would be required under
the IBCL. Pursuant to the Merger Agreement, the Company has agreed to take all
action necessary under the IBCL and its Charter and Bylaws to convene a
meeting of its shareholders promptly following consummation of the Offer to
consider and vote on the Merger, if a shareholders' vote is required.
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Appraisal Rights. Currently, no appraisal or dissenter's rights are
available in connection with the Offer. If the Shares are listed on the AMEX
as of the record date fixed to determine the shareholders of the Company
entitled to vote on the Merger, no appraisal or dissenter's rights will be
available in connection with the Merger. However, if the Shares are not listed
on the AMEX as of the record date for the Merger, shareholders of the Company
will have certain rights under the IBCL to dissent and demand appraisal of and
to receive payment in cash for the fair value of their Shares. Such rights to
dissent, if the statutory procedures are complied with, could lead to a
judicial determination of the fair value of the Shares (excluding any
appreciation or depreciation in value arising from the expectation of the
Merger unless exclusion would be inequitable) required to be paid in cash to
such dissenting holders of their Shares. In addition, if a judicial appraisal
proceeding is commenced in accordance with IBCL, such dissenting shareholders
may be entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, an Indiana court
would be required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition
to, the market value of the Shares, including, among other things, asset
values and earning capacity. Therefore, the value so determined in any
appraisal could be different from the price being paid in the Offer.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act,
which is applicable to certain "going private" transactions and which may,
under certain circumstances, be applicable to the Merger or another business
combination in which the Offeror seeks to acquire the remaining Shares not
held by it following the purchase of Shares pursuant to the Offer. The Offeror
believes, however, that Rule 13e-3 will not be applicable to the Merger if the
Merger is consummated within one year after the termination of the Offer at
the Offer Price. If applicable, Rule 13e-3 requires, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the proposed transaction and the consideration
offered to minority shareholders in such transaction be filed with the
Commission and disclosed to shareholders prior to the consummation of the
transaction.
Plans for the Company. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger. Parent intends to seek additional
information about the Company prior to the Merger. Thereafter, Parent intends
to review such information as part of a comprehensive review of the Company's
business, operations, capitalization and management with a view to optimizing
the Company's potential contribution to Parent's business. The Parent expects
to integrate the operations of Kevco and the Company following the
consummation of the Offer and the Merger.
Except as indicated in this Offer to Purchase, Parent does not have any
current plans or proposals that relate to or would result in any of the
following: an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company or any of its
subsidiaries; a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries; any change in the present Board of Directors or
management of the Company; any material change in the Company's present
capitalization; or any other material change in the Company's corporate
structure or business. The Parent does not expect to pay dividends in the
foreseeable future. Notwithstanding the foregoing, following the acquisition
of Shares pursuant to the Offer, the Offeror may designate up to that number
of directors of the Board of Directors of the Company as will make the
percentage of the Company's directors designated by the Offeror equal to the
aggregate voting power of the Shares held by Parent, except that, if Parent so
requests, the Company's Board of Directors shall have two directors who are
directors on the date of the Merger Agreement and who are not officers or
affiliates of the Company or Parent or any of their respective subsidiaries.
In addition, assuming the designation of directors as aforesaid and so long as
there are holders of Shares other than Parent or any of its subsidiaries,
Parent expects that the Board of Directors would not declare dividends on the
Shares. All of the directors of the Company have indicated to the Parent that
if the Offer is consummated each director intends to immediately resign as a
director of the Company.
13. THE MERGER AGREEMENT. The following summary of certain provisions of the
Merger Agreement, a copy of which is filed as an exhibit to the Schedule 14D-
1, is qualified in its entirety by reference to the text of the Merger
Agreement. Any terms not defined herein have the meaning set forth in the
Merger Agreement.
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The Merger Agreement
The Offer. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Pursuant to the terms and conditions of the Merger
Agreement, each of the Company, Parent and the Offeror have agreed, subject to
certain exceptions, to use its commercially reasonable efforts to cause the
purchase of Shares pursuant to the Offer and the consummation of the Merger to
occur as soon as reasonably possible. Without limiting the foregoing, each of
the Company, Parent and the Offeror have agreed to use its commercially
reasonable efforts to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements that may be imposed on itself with
respect to the Offer and the Merger and shall promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon any of them in connection with the Offer and the Merger. In
addition, neither Parent nor any of its subsidiaries is obligated in
connection with obtaining any required HSR Act or other governmental approvals
to divest or hold separate or to otherwise take or commit to take any action
that limits its ability to retain the Company or any of its subsidiaries or
any of the businesses, product lines or assets of Parent or any of its
subsidiaries or that would have a material adverse effect on Parent. Pursuant
to the Merger Agreement, the Offeror expressly reserves the right to modify
the terms of the Offer, except that, without the prior written consent of the
Company, the Offeror shall not (i) reduce the number of Shares to be purchased
in the Offer, (ii) reduce the Offer Price, (iii) impose any conditions to the
Offer in addition to the conditions set forth in Section 15 of this Offer to
Purchase (the "Offer Conditions") or modify such conditions (other than to
waive any condition to the extent permitted by the Merger Agreement), (iv)
except as provided in the next sentence, extend the Offer, (v) change the form
of consideration payable in the Offer or (vi) make any other change or
modification in any of the terms of the Offer in any manner that is adverse to
the holders of Shares. Notwithstanding the foregoing, the Offeror may, without
the consent of the Company, (a) extend the Offer, if at the scheduled or
extended expiration date of the Offer, any of the conditions to the Offer
shall not be satisfied or waived, until such time as such conditions are
satisfied or waived, (b) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Commission or the staff thereof
applicable to the Offer, or (c) extend the Offer for a period of up to five
business days if, on any scheduled expiration date on which the conditions to
the Offer shall have been satisfied or waived, the number of Shares that have
been validly tendered and not withdrawn represent more than 50% of the
aggregate outstanding Shares (on a fully diluted basis), but less than 90% of
the then issued and outstanding Shares. The Merger Agreement further provides
that in the event that the Offeror would otherwise be entitled to terminate
the Offer at any scheduled expiration date thereof due to the failure of one
or more of the conditions to the Offer, unless the Merger Agreement shall have
been terminated pursuant to its terms, the Offeror shall, and Parent shall
cause the Offeror to, extend the Offer until such date as the conditions to
the Offer have been satisfied or such later date as required by applicable law
but not beyond December 31, 1997.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the IBCL,
the Offeror shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of the Offeror shall
cease and the Company shall continue as the Surviving Corporation and shall
succeed to and assume all the rights and obligations of the Offeror and the
Company in accordance with the IBCL. At the Effective Time, the Restated
Articles of Incorporation, as amended as of the Effective Time, and Bylaws of
the Company as amended as of the Effective Time, shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation. The directors of the
Offeror shall become the directors of the Surviving Corporation and the
officers of the Offeror shall become the officers of the Surviving
Corporation.
Conversion of Shares. As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any securities of the Offeror
or the Company, each Share (other than Shares owned by the Company, any
subsidiary of the Company, Parent, or the Offeror) shall be converted into the
right to receive, in cash, without interest, the Offer Price. Each issued and
outstanding share of stock of the Offeror owned by Parent shall, at the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of stock of the Offeror, be converted into and become
one validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
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Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Offeror. The
representations and warranties of the Company relate, among other things, to
its organization and qualification; subsidiaries; capital structure; authority
to enter into the Merger Agreement and to consummate the transactions
contemplated thereby; required consents and approvals; filings made by the
Company with the Commission under the Securities Act or the Exchange Act
(including financial statements included in the documents filed by the Company
under these acts); absence of any material adverse change; compliance with
laws; tax matters; liabilities; benefit plans and employment practices;
litigation; financial statements; real property; intellectual property;
environmental matters; and brokerage fees. Additionally, the Company has made
representations and warranties relating to product liability and product
warranties.
The Offeror and Parent have also made customary representations and
warranties to the Company. Representations and warranties of the Offeror and
Parent relate, among other things, to the following: their organization and
authority to conduct business, to enter into the Merger Agreement and to
consummate the transactions contemplated thereby; noncontravention; brokerage
fees; and required consents and approvals.
Covenants Relating to the Conduct of Business. During the period from the
date of the Merger Agreement until such time as Parent's designees shall
constitute a majority of the Board of Directors of the Company, the Company
has agreed that it will, and will cause its subsidiaries to, except as
contemplated by the Merger Agreement, conduct its business only in the
ordinary course consistent with past practice in all material respects, use
commercially reasonable efforts to preserve, maintain, and protect its assets
and business, use commercially reasonable efforts to preserve intact its
business organization, to keep available the services of the employees of its
business, and to maintain existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers, and others having business
relationships with its business, and comply with all applicable laws,
including all applicable federal and state securities laws, rules and
regulations and including, without limitation, the timely filing of all
periodic reports with the Commission required to be filed pursuant to the
Exchange Act. The Company has agreed that, except as otherwise expressly
provided by the Merger Agreement, during such period, the Company will not,
and will not permit any of its subsidiaries to, without the prior written
consent of Parent (which consent shall not be unreasonably withheld or
delayed):
(i) except in the ordinary course of business consistent with past
practice with respect to the purchase of inventory (including raw
materials), create, incur, guarantee, or assume any indebtedness for
borrowed money in respect of its business in excess of $500,000;
(ii) mortgage or pledge any material portion or portions of its
properties or assets or create any lien, (other than certain permitted
liens) , thereupon;
(iii)(a) enter into, adopt, or (except as may be required by applicable
law) amend in any material respect any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, stock purchase, pension, retirement, deferred compensation,
employment, or other employee benefit plan, trust, fund, or other
arrangement for the benefit or welfare of any director or executive officer
of its business; (b) except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense, increase
in any manner the compensation or fringe benefits of any director or
executive officer; (c) pay to any employee any benefit not required by any
employee benefit plan, trust, fund, or other arrangement as in effect on
the date hereof except for those paid in the ordinary course of business
and consistent with past practice; (d) pay any bonus to any employee except
for bonuses paid in the ordinary course of business and consistent with
past practice; (e) set aside or pay any dividend or distribution with
respect to stock of the Company, or redeem, repurchase, or otherwise
acquire any of its stock or other equity securities; or (f) offer, sell,
issue or commit to issue any shares of stock of the Company or securities
convertible into or having a right to acquire stock of the Company, except
for the issuance of stock upon the exercise of existing options, warrants
and convertible securities;
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(iv) sell, lease, transfer, or otherwise dispose of, directly or
indirectly, any of its assets, other than inventory and unusable equipment
sold in the ordinary course of business consistent with past practice,
assets which in the aggregate are not in excess of $2,000,000, and assets
presently subject to a purchase agreement as described in the Merger
Agreement;
(v) make any capital expenditures relating to its business which is in
excess of $500,000 as to any one item, other than pursuant to certain
existing commitments;
(vi) pay, discharge, or satisfy any material claims, liabilities, or
obligations relating to its business (whether accrued, absolute,
contingent, unliquidated, or otherwise, and whether asserted or
unasserted), other than the payment, discharge, or satisfaction in the
ordinary course of business consistent with past practice, or in accordance
with their terms, of liabilities reflected or reserved against in the
Company's financial statements or incurred since the latest of the
Company's financial statements in the ordinary course of business
consistent with past practice;
(vii) enter into any material contract or material transaction relating
to its business, except in the ordinary course of business consistent with
past practice or as described in the Merger Agreement;
(viii) amend, modify, or change in any material respect any existing
material contract relating to its business, other than in the ordinary
course of business consistent with past practice;
(ix) waive, release, grant, or transfer any rights of value relating to
its business, other than in the ordinary course of business consistent with
past practice;
(x) permit any current insurance or reinsurance policy to be canceled or
terminated or any of the coverages thereunder to lapse if such policy
covers material assets or insures risks, contingencies, or liabilities of
its business, unless simultaneously with such cancellation, termination, or
lapse, replacement policies providing coverage equal to or greater than the
coverage canceled, terminated, or lapsed have been obtained;
(xi) change any of the accounting principles or policies used by it
relating to the preparation of its financial statements, except for any
change required by reason of a concurrent change in GAAP and notice of
which is given in writing by the Company to Parent;
(xii) enter into any contract to acquire all or substantially all of the
assets or properties of any other person or merge or consolidate with or
acquire all or substantially all of the securities of any other person
other than transactions that are (a) in the ordinary course of business
consistent with past practice, (b) which would involve a purchase price not
in excess of $1,000,000 in the aggregate or (c) described in the Merger
Agreement;
(xiii) effect any change in the Restated Articles of Incorporation or
Bylaws of the Company or its subsidiaries except as may be required to
effect the transactions contemplated by the Merger Agreement;
(xiv) except with respect to transactions contemplated by subsections
(iv) and (xii) above, enter into or discontinue a material line of
business, or open or close any material office, distribution or
manufacturing facilities other than pursuant to the expiration of an
existing lease; or
(xv) agree to take any of the actions which would require the Company to
violate the Merger Agreement unless the Company's obligation to take such
action arises only if the Offer is not consummated.
Acquisition Proposals. The Merger Agreement provides that the Company shall,
and shall direct and use its commercially reasonable efforts to cause its
officers, directors, employees, agents and representatives to, cease ongoing
discussions with any person with respect to an Acquisition Proposal (as
hereinafter defined). Furthermore, the Company shall not, nor shall it permit
any of its subsidiaries, officers, directors or employees
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or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of
furnishing information), any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal or (ii) engage in discussions or negotiations regarding any
Acquisition Proposal; provided, however, that if, at any time prior to the
acceptance for payment of Shares pursuant to the Offer, the board of directors
of the Company determines in good faith, after consultation with and advice
from outside counsel, that it would be consistent with its fiduciary
responsibilities to the Company's shareholders under applicable law, the
Company may, in response to an Acquisition Proposal and subject to compliance
with the notification provisions discussed below, (A) furnish information with
respect to the Company to any person pursuant to a confidentiality agreement
in substantially the same form as the Confidentiality Agreement entered into
between the Company and Parent with respect to protecting the confidential
information of the Company, and (B) participate in discussions, investigations
and/or negotiations regarding such Acquisition Proposal. The Merger Agreement
defines "Acquisition Proposal" as any offer or proposal, inquiry or indication
of interest, from any person relating to any direct or indirect acquisition or
purchase of 5% or more of the aggregate assets of the Company and its
subsidiaries, taken as a whole, or 5% or more of the voting power of the
Shares or securities of any subsidiary of the Company then outstanding or any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 5% or more of the voting power of the Shares or securities
of any subsidiary of the Company then outstanding or any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any subsidiary of
the Company, other than the transactions contemplated by the Merger Agreement.
The Merger Agreement provides further that, except as described below,
neither the board of directors of the Company nor any committee thereof shall
(i) withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such board of directors
or such committee of the Offer, the Merger or the Merger Agreement; provided
that, the board of directors of the Company may, (A) in respect to any
takeover or Acquisition Proposal, suspend such recommendation for a period of
up to three days pending its analysis of such Acquisition Proposal or (B) at
any time prior to the consummation of the Offer, modify or withdraw such
recommendation if the board of directors of the Company determines in good
faith, after consultation with and the advice of outside counsel, that it
would be consistent with its fiduciary responsibilities to so modify or
withdraw such recommendation; provided further that, unless the Merger
Agreement shall have been terminated, any such suspension, modification or
withdrawal shall not prevent Parent and the Offeror, in its or their
discretion, from consummating the Offer and shall not affect any of the
actions taken by the Company pursuant to the provisions of the Merger
Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal, or (iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition or other similar
agreement (each, an "Acquisition Agreement") related to any Acquisition
Proposal. Notwithstanding the foregoing, in the event that prior to the
acceptance for payment of Shares pursuant to the Offer the board of directors
of the Company determines in good faith, after consultation with and the
advice of outside counsel, that it would be consistent with its fiduciary
responsibilities to the Company's shareholders under applicable law, the board
of directors may (subject to the other provisions regarding Acquisition
Proposals described herein) (i) withdraw or modify its approval or
recommendation of the Offer, the Merger and the Merger Agreement, (ii) approve
or recommend a Superior Proposal (as defined below), (iii) cause the Company
to enter into any letter of intent, agreement in principle, acquisition or
other similar agreement related to any Superior Proposal, or (iv) terminate
the Merger Agreement, but in each case, only at a time after the second
business day following Parent's receipt of written notice (a "Notice of
Superior Proposal") advising Parent that the Board of Directors of the Company
has received an Acquisition Proposal that may constitute a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal. For purposes of the
Merger Agreement, a "Superior Proposal" means any Acquisition proposal
determined by the board of directors of the Company in good faith, after
consultation with and advice from outside counsel, to be a bona fide proposal
and made by a third party for consideration consisting of cash, property
and/or securities, for more than a majority of the combined voting power of
the Shares then outstanding or all or substantially all of the assets of the
Company or its subsidiaries and otherwise on terms which the board of
directors of the Company determines in its good
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faith judgment, after consultation with and advice from outside counsel and
with a financial advisor of nationally recognized reputation (such as SBC
Warburg Dillon Read Inc.), to be more favorable to the Company's shareholders
than the Offer and the Merger.
In addition to the obligations of the Company described in the preceding two
paragraphs, the Merger Agreement provides that the Company shall promptly
advise Parent orally and in writing of any request for information or of any
Acquisition Proposal, and, subject to the fiduciary duties of the Board of
Directors of the Company, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making any such request or
Acquisition Proposal. The Company is further required under the terms of the
Merger Agreement to endeavor to keep Parent reasonably informed of the overall
status and, subject to the fiduciary duties of the Board of Directors of the
Company, the substance of any such request or Acquisition Proposal.
The Merger Agreement provides that nothing contained therein shall prohibit
the Company from taking and disclosing to its shareholders a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act or
from making any disclosure to the Company's shareholders if, in the good faith
judgment of the board of directors of the Company, in reliance upon advice
from outside counsel, such disclosure is necessary in order to comply with its
fiduciary duties to the Company's shareholders under applicable law or is
otherwise required under applicable law.
Third Party Standstill Agreements. During the period from the date of the
Merger Agreement until such time as Parent's designees shall constitute a
majority of the Board of Directors of the Company, the Company has agreed not
to terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its subsidiaries is a
party (other than any involving Parent) unless the Company's board of
directors shall have determined in good faith, in reliance upon advice from
outside counsel, that failing to release any third party or to amend, modify
or waive such provisions would not be consistent with the Company's board of
directors' fiduciary responsibilities under applicable law.
Options. Pursuant to the Merger Agreement, the Company has agreed to use
commercially reasonable efforts to obtain consents from holders of options
such that each option granted to a Company employee, consultant or director to
acquire Shares ("Option") that is outstanding immediately prior to the
Effective Time, whether or not then vested or exercisable, with respect to
which, the Offer Price is greater than the exercise price per Share shall,
effective as of immediately prior to the consummation of the Offer, be
canceled in exchange for a single lump sum cash payment equal to the product
of (1) the number of Shares subject to such Option and (2) the excess of the
Offer Price over the exercise price per Share of such Option. Furthermore,
each Option that is outstanding immediately prior to the consummation of the
Offer, whether or not then vested or exercisable, with respect to which, the
exercise price per Share is equal to or greater than the Offer Price shall,
effective as of the consummation of the Offer, be canceled and no payments
shall be made with respect thereto. Prior to the consummation of the Offer,
the Company shall use its commercially reasonable efforts to obtain any
consents from holders of Options as are necessary to give effect to the above
provisions.
Board Representation. The Merger Agreement provides that promptly after such
time as the Offeror purchases Shares pursuant to the Offer (but subject to
satisfaction of the Minimum Condition, as defined in Section 15, below), the
Offeror shall be entitled, to the fullest extent permitted by law, to
designate at its option up to that number of directors, rounded to the nearest
whole number, of the Company's board of directors, subject to compliance with
Section 14(f) of the Exchange Act, as will make the percentage of the
Company's directors designated by the Offeror equal to the aggregate voting
power of the Shares held by Parent. However, in the event that the Offeror's
designees are elected to the Board of Directors of the Company, until the
Effective Time, such Board of Directors if requested by Parent shall have two
directors who are directors on the date of the Merger Agreement and who are
not officers or affiliates of the Company, the Parent or any of their
subsidiaries (the "Independent Directors"). If the number of Independent
Directors shall be reduced below two for any reason whatsoever, the remaining
Independent Director shall, to the fullest extent permitted by law, designate
a person to fill such vacancy who shall be deemed to be an Independent
Director for purposes of the
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Merger Agreement or, if no Independent Directors then remain, the other
directors shall designate two persons to fill such vacancies who shall not be
officers or affiliates of the Company, the Parent or any of their
subsidiaries, and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement. Following the election or appointment of the
Offeror's designees pursuant to the Merger Agreement and prior to the
Effective Time, any amendment, or waiver of any term or condition, of the
Merger Agreement or the Company's Restated Articles of Incorporation or
Bylaws, any termination of the Merger Agreement by the Company, any extension
by the Company of the time for the performance of any of the obligations or
other acts of the Offeror or waiver or assertion of any of the Company's
rights under the Merger Agreement, and any other consent or action by the
board of directors of the Company with respect to the Merger Agreement, will
require the concurrence of a majority of the Independent Directors and no
other action by the Company, including any action by any other director of the
Company, shall be required for purposes of the Merger Agreement. In connection
with the foregoing, to the fullest extent permitted by law, the Company will
take all actions requested by Parent that are reasonably necessary to effect
the election or appointment of any such designee.
Indemnification. The Merger Agreement requires that at all times on and
after the consummation of the Offer, the Company fully perform all of its
obligations to the present and past officers and directors of the Company (the
"Indemnified Parties") under the provisions of the Company's Restated Articles
of Incorporation, Bylaws and any indemnification agreements (collectively, the
"Company Indemnification Obligations") for a period of at least six years
after the consummation of the Offer; provided, that if pursuant to any
indemnification agreement, the Company Indemnification Obligations extend for
a period longer than six years, the Company shall perform its obligations
under such agreement for the time period set forth therein. The Parent
irrevocably guarantees the performance of the Company Indemnification
Obligations if the tangible net book value of the Surviving Corporation is
less than $54 million at the time any claim, action, suit, proceeding or
investigation is brought against an Indemnified Party. Notwithstanding the
foregoing, the obligations of the Surviving Corporation and Parent shall not
exceed $54 million in the aggregate, and none of Parent's obligations under
the preceeding sentence shall be binding on Parent until and unless the Offer
is consummated. All of the directors of the Company have indicated to the
Parent that, if the offer is consummated, each director intends to immediately
resign as a director of the Company.
Conditions Precedent. The respective obligations of each party to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time
of certain conditions, including the following: (a) if required by applicable
law, the shareholders of the Company shall have approved the Merger Agreement
(provided that Parent, its subsidiaries and the Offeror vote all of their
Shares entitled to vote thereon in favor of the Merger); (b) the Offeror shall
have previously accepted for payment and paid for Shares pursuant to the
Offer; (c) there shall not be any law or ruling prohibiting the consummation
of the transactions contemplated by the Merger Agreement or making such
transaction illegal; and (d) any waiting period (and any extension thereof)
under the HSR Act applicable to the Merger shall have expired or been
terminated. The obligation of Parent and Offeror to effect the Merger is
additionally contingent upon (i) there being no material adverse change in the
Company, the business of the Company, or the Company's assets, results of
operations or financial condition of the Company's business since September
30, 1997; and (ii) Parent obtaining, prior to the expiration of the Offer,
sufficient financing on terms and conditions satisfactory to Parent to enable
consummation of the Offer and the Merger.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the consummation of the Offer:
(a) by mutual written consent of Parent, the Offeror and the Company; or
(b) by either the Company or Parent, if the Offer shall not have been
consummated on or before December 31, 1997 unless such failure to
consummate the Offer shall (i) be due to a breach of the Merger Agreement
by the party or parties seeking to terminate the Merger Agreement pursuant
to this clause (b), or (ii) through no fault of the parties to the Merger
Agreement, be due to the failure to obtain certain governmental approvals
contemplated by the Merger Agreement on or before April 30, 1998; or
(c) by either Parent or the Company, if there shall be any statute, rule,
or regulation that makes consummation of the transactions contemplated by
the Merger Agreement illegal or otherwise prohibited or
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a governmental entity shall have issued an order, decree, or ruling or
taken any other action permanently restraining, enjoining, or otherwise
prohibiting the consummation of such transactions, and such order, decree,
ruling, or other action shall have become final and nonappealable; or
(d) by either Parent or the Company: (i) if as a result of the failure of
any of the Offer Conditions (other than the Minimum Condition), the Offer
shall have terminated or expired in accordance with its terms without the
Offeror having accepted for payment any Shares pursuant to the Offer
consistent with the Offeror's obligations with respect to extension of the
Offer described above, or (ii) as a result of the failure of the Minimum
Condition, the Offer shall have terminated or expired in accordance with
its terms without the Offeror having accepted for payment any Shares
pursuant to the Offer consistent with the Offeror's obligations with
respect to extension of the Offer described above, or (iii) the Offeror
shall have, consistent with its obligations under the Merger Agreement,
failed to pay for the Shares prior to December 31, 1997 (provided that the
right to terminate the Merger Agreement pursuant to this clause (d) shall
not be available to any party whose failure to perform any of its
obligations under the Merger Agreement results in the failure of any such
condition to the Offer) provided that neither Parent nor Offeror may
terminate for failure to obtain certain governmental approvals on or before
April 30, 1998; or
(e) by Parent or the Offeror prior to the purchase of Shares pursuant to
the Offer in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in the Merger Agreement
which (i) would give rise to the failure of condition (d) or (e) described
below in Section 15 and (ii) cannot be or has not been cured within ten
business days after the giving of written notice to the Company; or
(f) by Parent or the Offeror if either Parent or the Offeror is entitled
to terminate the Offer as a result of the occurrence of any event set forth
in paragraph (c) described below in Section 15; provided that the temporary
suspension of the recommendation of the Company's board of directors
described above under "Acquisition Proposals" shall not give rise to a
right of termination pursuant to this clause (f); or
(g) by the Company as described above under "Acquisition Proposals";
provided, that it has complied with all provisions therein and it complies
with requirements of the Merger Agreement relating to payment of the
Company Termination Fee (as defined below under "Fees and Expenses"); or
(h) by the Company, if (i) any of the representations or warranties of
Parent or the Offeror set forth in the Merger Agreement that are qualified
as to materiality shall not be true and correct in any material respect or
any such representations or warranties that are not so qualified shall not
be true and correct in any material respect, or (ii) Parent or the Offeror
shall have failed to perform in any material respect any material
obligation or to comply in any material respect with any material agreement
or covenant of Parent or the Offeror to be performed or complied with by it
under the Merger Agreement and, in the case of (i), such untruth or
incorrectness cannot be or has not been cured within ten business days
after the giving of written notice to Parent or the Offeror, and, in the
case of (ii), such failure cannot be or has not been cured within ten
business days after the giving of written notice to Parent or the Offeror;
or
(i) by the Company, prior to commencement of the Offer if the Offeror for
any reason fails to commence the Offer in accordance with the Merger
Agreement within five business days following the date of the Merger
Agreement.
In the event of a termination of the Merger Agreement by either the Company
or Parent, the Merger Agreement shall forthwith become null and void (except
for certain specified provisions, including those pertaining to the payment of
certain expenses and fees). If the Merger Agreement is terminated by either
Parent or Offeror or by the Company, Offeror shall, and Parent shall cause
Offeror to, terminate promptly the Offer. If the Merger Agreement is
terminated under certain provisions (Section 7.3(b) or 7.8(b) of the Merger
Agreement), then payment of the Company Termination Fee and the Parent Expense
Reimbursement (as defined below under "Fees and Expenses") shall be the
exclusive remedy of the parties.
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Fees and Expenses. Except as provided in the Merger Agreement, whether or
not the Offer or Merger is consummated, Parent, Offeror and Company shall each
be responsible for their own fees and expenses incurred in connection with the
transactions contemplated by the Merger Agreement.
The Company shall pay to Parent $6,000,000 (the "Company Termination Fee")
as follows: (i) upon demand, if Parent or Offeror terminates the Merger
Agreement as described in section (f) set forth under "Termination," above;
(ii) upon demand, if Company terminates the Merger Agreement under section (g)
set forth under "Termination," above; or (iii) if (A) Parent or the Company
terminates the Merger Agreement under section (d)(ii) set forth under
"Termination," above, or (B) Parent terminates the Merger Agreement under
section (e) set forth in "Termination," above, as a result of a breach of a
representation, warranty or covenant, and in each case, before such
termination, an Acquisition Proposal shall have been made and publicly
disclosed and concurrently therewith or within twelve months thereafter, the
Company enters into a merger agreement, acquisition agreement or similar
agreement (including without limitation a letter of intent) with respect to a
Superior Proposal and a Superior Proposal is consummated, then the Company
shall pay the Company Termination Fee upon the earlier of the execution of
such agreement or upon consummation of such Superior Proposal; provided,
however, if a dispute exists between the Company and Parent concerning whether
a transaction constitutes a Superior Proposal, The Principal Financial Group
or its successor shall determine whether the proposal is more favorable to the
Company's shareholders than the Offer and the Merger.
If through no fault of Parent or Offeror , Parent cannot consummate the
Offer because any of the conditions set forth in paragraphs (d), (e) or (g)
(insofar as it relates to the Company) of the Offer Conditions exists, then
the Company shall pay to Parent on demand an amount equal to the actual out-
of-pocket expenses incurred by Parent and Offeror in an amount not to exceed
$1,000,000; provided, if Parent incurs a commitment or similar fee with
respect to financing the Offer, Company shall pay Parent upon demand an amount
equal to such commitment or similar fee not to exceed an additional $2,000,000
(the "Parent Expense Reimbursement"). Upon receipt of the Parent Expense
Reimbursement, Parent and Offeror shall terminate the Merger Agreement.
Notwithstanding the foregoing, Parent and Offeror shall not be required to
terminate the Merger Agreement or accept the Parent Expense Reimbursement if
any of the forgoing conditions exist as a result of the following with respect
to the Company: (i) an intentional or willful breach of a representation or
warranty, (ii) intentional or willful failure to perform a covenant, or (iii)
fraud.
In the event the Offer is not consummated by December 31, 1997 only because
Parent was unable to obtain sufficient financing on terms and conditions
satisfactory to Parent to enable consummation of the Offer and the Merger,
then the Parent shall pay to the Company, upon demand, $6,000,000 (the "Parent
Termination Fee"); provided that if certain of the Offer Conditions exists,
Parent shall not be required to pay the Parent Termination Fee.
The Shareholders Agreement
As required by the Merger Agreement, the Parent, Offeror and certain
officers and directors of the Company entered into a Shareholders Agreement
dated as of October 21, 1997 with respect to Shares held by such officers and
directors as of the date of the Shareholders Agreement, together with any
shares thereafter acquired by such officers and directors before the
termination of the Shareholders Agreement. As of the date of the Shareholders
Agreement, such officers and directors held 1,091,113 Shares. Under the
Shareholders Agreement, such officers and directors agreed to validly tender
(and not to withdraw except in the case of termination of the Merger Agreement
as a result of a Superior Proposal) their Shares in accordance with the terms
of the Offer. Furthermore, such officers and directors agreed, during the
effective period of the Shareholders Agreement, to vote or cause to be voted
their Shares (i) in favor of the Merger, the Merger Agreement and all actions
contemplated by the Merger Agreement and the Shareholders Agreement, (ii)
against any 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 the Shareholders Agreement, and (iii) except as
otherwise agreed to in writing in advance by Parent, against the following
actions other than the Merger and the transactions contemplated by the Merger
Agreement: (A) any extraordinary corporate transaction, such as a merger,
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consolidation, or other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its subsidiaries; (C)(1) any
change in a majority of the persons who constitute the Board of Directors of
the Company; (2) any change in the present capitalization of the Company or
any amendment of the Company's Restated Articles of Incorporation or Bylaws;
(3) any other material change in the Company's corporate structure or
business; or (4) any other action involving the Company or its subsidiaries
which is intended or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially adversely affect the Merger and the
transactions contemplated by the Merger Agreement and the Shareholders
Agreement. Finally, under the Shareholders Agreement, such officers and
directors each granted to and appointed Parent and certain of its officers
proxy and attorney-in-fact (with full power of substitution) to vote such
Shares, or grant a consent or approval in respect of the Shares in favor of
the transactions contemplated by the Merger Agreement and against any
Acquisition Proposal. The covenants and agreements with respect to Shares held
by such officers and directors terminate upon the earliest of (w) the
acquisition of the Shares by Parent or Offeror pursuant to the Offer, (x) the
Effective Time of the Merger, (y) the termination of the Merger Agreement or
the withdrawal or modification by the Company's board of directors of its
recommendation of the Offer or the Merger as permitted by section 7.3(b) of
the Merger Agreement, and (z) the six month anniversary of the date of the
Shareholders Agreement. Such officers and directors acknowledged that Parent
was entering into, and causing Offeror to enter into, the Merger Agreement in
reliance upon their execution and delivery of the Shareholders Agreement.
The Company and Parent are also parties to the Confidentiality Agreement
containing customary terms, including a standstill provision. The
Confidentiality Agreement is filed as an exhibit to the Schedule 14D-1 and is
incorporated herein by reference.
14. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that neither
the Company nor any of its subsidiaries will, among other things, from the
date of the Merger Agreement until the time Parent's designees shall
constitute a majority of the Board of Directors of the Company, (i) except
pursuant to the terms of certain specified agreements, set aside or pay any
dividend or distribution with respect of, stock of the Company, or redeem,
repurchase, or otherwise acquire any of its stock or other equity securities;
or (ii) offer, sell, issue or commit to issue any shares of its stock or
securities convertible into or having a right to acquire its stock, except for
the issuance of stock upon the exercise of existing options, warrants or
convertible securities.
15. CERTAIN CONDITIONS OF THE OFFEROR. Notwithstanding any other terms of
the Offer, but subject, in all cases, to Parent's and the Offeror's
obligations under the Merger Agreement, the Offeror shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 14e-l(c) under the Exchange Act (relating to the
Offeror's obligation to promptly pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless (i) the Minimum Condition, (ii) the HSR Act
Condition and (iii) the Financing Condition shall have been satisfied.
Furthermore, notwithstanding any other term of the Offer, but subject, in all
cases, to Parent's and the Offeror's obligations set forth in the Merger
Agreement, the Offeror shall not be required to accept for payment or, to pay
for any Shares not theretofore accepted for payment or paid for, and may
terminate the Offer at any time if, at any time on or after the date of the
Merger Agreement and before the acceptance of such Shares for payment or the
payment therefor, any of the following conditions exists (other than as a
result of any action or inaction of Parent or any of its subsidiaries that
constitutes a breach of the Merger Agreement):
(a) there shall be instituted or pending by any governmental agency or
similar authority in any United States federal or state court or
administrative agency any suit, action, proceeding, application or
counterclaim which would reasonably be expected to (i) restrain or prohibit
the acquisition by Parent or Offeror of the Shares pursuant to the Offer,
the consummation of the Offer or the Merger or require the Company, Parent
or Offeror to pay any damages that are material in relation to the Company
and its subsidiaries or Parent and its subsidiaries, taken as a whole, (ii)
prohibit or limit in any material respect the ownership or operation of any
business or assets of the Company or its subsidiaries, or Parent or its
subsidiaries, as they are presently being operated or to compel the Company
or Parent to dispose of or hold
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separate any material business or assets of the Company and its
subsidiaries or Parent and its subsidiaries, as a result of the Offer or
the Merger, (iii) impose material limitations on the ability of Parent or
Offeror to acquire or hold, to exercise full rights of ownership of, any
Shares to be accepted for payment pursuant to the Offer, including, without
limitation, the right to vote such Shares on all matters properly presented
to the shareholders of the Company, (iv) prohibit Parent or any of its
subsidiaries from effectively controlling any material business or
operations of the Company or its subsidiaries, or (v) which otherwise is
reasonably likely to have a Material Adverse Effect (as defined in the
Merger Agreement) on the business, properties, assets, financial condition
or results of operations of the Company and its subsidiaries taken as a
whole;
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any United States federal or state
governmental agency, court or similar authority, any statute, rule,
regulation, judgment, order of injunction, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that would reasonably be expected to result in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above (other than
any state law, statute, rule or regulation whose applicability can be
avoided by not extending the Offer to residents of such state provided that
in the aggregate not more than 5% of the outstanding Shares as of the
consummation of the Offer shall be owned of record by residents of all such
states);
(c) the board of directors of the Company or any committee thereof shall
have and be continuing to have suspended (in excess of three days),
withdrawn or modified in a manner adverse to Parent or Offeror its approval
or recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any Acquisition Proposal, or shall have resolved to
take any of the foregoing actions;
(d) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true
and correct in any respect or any such representations and warranties that
are not so qualified shall not be true and correct in any material respect,
in each case, at the date of the Merger Agreement and as if such
representations and warranties were made as of such time of determination
(except that representations and warranties that speak as of a specified
date shall only be true and correct to such extent as of such date);
(e) the Company shall have and be continuing to have failed to perform in
any material respect any material obligation or to comply in any material
respect with any material agreement or material covenant of the Company to
be performed or complied with by it under the Merger Agreement prior to the
consummation of the Offer;
(f) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a
national securities exchange in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified
increase or decrease in a market index or similar "circuit breaker"
process), (ii) a declaration of a banking moratorium or any general
suspension of payments in respect of banks in the United States, (iii) any
material limitation (whether or not mandatory) by any governmental entity
on, or other similar event that materially adversely affects the extension
of credit in the United States by banks or other lending institutions, (iv)
a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
which materially adversely affects the extension of credit in the United
States by banks or other lending institutions, or (v) from the date of the
Merger Agreement through the date of termination or expiration, a decline
of at least 25% in either the Dow Jones Industrial Average or the Standard
& Poor's 500 Index; or
(g) there shall have occurred and be continuing any material adverse
change with respect to the Company or Parent (other than changes in general
economic conditions or in economic conditions generally affecting the
industry in which the Company and Parent operate).
The foregoing conditions are for the benefit of Parent and the Offeror and
may, subject to the terms and conditions of the Merger Agreement, be waived by
Parent and the Offeror in whole or in part at any time and
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from time to time in their sole discretion; provided, however, that the
Minimum Condition must be satisfied prior to acceptance of any Shares for
purchase pursuant to the Offer. The failure by Parent or the Offeror at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances and each such right shall be deemed an ongoing right that
may be asserted at any time and from time to time. Notwithstanding the fact
that Offeror reserves the right to assert the occurrence of a condition
following acceptance for payment but prior to payment in order to delay or
cancel its obligation to pay for properly tendered Shares, the Offeror shall
either promptly pay for such Shares or promptly return such Shares.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. Except as set forth in
this Section, the Offeror is not aware of any approval or other action by any
governmental or administrative agency that would be required for the
acquisition or ownership of Shares by the Offeror as contemplated herein.
Should any such approval or other action be required, it will be sought, but
the Offeror has no current intention to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such matter, subject,
however, to the Offeror's right to decline to purchase Shares if any of the
conditions specified in Section 15 shall have occurred. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions, or that adverse
consequences might not result to the Company's or Parent's business or that
certain parts of the Company's or Parent's business might not have to be
disposed of if any such approvals were not obtained or other action taken.
U.S. Antitrust. Under the provisions of the HSR Act applicable to the Offer,
the acquisition of Shares under the Offer may be consummated following the
expiration of a 15-day waiting period following the filing by Parent of a
Premerger Notification and Report Form with respect to the Offer, unless
Parent receives a request for additional information or documentary material
from the Department of Justice, Antitrust Division (the "Antitrust Division")
or the Federal Trade Commission ("FTC") or unless early termination of the
waiting period is granted. Parent expects to make such a filing on October 29,
1997 and, accordingly, the initial waiting period will expire on November 14,
1997. If, within the initial 15-day waiting period, either the Antitrust
Division or the FTC requests additional information or documentary material
concerning the Offer, the waiting period will be extended through the tenth
day after the date of substantial compliance by all parties receiving such
requests. Complying with a request for additional information or documentary
material can take a significant amount of time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition
of the Company. At any time before or after the Offeror's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or the consummation of the Merger, or seeking the
divestiture of Shares acquired by the Offeror or the divestiture of
substantial assets of the Company or its subsidiaries or Parent or its
subsidiaries or seeking or imposing other conditions. Private parties may also
bring legal action under the antitrust laws under certain circumstances. There
can be no assurance that a challenge to the Offer or the consummation of the
Merger on antitrust grounds will not be made, or, if such a challenge is made,
of the result thereof.
If any applicable waiting period under the HSR Act applicable to the Offer
has not expired or been terminated prior to the Expiration Date, the Offeror
will not be obligated to proceed with the Offer or the purchase of any Shares
not theretofore purchased pursuant to the Offer. See Section 15.
State Takeover Laws. The Company is incorporated under the laws of the State
of Indiana. In general, Section 23-1-43-18 of the IBCL ("Section 23-1-43-18")
prevents an "interested shareholder" (including a person who owns or has the
right to acquire 10% or more of a corporation's outstanding voting stock) from
engaging in a "business combination" (defined to include mergers and certain
other actions) with an Indiana corporation for a period of five years
following the date such person became an interested shareholder unless, among
other things, the "business combination" or the acquisition of shares is
approved by the Board of
32
<PAGE>
Directors of such corporation prior to such person's becoming an interested
shareholder. The consummation of the Offer would otherwise trigger the
requirements of Section 23-1-43-18; however, as the Company's Board of
Directors has approved the Offer and the Merger in advance, Section 23-1-43-18
is inapplicable to the Offer and the Merger. Pursuant to Sections 23-1-42-1 to
23-1-42-11 of the IBCL, an "acquiring person" who makes a "control share
acquisition" in the Company may not exercise voting rights on any "control
shares" unless such voting rights are conferred by a majority vote of the
disinterested shareholders of the issuing corporation at a special meeting of
such shareholders held upon the request and at the expense of the acquiring
person. Under the IBCL, "control shares" means shares acquired by a person
that, when added to all other shares of the issuing public corporation owned
by that person or in respect to which that person may exercise or direct the
exercise of voting power, would otherwise entitle that person to exercise
voting power of the issuing public corporation in the election of directors
within any of the following ranges: (i) one-fifth or more but less than one-
third; (ii) one-third or more but less than a majority; or (iii) a majority or
more. "Control share acquisition" means, subject to certain exceptions, the
acquisition, directly or indirectly, by any person of ownership of, or the
power to direct the exercise of voting power with respect to, issued and
outstanding control shares. Shares acquired within 90 days or pursuant to a
plan to make a control share acquisition are considered to have been acquired
in the same acquisition. The above provisions do not apply if, before a
control share acquisition is made, the Company's Charter or Bylaws provide
that said provisions do not apply. The Company has agreed to amend its Bylaws
prior to consummation of the Offer to make the foregoing provisions
inapplicable. Indiana also has a takeover offers statute that the Offeror must
comply with in connection with the Offer. This statute requires the Offeror to
file a takeover offer statement with the Indiana Securities Commissioner (the
"Commissioner"). The Commissioner will hold a hearing within 20 business days
to determine whether the takeover offer statement provides full and fair
disclosure and the Commissioner has the power to prohibit purchases under the
Offer unless the takeover offer statement is deemed adequate by the
Commissioner. A number of other states have adopted laws and regulations
applicable to attempts to acquire securities of corporations that are
incorporated, or have substantial assets, shareholders, principal executive
offices or principal places of business or whose business operations otherwise
have substantial economic effects in such states. In Edgar v. MITE Corp., in
1982, the Supreme Court of the United States (the "U.S. Supreme Court")
invalidated on constitutional grounds the Illinois Business Takeover statute,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However in 1987, in CTS Corp. v.
Dynamics Corp. of America, the U.S. Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of
a target corporation without the prior approval of the remaining shareholders.
The state law before the U.S. Supreme Court was by its terms applicable only
to corporations that had a substantial number of shareholders in the state and
were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Offeror does not know whether any of these laws will, by their
terms, apply to the Offer or the Merger and has not attempted to comply with
any such laws. Should any person seek to apply any state takeover law, the
Offeror will take such action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to the Offer or the Merger, and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer, the
Offeror might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined, the
Offeror might be unable to accept for payment any Shares tendered pursuant to
the Offer, or be delayed in continuing or consummating the Offer and the
Merger. In such event, the Offeror may not be obligated to accept for payment
any Shares tendered. See Section 15.
17. FEES AND EXPENSES. Neither the Offeror nor Parent, nor any officer,
director, shareholder, agent or other representative of the Offeror or Parent
will pay any fees or commissions to any broker, dealer or other person (other
than the Dealer Manager, the Information Agent and the Depositary) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies and other nominees will, upon request, be
reimbursed by the Offeror for customary mailing and handling expenses incurred
by them in forwarding materials to their customers.
33
<PAGE>
Rauscher Pierce Refsnes, Inc. is acting as Dealer Manager in connection with
the Offer and is providing certain financial advisory services to Parent and
the Offeror in connection with the Offer. Parent has agreed to pay Rauscher
Pierce Refsnes, Inc. reasonable and customary compensation for such services.
In addition, Parent has agreed to reimburse Rauscher Pierce Refsnes, Inc. for
its out-of-pocket expenses related to its engagement, including the reasonable
fees and expenses of its counsel, and has agreed to indemnify Rauscher Pierce
Refsnes, Inc. and certain affiliated persons against certain liabilities and
expenses in connection with its services, including, without limitation,
certain liabilities under the federal securities laws.
The Offeror has retained MacKenzie Partners, Inc. as Information Agent and
ChaseMellon Shareholder Services, L.L.C. as Depositary in connection with the
Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services hereunder and reimbursement for
their reasonable out-of-pocket expenses. The Depositary will also be
indemnified by the Offeror against certain liabilities in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telex,
telegraph and personal interviews and may request brokers, dealers and other
nominee shareholders to forward materials relating to the Offer to beneficial
owners of Shares.
18. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Shares residing in any jurisdiction
in which the making or acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
the Offeror by the Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer
to Purchase or in the Letter of Transmittal and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror or Parent.
The Offeror and Parent have filed with the Commission the Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer. Schedule
14D-1 and any amendments thereto, including exhibits, may be examined and
copies may be obtained at the same places and in the same manner as set forth
with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
SCC ACQUISITION CORP.
October 28, 1997
34
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF THE PARENT AND THE OFFEROR
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below are the name,
current business address, citizenship, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each executive officer and director of Parent. Unless otherwise
indicated, each such person's business address is 1300 S. University Drive,
Suite 200, Fort Worth, Texas 76107. All persons listed below are citizens of
the United States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
---- ----------------------------------------------
<C> <S>
Jerry E. Kimmel............. Jerry E. Kimmel is a founder of Parent and has
spent his entire career in this industry. Mr.
Kimmel has served as President of Parent since
1978 and has served as Chairman of the Board and
Chief Executive Officer of Parent since 1993. In
1992, Mr. Kimmel was inducted into the MH/RV
Hall of Fame. Mr. Kimmel served as the Chairman
of the Board of Governors of the Manufactured
Housing Institute ("MHI"),
a leading manufactured housing trade group, in
1983 and 1984, and has served in various other
MHI board capacities.
Clyde A. Reed, Jr. ......... Clyde A. Reed, Jr. joined Parent in 1965 and has
served as Executive Vice President since 1986
and Chief Operating Officer since 1991. From
1978 to 1986, Mr. Reed served as Vice President
of Parent. Mr. Reed has been a director of
Parent since November 1996.
Ellis L. McKinley, Jr. ..... Ellis L. McKinley, Jr. joined Parent in 1995,
has served as Vice President and Chief Financial
Officer since such time and has served as a
director and Treasurer of Parent since November
1996. From 1994 to 1995, Mr. McKinley was Vice
President of Finance, Chief Financial Officer,
Secretary and Treasurer of Renters Choice, Inc.
From 1976 until 1994, Mr. McKinley was employed
with Grant Thornton, a public accounting firm in
Dallas, Texas, where he served as an audit
partner from 1987 through 1994. Mr. McKinley
received his B.B.A. in Accounting from the
University of Texas in 1976.
Richard S. Tucker........... Richard S. Tucker has served as a director of
Parent since 1976, as an assistant secretary of
the Parent since 1988, and as the Secretary of
Parent since November 1996. Since 1995, Mr.
Tucker has been a partner in the law firm of
Jackson Walker L.L.P., the Company's outside
legal counsel, located at 777 Main Street, Suite
1800, Fort Worth, Texas 76102. From 1984 to
1995, Mr. Tucker was a member of the law firm of
Simon, Anisman, Doby & Wilson, a Professional
Corporation, located in Fort Worth, Texas. Mr.
Tucker received his B.B.A. in Accounting from
the University of Texas in 1966 and his J.D.
from Southern Methodist University School of Law
in 1969.
C. Lee Denham............... C. Lee Denham has served as President of
Parent's Sunbelt subsidiary since November 1996
and as Vice President of the Sunbelt Wood
Components division of Parent from 1995 to
November 1996. Mr. Denham was division manager
of Sunbelt Wood Components from 1991 to 1995.
From 1981 to 1991, Mr. Denham was President of
Sunbelt Wood Components. From 1970 until
founding Sunbelt Wood Components in
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
---- ----------------------------------------------
<C> <S>
1981, Mr. Denham was employed by Universal
Forest Products, Inc. Mr. Denham received his
B.B.A. in Marketing from the University of
Georgia in 1970.
Gregory G. Kimmel........... Gregory G. Kimmel joined Parent in 1994 and has
served as Vice President since January 1996 and
as a director of Parent since May 1997. Mr.
Kimmel received his B.S. in Education from
McMurray University in 1994. Gregory G. Kimmel
is the son of Jerry E. Kimmel, the Chairman,
President and Chief Executive Officer of Parent.
Martin C. Bowen............. Martin C. Bowen has served as a director of
Parent since November 1996. Mr. Bowen has served
as President and Chief Executive Officer of
Performing Arts Fort Worth, Inc. since 1993,
Vice President of Fine Line, Inc. since January
1996 and as a director of Aztec Manufacturing
Company since November 1993. From 1989 to 1992
he was Chairman of the Fort Worth Region for
Team Bank. From 1987 to 1989, Mr. Bowen served
as Chairman & CEO of Texas American
Bank/Houston. From 1985 to 1987 he served as
Executive Vice President of Texas American
Bank/Fort Worth. Mr. Bowen received his B.B.A.
in Finance from Texas A&M University in 1964 and
his Bachelor of Foreign Trade degree from the
American Institute of Foreign Trade, Phoenix,
Arizona, in 1968. Additionally, he received his
J.D. from Baylor University School of Law in
1973.
Richard Nevins.............. Richard Nevins has served as a director of
Parent since November 1996. Since 1992, Mr.
Nevins has served as President of Richard Nevins
& Associates, a financial advisory firm. Mr.
Nevins was elected as a director of Fruehauf
Trailer Corporation ("Fruehauf")
in 1995 and was elected as Chairman of
Fruehauf's executive committee in August 1996.
On October 7, 1996, Fruehauf filed for relief
under Chapter 11 of the Bankruptcy Code of the
United States. Together with the other members
of the Fruehauf board who had been elected by
the shareholders, Mr. Nevins resigned his
positions with Fruehauf effective October 9,
1996. During 1996, Mr. Nevins served as acting
Chief Operating Officer and Chief Restructuring
Officer for Sun World International, a
California agricultural firm, following the
filing of a petition in bankruptcy by Sun World
International. From 1995 to 1996, Mr. Nevins
served as a director of Ampex Corporation and
from 1993 to 1995 he served as a director of The
Actava Group (now Metromedia International
Group). From 1990 to 1992 he was a Managing
Director of Smith Barney Harris Upham & Co. Mr.
Nevins received his B.A. in Economics from the
University of California, Riverside in 1972 and
his M.B.A. from Stanford Graduate School of
Business in 1975.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF OFFEROR. Set forth below are the
name, current business address, citizenship, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each executive officer and director of the Offeror. Unless otherwise
indicated, each such person's business address is 1300 S. University Drive,
Suite 200, Fort Worth, Texas 76107. All persons listed below are citizens of
the United States of America.
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
---- ----------------------------------------------
<C> <S>
Jerry E. Kimmel............. Jerry E. Kimmel has been the President and a
director of the Offeror since its formation in
October of 1997. For further biographical
information regarding Mr. Kimmel, see Section 1
of this Annex I, above.
Ellis L. McKinley, Jr. ..... Ellis L. McKinley has been the Vice President
and Treasurer of the Offeror since its formation
in October of 1997. For further biographical
information regarding Mr. McKinley, see Section
1 of this Annex I, above.
Richard S. Tucker........... Richard S. Tucker has been the Secretary and a
director of the Offeror since its formation in
October of 1997. For further biographical
information regarding Mr. Tucker, see Section 1
of this Annex I, above.
</TABLE>
I-3
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal and certificates for
Shares and any other required documents should be sent or delivered by each
shareholder of the Company or such shareholder's broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of the addresses
set forth below:
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight:
P.O. Box 3301 (201) 329-8936 85 Challenger Road Mail Drop-Reorg
South Hackensack, New Jersey fax confirmation number: Ridgefield Park, New Jersey 07660
07606 (201) 296-4860 Attn: Reorganization Dept.
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses or telephone numbers
and locations set forth below. Additional copies of this Offer to Purchase,
the Letter of Transmittal and the Notice of Guaranteed Delivery may be
obtained from the Information Agent. Shareholders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
MacKenzie
Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Banks and Brokers call collect: (212) 929-5500
ALL OTHERS CALL TOLL FREE: (800) 322-2885
The Dealer Manager for the Offer is:
RAUSCHER PIERCE REFSNES, INC.
2711 N. Haskell Ave., Ste. 2400
Dallas, TX 75204-2936
(214) 989-1463
(Call Collect)
I-4
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SHELTER COMPONENTS CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 28, 1997
BY
SCC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
KEVCO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight:
P.O. Box 3301 (201) 329-8936 85 Challenger Road Mail Drop-Reorg
South Hackensack, New Jersey fax confirmation number: Ridgefield Park, New Jersey 07660
07606 (201) 296-4860 Attn: Reorganization Dept.
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders of Shelter
Components Corporation (the "Company") if certificates evidencing Shares are
to be forwarded herewith or, unless an Agent's Message (as defined in the
Offer to Purchase) is utilized, if delivery of Shares (as defined below) is to
be made by book-entry transfer to the Depositary's account at The Depository
Trust Company or Philadelphia Depository Trust Company (hereinafter
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in Section 3 of the Offer to Purchase (as defined
below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their Shares and all other documents required hereby to the
Depositary by the Expiration Date (as defined in the Offer to Purchase), or
who cannot comply with the book-entry transfer procedures on a timely basis,
may nevertheless tender their Shares pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2.
DESCRIPTION OF SHARES TENDERED
- - -------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) Shares Tendered (Attach
additional list if
necessary)
- - -------------------------------------------------------------------------------
Share
Certificate
Number(s)*
Number of
Shares
Represented
by
Certificate(s)*
Number
of
Shares**
(Please fill in, if blank, exactly as name(s)
appear(s) on Share certificates)
- - -------------------------------------------------------------------------------
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
---------------------------
Total
Shares:
- - -------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by Book-Entry Transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------------------------------
Check Box of Applicable Book-Entry Transfer Facility (check one)
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account No.
-------------------------------------------------------------------
Transaction Code No.
------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
----------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------
Window Ticket Number (if any)
----------------------------------------------------
Name of Institution which Guaranteed Delivery
------------------------------------------
If delivery is by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account No.
-------------------------------------------------------------------
Transaction Code No.
------------------------------------------------------------
Ladies and Gentlemen:
The undersigned hereby tenders to SCC Acquisition Corp. (the "Offeror"), an
Indiana corporation and a wholly-owned subsidiary of Kevco, Inc., a Texas
corporation ("Parent"), the above-described shares of common stock, $.01 par
value per share (the "Shares") of Shelter Components Corporation, an Indiana
corporation (the "Company"), pursuant to the Offeror's offer to purchase all
of the outstanding Shares at a purchase price of $17.50 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated October 28, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase, and any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). The Offer is being made in connection with the Agreement and Plan of
Merger, dated as of October 21, 1997 (the "Merger Agreement"), among the
Parent, the Offeror and the Company.
Subject to and effective upon acceptance for payment of and payment for the
Shares properly tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Offeror all right, title and interest in
and to all the Shares that are being tendered hereby (and any and all other
Shares or other securities issued or issuable in respect thereof) and appoints
the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares (and all such other Shares or
securities), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares (and all such other Shares or securities), or
transfer ownership of such Shares (and all such other Shares or securities) on
the account books maintained by any of the Book-Entry
2
<PAGE>
Transfer Facilities, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the Offeror,
(b) present such Shares (and all such other Shares or securities) for transfer
on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and all such other
Shares or securities), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Offeror as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or his substitute shall in his
sole judgment deem proper, with respect to all of the Shares tendered hereby
that have been accepted for payment by the Offeror prior to the time of any
vote or other action (and any and all other Shares or other securities or
rights issued or issuable in respect of such Shares) at any meeting of
shareholders of the Company (whether annual or special and whether or not an
adjourned meeting), any actions by written consent in lieu of any such meeting
or otherwise. This proxy is irrevocable and is granted in consideration of,
and is effective upon, the acceptance for payment of such Shares by the
Offeror in accordance with the terms of the Offer. Such acceptance for payment
shall revoke any other proxy or written consent granted by the undersigned at
any time with respect to such Shares (and all such other Shares or other
securities or rights), and no subsequent proxies will be given or written
consents will be executed by the undersigned (and if given or executed, will
not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities or rights issued or
issuable in respect of such Shares) and that when the same are accepted for
payment by the Offeror, the Offeror will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or the
Offeror to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby (and all such other Shares or other
securities or rights). All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
the Offeror upon the terms and subject to the conditions of the Offer. The
Offeror's acceptance of such Shares for payment will constitute a binding
agreement between the undersigned and the Offeror upon the terms and subject
to the conditions of the Offer, including, without limitation, the
undersigned's representation and warranty that the undersigned owns the Shares
being tendered.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
certificates evidencing Shares not tendered or not purchased, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price of any
Shares purchased and return any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the undersigned at
the address shown below the undersigned's signature(s). In the event that both
"Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the check for the purchase price of any Shares
purchased and return any Shares not tendered or not purchased in the name(s)
of, and mail said check and any certificates to, the person(s) so indicated.
The undersigned recognizes that the Offeror has no obligation, pursuant to the
"Special Payment Instructions," to transfer any Shares from the name(s) of the
registered holder(s) thereof if the Offeror does not accept for payment any of
the Shares so tendered.
3
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS(SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check
To be completed ONLY if the check for the purchase price of Shares
for the purchase price of Shares purchased or certificates for
purchased or certificates for Shares not tendered or not
Shares not tendered or not purchased are to be mailed to
purchased are to be issued in the someone other than the undersigned
name of someone other than the or to the undersigned at an
undersigned or if Shares tendered address other than that shown
hereby and delivered by Book-Entry below the undersigned's
Transfer which are not accepted signature(s).
for payment are to be returned by
credit to an account at one of the
Book-Entry Transfer Facilities
other than designated above.
Issue [ ] Check [ ] certificates
to:
Name:_____________________________
(Print Name)
Mail [ ] Check [ ] certificates Address:__________________________
to:
Name:_____________________________ -----------------------------------
(Print Name) (Including Zip Code)
Address:__________________________ -----------------------------------
----------------------------------- (Taxpayer Identification or Social
Security No.)
(Including Zip Code)
-----------------------------------
(Taxpayer Identification or Social
Security No.)
[ ] Credit Shares delivered by
book-entry transfer and not
purchased to the account set
forth below:
Check appropriate box.
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust
Company
4
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program,
the New York Stock Exchange Medallion Signature Guarantee Program, the Stock
Exchange Medallion Program, or by any other bank, broker, dealer, credit
union, savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing constituting an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i)
by a registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If the certificates are registered in
the name of a person or persons other than the signer of this Letter of
Transmittal, or if payment is to be made or delivered to, or certificates
evidencing unpurchased Shares are to be issued or returned to, a person other
than the registered owner or owners, then the tendered certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates or stock powers, with the signatures on the certificates or stock
powers guaranteed by an Eligible Institution as provided herein. See
Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal
is to be used either if certificates are to be forwarded herewith or, unless
an Agent's Message (as defined in the Offer to Purchase) is utilized, if the
delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Certificates for
all physically delivered Shares, or a confirmation of a book-entry transfer
into the Depositary's account at one of the Book-Entry Transfer Facilities of
all Shares delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) and
any other documents required by this Letter of Transmittal, or an Agent's
Message in the case of a book-entry delivery, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter
of Transmittal by the Expiration Date. If certificates are forwarded to the
Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery. Shareholders who
cannot deliver their Shares and all other required documents to the Depositary
by the Expiration Date must tender their Shares pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant
to such procedures: (a) such tender must be made by or through an Eligible
Institution; (b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror, must be received
by the Depositary prior to the Expiration Date; and (c) the certificates for
all tendered Shares, in proper form for tender, or a confirmation of a book-
entry transfer into the Depositary's account at one of the Book-Entry Transfer
Facilities of all Shares delivered electronically, as well as a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), and any other documents required by this Letter of
Transmittal must be received by the Depositary within three trading days after
the date of execution of such Notice of Guaranteed Delivery, all as provided
in Section 3 of the Offer to Purchase. The term "trading day" is any day on
which the New York Stock Exchange is open for business.
THE METHOD OF DELIVERY OF CERTIFICATES EVIDENCING SHARES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY A
CONFIRMATION OF A BOOK-ENTRY TRANSFER). IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal
(or a manually signed facsimile thereof), the tendering shareholder waives any
right to receive any notice of the acceptance for payment of the Shares.
5
<PAGE>
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to shareholders who tender by book-entry
transfer). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new certificate for the remainder of the Shares represented by
the old certificate will be sent to the person(s) signing this Letter of
Transmittal unless otherwise provided in the appropriate box on this Letter of
Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares evidenced by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made, or
certificates evidencing Shares not tendered or not purchased are to be
returned, in the name of any person other than the registered holder(s), in
which case the certificate(s) for such Shares tendered hereby must be
endorsed, or accompanied by, appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s) for such Shares. Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificates for such Shares. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution. If this Letter of
Transmittal or any certificate evidencing Shares or any stock power is signed
by a trustee, executor, administrator, guardian, attorney-in- fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Offeror of the authority of such person so to act must be
submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6,
the Offeror will pay any stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or Shares not tendered or not
purchased are to be returned in the name of, any person other than the
registered holder(s), then the amount of any stock transfer taxes (whether
imposed on the registered holder(s), such other person or otherwise) payable
on account of the transfer to such person will be deducted from the purchase
price unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instruction. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or
not purchased are to be returned, in the name of a person other than the
person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or
6
<PAGE>
not purchased are to be mailed to someone other than the person(s) signing
this Letter of Transmittal or to the person(s) signing this Letter of
Transmittal at an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed. Shareholders tendering
Shares by book-entry transfer may request that Shares not purchased be
credited to such account at any of the Book-Entry Transfer Facilities as such
shareholder may designate under "Special Payment Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facilities designated above.
8. Substitute Form W-9. The tendering shareholder is required to provide the
Depositary with such shareholder's correct taxpayer identification number
("TIN") on Substitute Form W-9, which is provided below, unless an exemption
applies. Failure to provide the information on the Substitute Form W-9 may
subject the shareholder to federal income tax backup withholding at the rate
of 31% on the payment of the purchase price for the Shares and to certain
penalties.
9. Foreign Holders. Foreign holders must submit a completed IRS Form W-8 to
avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
10. Requests for Assistance or Additional Copies. Questions and requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses or telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
11. Waiver of Conditions. The conditions of the Offer may be waived by the
Offeror (subject to certain limitations in the Merger Agreement), in whole or
in part, at any time or from time to time, in the Offeror's sole discretion.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required to provide the Depository with such
shareholder's correct TIN, which, in the case of a shareholder who is an
individual, is his or her social security number, or, in the alternative,
establish a basis for exemption from backup withholding. Exempt shareholders
(including, among others, corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. If the
correct taxpayer identification number or an adequate basis for exemption is
not provided, the shareholder may be subject to backup withholding at the rate
of 31% on the purchase price of the Shares purchased pursuant to the Offer and
to certain penalties.
Generally, to prevent backup withholding, a shareholder may complete the
Substitute Form W-9 provided below. A shareholder that is a foreign
individual, however, must submit Form W-8 or a substantially similar form to
the Depositary, certifying under penalties of perjury that the individual is
exempt from backup withholding. This form may be obtained from the Depositary.
Backup withholding is not an additional tax. A shareholder subject to backup
withholding may reduce such shareholder's federal income tax liability by the
amount withheld. Additionally, if the backup withholding results in an
overpayment of taxes, the shareholder may obtain a refund.
7
<PAGE>
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payment to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder must
provide the Depositary with such shareholder's correct TIN by completing the
Substitute Form W-9 and certifying that the TIN provided on the Substitute
Form W-9 is correct, or in the alternative the shareholder must certify that
such shareholder is exempt from backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the TIN, generally the
social security number or employer identification number, of the record holder
of the Shares tendered hereby. If the Shares are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report. If the tendering shareholder
has not been issued a TIN and has applied for a number or intends to apply for
a number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number, which
appears in a separate box below the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN by the time of
payment, the Depositary will withhold 31% of all payments of the purchase
price until a TIN is provided to the Depositary.
8
<PAGE>
SIGN HERE
(Complete Substitute Form W-9 below)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(Signature(s) of Owner(s))
Name(s)_____________________________________________________________________
(Please Print)
Capacity (full title)_______________________________________________________
Address_____________________________________________________________________
-----------------------------------------------------------------------------
(Include Zip Code)
-----------------------------------------------------------------------------
Area Code and Telephone Number______________________________________________
Taxpayer Identification or Social Security Number___________________________
(See Substitute Form W-9)
Dated:________________________________________________________________ , 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full
title and see Instruction 5)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s)_____________________________________________________
Name________________________________________________________________________
Name of Firm________________________________________________________________
Address_____________________________________________________________________
-----------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number______________________________________________
Date:_________________________________________________________________ , 1997
9
<PAGE>
PART I--Taxpayer _______________________
SUBSTITUTE Identification Number-- (Social Security
FORM W-9 For all accounts, enter Number) OR
your TIN in the box at
right. (For most
individuals, this is
your social security
number. If you do not
have a TIN, see
Obtaining a Number in
the enclosed
Guidelines.) Certify by
signing and dating
below. Note: If the
account is in more than
one name, see the chart
in the enclosed
Guidelines to determine
which number to give
the payer.
DEPARTMENT OF THE
TREASURY _______________________
(Employer
Identification Number)
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR (If awaiting TIN write
TAXPAYER IDENTIFICATION "Applied For")
NUMBER (TIN)
----------------------------------------------------
PART II--For Payees Exempt from backup
Withholding, see the enclosed Guidelines and
complete as instructed therein.
- - -------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as
a result of failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- - -------------------------------------------------------------------------------
SIGNATURE DATE __________ ,1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31
PERCENT OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31 percent of all reportable payments made to me thereafter
will be withheld until I provide a number.
Signature:___________________________________________ Date:_______________
10
<PAGE>
The Information Agent for the Offer is:
MacKenzie
Partners, Inc.
156 Fifth Avenue
New York, New York 10010
Banks and Brokers call collect: (212) 929-5500
ALL OTHERS CALL TOLL FREE: (800) 322-2885
The Dealer Manager for the Offer is:
RAUSCHER PIERCE REFSNES, INC.
2711 N. Haskell Ave., Ste. 2400
Dallas, TX 75204-2936
(214) 989-1463 (Call Collect)
<PAGE>
EXHIBIT (a)(3)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHELTER COMPONENTS CORPORATION
AT
$17.50 NET PER SHARE
BY
SCC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
KEVCO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
October 28, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by SCC Acquisition Corp., an Indiana corporation (the
"Offeror") and a wholly-owned subsidiary of Kevco, Inc., a Texas corporation
("Parent"), to act as Dealer Manager in connection with the Offeror's offer to
purchase all outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Shelter Components Corporation, an Indiana corporation (the
"Company"), at a purchase price of $17.50 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated October 28, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer")
enclosed herewith. The Offer is being made in connection with the Agreement
and Plan of Merger, dated as of October 21, 1997, among Parent, the Offeror
and the Company (the "Merger Agreement"). Holders of Shares whose certificates
for such Shares (the "Certificates") are not immediately available or who
cannot deliver their Certificates and all other required documents to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES THAT CONSTITUTE, ON A FULLY-DILUTED BASIS, A MAJORITY OF THE VOTING
POWER OF THE SHARES (THE "MINIMUM CONDITION") (II) THE EXPIRATION OR
TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT (THE "HSR
CONDITION"), (III) PARENT OBTAINING, PRIOR TO THE EXPIRATION OF THE OFFER,
SUFFICIENT FINANCING ON TERMS ACCEPTABLE TO PARENT, TO ENABLE CONSUMMATION OF
THE OFFER AND THE MERGER (THE "FINANCING CONDITION") AND (IV) THE SATISFACTION
OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 15 OF THE OFFER TO
PURCHASE.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. The Offer to Purchase, dated October 28, 1997.
2. The Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares.
1
<PAGE>
3. A letter to shareholders of the Company from Larry D. Renbarger, the
Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to the
shareholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter that may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided
for obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of the Offer to Purchase promptly after the later to
occur of (a) the Expiration Date and (b) the satisfaction or waiver of the
conditions set forth in Section 15 of the Offer to Purchase related to
regulatory matters. Subject to compliance with Rule 14e-1(c) under the
Securities Exchange Act of 1934, the Offeror expressly reserves the right to
delay payment for Shares in order to comply in whole or in part with any
applicable law. See Sections 1 and 16 of the Offer to Purchase. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares or timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company, pursuant to the procedures set forth in
Section 3 of the Offer to Purchase, (ii) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with
all required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in Section 2 of the Offer to Purchase) and (iii)
any other documents required by the Letter of Transmittal.
The Offeror will not pay any fees or commissions to any broker or dealer or
any other person (other than the Dealer Manager, the Information Agent and the
Depositary as described in Section 17 of the Offer to Purchase) in connection
with the solicitation of tenders of Shares pursuant to the Offer. The Offeror
will, however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your clients.
The Offeror will pay any stock transfer taxes incident to the transfer to it
of validly tendered Shares except as otherwise provided in Instruction 6 of
the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, DECEMBER 1, 1997,
UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) or other required
documents should be sent to the Depositary and (ii) Certificates representing
the tendered Shares on a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) should be delivered to the Depositary in accordance with
the instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender must
be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
2
<PAGE>
Any inquiries you may have with respect to the Offer should be addressed to
Rauscher Pierce Refsnes, Inc., the Dealer Manager, at its respective address
and telephone number set forth on the back cover of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained by calling
MacKenzie Partners, Inc., the Information Agent, collect at (212) 929-5500 or
from brokers, dealers, commercial banks or trust companies.
Very truly yours,
RAUSCHER PIERCE REFSNES, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PARENT, THE OFFEROR, THE COMPANY, THE
DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY
OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT
OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER
OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
EXHIBIT (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHELTER COMPONENTS CORPORATION
AT
$17.50 NET PER SHARE
BY
SCC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
KEVCO, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, DECEMBER 1, 1997, UNLESS THE OFFER IS EXTENDED.
October 28, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated October 28,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer") relating to an offer by SCC Acquisition Corp., an Indiana
corporation (the "Offeror") and a wholly-owned subsidiary of Kevco, Inc., a
Texas corporation ("Parent"), to purchase all outstanding shares of common
stock, par value $.01 per share (the "Shares") of Shelter Components
Corporation, an Indiana corporation (the "Company"), at a purchase price of
$17.50 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer. The Offer is
being made in connection with the Agreement and Plan of Merger, dated as of
October 21, 1997, among Parent, the Offeror and the Company (the "Merger
Agreement"). Holders of Shares whose certificates for such Shares (the
"Certificates") are not immediately available or who cannot deliver their
Certificates and all other required documents to ChaseMellon Shareholder
Services, L.L.C. (the "Depositary") or complete the procedures for book-entry
transfer prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase) must tender their shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF SHARES
CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A TENDER OF
SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and conditions
set forth in the Offer.
Please note the following:
1.The tender price is $17.50 per Share, net to you in cash without interest.
2.The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on Monday, December 1, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer such
number of Shares that would constitute a majority of the voting power of
the Shares (assuming the exercise of all options to purchase, and the
conversion of all securities convertible or exchangeable into, Shares
outstanding at the expiration date of the Offer). The Offer is also
subject to the other terms and conditions contained in the Offer to
Purchase.
1
<PAGE>
Tendering shareholders will not be obligated to pay brokerage fees or
commissions imposed by Parent or the Offeror or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the
transfer of Shares pursuant to the Offer.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Offeror by Rauscher Pierce Refsnes, Inc. or
by one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
If you wish to have us tender any or all of the Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope in which to return your instruction
to us is enclosed. If you authorize the tender of your Shares, all such Shares
will be tendered unless otherwise indicated in such instruction form. PLEASE
FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO
TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHELTER COMPONENTS CORPORATION
BY
SCC ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated October 28, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer") in connection with the offer by
SCC Acquisition Corp., an Indiana corporation (the "Offeror") and a wholly-
owned subsidiary of Kevco, Inc., a Texas corporation ("Parent"), to purchase
all of the outstanding shares of common stock, par value $.01 per share (the
"Shares") of Shelter Components Corporation, an Indiana corporation (the
"Company"), at a purchase price of $17.50 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer.
This will instruct you to tender to the Offeror the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Number of Shares to be Tendered:*
SIGN HERE
-------------------------------------
Account Number:
-------------------------------------
Signature(s) of Holder(s)
Date: ,1997 -------------------------------------
-------------------------------------
(Print Name(s))
-------------------------------------
-------------------------------------
(Print Address(es))
-------------------------------------
(Area Code and Telephone Number(s))
-------------------------------------
(Taxpayer Identification or Social
Security Number(s))
- - --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
3
<PAGE>
EXHIBIT (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
SHELTER COMPONENTS CORPORATION
TO
SCC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
KEVCO, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, DECEMBER 1, 1997 UNLESS THE OFFER IS EXTENDED.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of common stock, par
value $.01 per share (the "Shares"), of Shelter Components Corporation, an
Indiana corporation (the "Company"), are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase). Such form
may be delivered by hand, facsimile transmission, or mail to the Depositary.
See Section 3 of the Offer to Purchase, dated October 28, 1997 (the "Offer to
Purchase").
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight
P.O. Box 3301 (for Eligible Courier:
South Hackensack, New Jersey 85 Challenger Road Mail Drop-
07606 Institutions Only): Reorg
(201) 329-8936 Ridgefield Park, New Jersey 07660
fax confirmation number: Attn: Reorganization Dept.
(201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE,
DOES NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE). UNDER THE
INSTRUCTION THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE APPLICABLE
SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
1
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SCC Acquisition Corp., an Indiana
corporation and a wholly-owned subsidiary of Kevco, Inc., a Texas corporation
("Parent"), upon the terms and subject to the conditions set forth in the Offer
to Purchase, and the related Letter of Transmittal, receipt of which are hereby
acknowledged, Shares of the Company, pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
Number of Shares Tendered:
Certificate No(s) (if available): Name(s) of Record Holder(s):
- - --------------------------------- --------------------------------------
- - --------------------------------- --------------------------------------
(Please Print)
Address(es):
--------------------------------------
(Zip Code)
Name of Tendering Institution:
Check one box if securities will Area Code and Telephone No(s):
be tendered by book-entry
transfer:
--------------------------------------
[ ] The Depository Trust Company Signature(s):
[ ] Philadelphia Depository Trust
Company Account No.:
Dated: , 1997
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program, the Stock Exchange Medallion Program, or a bank, broker,
dealer, credit union, savings association or other entity that is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, guarantees the delivery to the
Depositary of the Shares tendered hereby, together with a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile(s)
thereof) and any other required documents, or an Agent's Message (as defined
in the Offer to Purchase) in the case of a book-entry delivery of Shares, all
within three trading days of the date hereof. A "trading day" is any day on
which the New York Stock Exchange is open for business.
-------------------------------------
(Authorized Signature)
Name of Firm: Title:
Name:
(Please Print or Type)
Address: Area Code and Telephone No.:
- - --------------------------------- Dated:
(Zip Code)
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM--CERTIFICATES SHOULD BE
SENT WITH LETTER OF TRANSMITTAL
3
<PAGE>
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens,
e.g., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen, e.g., 00-0000000. The table below will help determine the
number to give the payer.
- - -------------------------------------- --------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- - ---------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor(1)
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person(3)
minor, or incompetent
person
7.a A revocable savings The grantor-
trust account (in which trustee(1)
grantor is also
trustee)
b Any "trust" account The actual
that is not a legal or owner(1)
valid trust under State
law
8. Sole proprietorship The owner(4)
account
- - ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
-----
<S> <C>
9. A valid trust, estate, The legal entity
or pension trust (do not furnish
the identifying
number of the
personal
representative
or trustee
unless the real
entity itself is
not designated
in the account
title)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
-----
</TABLE>
(1)List first and circle the name of the person whose number you furnish.
(2)Circle the minor's name and furnish the minor's social security number.
(3)Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4)Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5)List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for Employer Identification
Number (for businesses and all other entities), for Form W-7 for International
Taxpayer Identification Number (for alien individuals required to file U.S.
tax returns), at an office of the Social Security Administration or the
Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING PENALTIES
Payees generally exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement account, or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government or a political subdivision, agency or instrumentality
thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if (i) this interest is $600 or more,
(ii) the interest is paid in the course of the payer's trade or business
and (iii) you have not provided your correct taxpayer identification
number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE A SUBSTITUTE FORM W-9 TO AVOID
POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the Treasury Regulations under sections 6041,
6041A(a), 6045, and 6050A.
PRIVACY ACT NOTICES. Section 6109 requires most recipients of dividends,
interest or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to
file tax returns. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. --If you falsify
certifications or affirmations, you may be subject to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
- - --------
* Unless otherwise noted herein, all references to section numbers are
references to the Internal Revenue Code of 1986, as amended.
<PAGE>
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated October
28, 1997 and the related Letter of Transmittal and is not being made to, nor
will tenders be accepted from or on behalf of, holders of Shares residing in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the securities, blue sky or other laws of such
jurisdiction. However, the Offeror may, in its discretion, take such action as
it may deem necessary to make the Offer in any jurisdiction and extend the Offer
to holders of Shares in such jurisdiction. In those jurisdictions where
securities laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Offeror by Rauscher Pierce
Refsnes, Inc. (the "Dealer Manager") or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHELTER COMPONENTS CORPORATION
AT
$17.50 NET PER SHARE
BY
SCC ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY
OF
KEVCO, INC.
SCC Acquisition Corp., an Indiana corporation (the "Offeror") and a wholly-
owned subsidiary of Kevco, Inc., a Texas corporation ("Parent"), is offering to
purchase all outstanding shares of common stock, par value $.01 per share (the
"Shares") of Shelter Components Corporation, an Indiana corporation (the
"Company"), at a price of $17.50 per Share, net to the seller in cash without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated October 28, 1997 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
- - ------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, NOVEMBER 26, 1997, UNLESS THE OFFER IS EXTENDED.
- - ------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES THAT CONSTITUTE ON A FULLY-DILUTED BASIS A MAJORITY OF THE SHARES, (ii)
THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT
(AS DEFINED IN THE OFFER TO PURCHASE), (iii) PARENT OBTAINING, PRIOR TO THE
EXPIRATION OF THE OFFER, SUFFICIENT FINANCING TO CONSUMMATE THE OFFER AND THE
MERGER (AS DEFINED HEREIN) AND (iv) THE SATISFACTION OF CERTAIN OTHER TERMS AND
CONDITIONS.
<PAGE>
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of October 21, 1997 (the "Merger Agreement") among Parent, the Offeror and
the Company. The Merger Agreement provides that, among other things, after the
purchase of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with relevant
provisions of the Business Corporation Law of the State of Indiana, as amended
(the "IBCL"), the Offeror will be merged with and into the Company (the
"Merger"). At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company, Shares held by any subsidiary of the
Company, Parent, the Offeror or any other wholly-owned subsidiary of Parent, or
Shares which are held by shareholders, if any, who properly exercise their
appraisal rights, if any, under the IBCL) will be cancelled and converted into
the right to receive $17.50 in cash, or any higher price that is paid in the
Offer, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY, BY THE UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT AT A MEETING DULY CALLED AND HELD IN WHICH A QUORUM OF
DIRECTORS WAS PRESENT, HAS APPROVED THE OFFER, THE MERGER AND THE MERGER
AGREEMENT, HAS DETERMINED THAT EACH OF THE OFFER AND THE MERGER ARE FAIR TO, AND
IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS, AND RECOMMENDS THAT THE
COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER ALL THEIR SHARES PURSUANT TO
THE OFFER.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn, if and when the Offeror gives oral or written notice to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") of the Offeror's acceptance of
such Shares for payment pursuant to the Offer. In all cases, payment of Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which shall act as agent for tendering
shareholders for the purpose of receiving payment from the Offeror and
transmitting payment to validly tendering shareholders. Under no circumstances
will interest on the purchase price for Shares be paid by the Offeror,
regardless of any delay in making such payment. Payment for Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary (i) of certificates for such Shares or timely confirmation of a book-
entry transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facilities (as defined in the Offer to Purchase) pursuant to the
procedures set forth in the Offer to Purchase, (ii) a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof), with
any required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and (iii) any other
documents required by the Letter of Transmittal.
If any of the conditions set forth in the Offer to Purchase that relate to
the Offeror's obligations to purchase the Shares are not satisfied by 12:00
Midnight, New York City time, on Wednesday, November 26, 1997 (or any other time
then set as the Expiration Date), the Offeror may, subject to the terms of the
Merger Agreement, (i) extend the Offer and, subject to applicable withdrawal
rights, retain all tendered Shares until the expiration of the Offer as so
extended, (ii) subject to complying with applicable rules and regulations of the
Securities and Exchange Commission, accept for payment all Shares so tendered
and extend the Offer, or (iii) terminate the Offer and not accept for payment
any Shares and return all tendered Shares to tendering shareholders. The term
"Expiration Date" shall mean 12:00 Midnight, New York City time, on Wednesday,
November 26, 1997 unless the Offeror shall have extended the period of time for
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by the Offeror,
shall expire.
Subject to the limitations set forth in the Offer and the Merger Agreement,
the Offeror reserves the right (but will not be obligated), at any time or from
time to time in its sole discretion, to extend the period during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
by making a public announcement of such extension. There can be no assurance
that the Offeror will exercise its right to extend the Offer. Any extension of
the period during which the Offer is open will be followed, as promptly as
practicable, by public announcement thereof, such announcement to be issued not
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the rights of a tendering shareholder to withdraw such shareholder's Shares.
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable, except that Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date, and, unless theretofore accepted for payment, may also be
withdrawn at any time after November 26, 1997. For a withdrawal to be effective,
a written, telegraphic, telex or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of the Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of such
Shares, if different from the name of the
<PAGE>
person who tendered the Shares. If certificates for Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such certificates
have been tendered for the account of an Eligible Institution (as defined in the
Offer to Purchase), the signature on the notice of withdrawal must be guaranteed
by an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account of the
Book-Entry Transfer Facility to be created with the withdrawn Shares. All
questions as to the form and validity (including time of receipt) of a notice of
withdrawal will be determined by the Offeror, in its sole discretion, and its
determination shall be final and binding on all parties.
The information required to be disclosed by Paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided to the Offeror its list of shareholders and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase, the related Letter of Transmittal and other
related materials are being mailed to record holders of Shares and will be
mailed to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
lists or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent at their respective addresses and telephone numbers as
set forth below. The Offeror will not pay any fees or commissions to any broker
or dealer or to any other person (other than the Dealer Manager and the
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
Additional copies of the Offer to Purchase, the Letter of Transmittal and all
other tender offer materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies, and will be furnished
promptly at the Offeror's expense.
The Information Agent for the Offer is:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
Call Toll Free (800) 322-2885
The Dealer Manager for the Offer is:
Rauscher Pierce Refsnes, Inc.
2711 N. Haskell Ave., Ste. 2400
Dallas, TX 75204-2936
(214) 989-1463 (Call Collect)
<PAGE>
EXHIBIT (a)(8)
- - --------------------------------------------------------------------------------
Companies (SST) Page 1
- - --------------------------------------------------------------------------------
[LOGO OF COMPANIES CHANNEL APPEARS HERE]
KEVCO AND SHELTER COMPONENTS
ANNOUNCE MERGER AGREEMENT
October 22, 1997 9:28 AM EDT
MERGER TO ESTABLISH THE LEADING DISTRIBUTOR TO MANUFACTURED HOUSING INDUSTRY
FORT WORTH, Texas, Oct.22 /PRNewswire/ -- Kevco, Inc. (Nasdaq: KVCO) and Shelter
Components Corporation (Amex: SST) jointly announced that they have signed a
definitive merger agreement for Kevco to acquire all the outstanding shares of
Shelter Components. Pursuant to the agreement, Kevco will pay $17.50 per share
for each share of common stock of Shelter Components which currently has
approximately 7.8 million shares of common stock outstanding.
The transaction will be a cash tender offer followed by a cash merger to acquire
any shares not previously tendered. As a result of the transaction, Shelter
Components will become a wholly-owned subsidiary of Kevco. The transaction has
been recommended by the Boards of Directors of each company. The cash tender
offer is subject to Kevco receiving at least a majority of the outstanding
shares of Shelter Components as well as the receipt of the required regulatory
approvals and completion of anticipated financing, and is expected to be
completed before year end.
"The acquisition of Shelter Components establishes Kevco as the leading
distributor of building products for the manufactured home and recreational
vehicle industries," said Jerry E. Kimmel, Chairman, President and Chief
Executive Officer of Kevco. "We believe the combination of the two organizations
will significantly enhance the value of our services to customers. Shelter
Components distributes a broad range of products including hardware, fasteners,
doors, siding, vinyl windows, plumbing, electrical and other building products.
These generally complement the plumbing fixtures, wood products and other
building components that Kevco markets through our distribution centers and
manufacturing facilities. The addition of the product lines represented by
Shelter Components will enable us to meet more of the needs of customers which
should facilitate their production planning. We also expect that the merger will
lead to increased economies of scale."
Kimmel added, "The public offering we completed a year ago has provided the
additional capital that has helped Kevco become a key participant in the
consolidation now occurring within our industry. This agreement to merge Shelter
Components with Kevco follows the acquisitions earlier this year of Bowen Supply
and Consolidated Forest Products. We recognize the challenges ahead in combining
our operations but are excited about what we believe is an exceptional
opportunity to further our commitment to provide superior customer service."
Larry D. Renbarger, Chief Executive Officer of Shelter Components, stated, "We
believe the continued consolidation of the supply-side of our core markets is
responsive to our customers objectives and will also benefit vendors and
employees."
For the year ended December 31, 1996, Shelter Components reported net sales of
<PAGE>
- - --------------------------------------------------------------------------------
Companies (SST) Page 2
- - --------------------------------------------------------------------------------
$446 million and net income of $7.7 million, or $0.98 per share, excluding
divested carpet operations. For the same period, Kevco reported net sales of
$267 million and pro forma net income of $8.9 million, or $1.60 per share.
Shelter Components, headquartered in Elkhart, Indiana, is a nationwide
distributor of building products used principally in the production of
manufactured housing, modular housing and recreational vehicles. Shelter
Components also manufactures plastic products and laminates decorative wallboard
primarily for these markets.
Kevco, headquartered in Fort Worth, Texas, is a leading wholesale distributor
and manufacturer of building products to the manufactured housing and
recreational vehicle industries.
Certain statements contained herein which are not historical facts are forward-
looking statements that involve risks and uncertainties, including, but not
limited to, the impact of competitors' pricing, product quality and related
features; the cyclical nature and seasonality of the manufactured housing and RV
markets; the dependence of the Company on its principal customers and key
suppliers; and other risks detailed in the Company's Form 10-K and 10-Q filings
with the Securities and Exchange Commission, including those set forth in the
Prospectus relating to the Company's initial public offering. SOURCE Shelter
Components Corporation
(C) PR Newswire. All rights reserved.
<PAGE>
EXHIBIT (a)(9)
- - --------------------------------------------------------------------------------
Companies (SST) Page 1
- - --------------------------------------------------------------------------------
[LOGO OF SHELTER COMPONENTS CORPORATION APPEARS HERE]
- - ------------------------ NEWS RELEASE
CONTACT:
Mark C. Neilson, CFO
Phone: 800-571-6929
Fax: 219-262-2213
- - ------------------------
SHELTER COMPONENTS CORPORATION
REPORTS THIRD QUARTER RESULTS
October 22, 1997
ELKHART, IN October 22, 1997, -- Shelter Components Corporation (SST - AMEX)
today reported net sales of $129 million and net income of $2.5 million or $.32
per share for the quarter ended September 30, 1997, compared with reported net
sales of $139 million and net income of $3.2 million or $.42 per share,
respectively, for the comparable 1996 quarter. For the nine months ended
September 30, 1997, the Company reported net sales of $358 million and net
income of $6.9 million or $.89 per share compared to reported net sales of $397
million and net income of $8.4 million or $1.08 per share for the first nine
months of 1996. The results for 1997 include after-tax gains on the sales of
certain idle facilities totaling $.04 per share for the nine months ended
September 30, 1997, respectively.
The 1996 results include the carpet manufacturing and yarn processing operations
of Danube Carpet Mills, Inc., which were sold on December 31, 1996. The
following table reflects the comparative three and nine month proforma results
excluding Danube's 1996 results:
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
Reported Proforma Reported Proforma
9/30/97 9/30/96 Change 9/30/97 9/30/96 Change
<S> <C> <C> <C> <C> <C> <C>
Net sales $128,546 $118,844 +8% $357,879 $339,120 +6%
Operating income 4,235 4,621 (8%) 11,237 11,650 (4%)
Net income 2,494 2,561 (3%) 6,900 6,318 +9%
Net income per share .32 .33 (3%) .89 .82 +9%
</TABLE>
Management noted that the 8% improvement in third quarter proforma net sales
(excluding carpet operations from 1996 results) was encouraging given the
decline in homes produced during the quarter by the Manufactured Housing
industry, the Company's primary market.
The third quarter included the operating results of Plastic Solutions ("PSI") a
plastic injection molder which was acquired at the end of the second quarter of
1997. PSI accounted for approximately $2 million of the $10 million increase in
net sales during the quarter compared to proforma net sales the 1996 quarter,
and contributed approximately $.01 per share to the third quarter 1997 earnings.
Shelter Components Corporation, operating through its various subsidiaries, is a
nationwide distributor of hardware, fasteners, building products, vinyl windows,
floor coverings, plumbing and electrical products used principally in the
production of Manufactured Housing, Modular Housing and Recreational Vehicles.
In addition, the Company manufactures plastic products and laminates decorative
wallboard primarily for these markets.
<PAGE>
<TABLE>
<CAPTION>
SHELTER COMPONENTS CORPORATION
Financial Highlights
(000's omitted except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
INCOME STATEMENT 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $128,546 $139,311 $357,879 $397,065
Cost of sales 110,743 118,992 307,906 339,549
Gross profit 17,803 20,319 49,973 57,516
Commission income 708 709 2,074 1,827
18,511 21,028 52,047 59,343
Selling, general and
administrative expenses 14,276 15,298 40,810 44,291
Operating income 4,235 5,730 11,237 15,052
Gains on sales of real estate 13 -- 447 --
Interest income 244 34 755 102
Interest expense (437) (460) (1,219) (1,398)
Income before income taxes 4,055 5,304 11,220 13,756
Income taxes 1,561 2,069 4,320 5,365
Net income $ 2,494 $ 3,235 $ 6,900 $ 8,391
Earnings per share $ .32 $ .42 $ .89 $ 1.08
Weighted average shares outstanding 7,855 7,783 7,797 7,749
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET
Assets: 09/30/97 12/31/96
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 13,139 $ 21,096
Trade receivables 33,010 22,827
Inventories 43,001 41,475
Prepaid and other assets 1,199 3,171
Deferred taxes 2,128 2,128
Total Current Assets 92,477 90,697
Property and equipment, net 25,929 19,381
Goodwill, net 13,126 10,312
Other assets 1,322 520
Total Assets $132,854 $120,910
Liabilities & Stockholders' Equity:
Current liabilities:
Short term debt $ -- $ 6,000
Current maturities of long term debt 3,007 1,904
Trade payables 33,079 23,067
Accrued expenses 7,279 7,261
Income taxes payable 1,023 2,381
Total Current Liabilities 44,388 40,613
Long-term debt 17,208 16,639
Deferred taxes and other obligations 968 878
Stockholders' equity 70,290 62,780
Total Liabilities & Stockholders'
Equity $132,854 $120,910
</TABLE>
<PAGE>
EXHIBIT (b)
[LOGO OF NATIONSBANK APPEARS HERE]
October 27, 1997
Kevco, Inc.
1300 S. University Drive
Suite 200
Fort Worth, TX 76107
Attn: Mr. Jerry E. Kimmel
RE: Acquisition Financing
---------------------
Gentlemen:
You have advised us that Kevco, Inc. (the "Borrower"), through a new wholly
owned subsidiary ("Newco"), intends to acquire all of the capital stock of
Shelter Components Corporation (the "Acquired Company") pursuant (i) to a cash
tender offer (the "Tender Offer") for all (but in no event less than a majority)
of the outstanding shares of common stock of the Acquired Company at a price of
$17.50 per share, and (ii) the subsequent merger of Newco with or into the
Acquired Company (the "Merger"). Hereinafter the Tender Offer and the Merger may
be collectively referred to as the "Acquisition". You also have advised us that
in connection with the Acquisition all existing indebtedness of the Acquired
Company (approximately $20.5 million) and the Borrower (approximately $48.3
million) will be refinanced.
In order to complete the Acquisition and refinancings described above, and to
pay the costs and expenses related to the Acquisition and related financings,
you have advised us that the Borrower intends (i) to raise not less than $100.0
million from its issuance of new senior subordinated debt (the "Subordinated
Debt"), and (ii) to borrow not more than $110.0 million under newly arranged
senior credit facilities in an aggregate amount up to $130.0 million (with such
amounts each being reduced by Subordinated Debt proceeds in excess of $100.0
million).
You have advised us that no other external financing other than the financing
described herein will be required in connection with the Acquisition and
refinancings.
In connection with the foregoing, NationsBank of Texas, N.A. ("NationsBank" or
the "Agent") is pleased to advise you of its commitment (this letter agreement
being the "Commitment Letter") to provide the full principal amount of the
Senior Credit Facilities described in the Summary of Indicative Terms and
Conditions attached to this Commitment Letter as Exhibit A (the "Term Sheet").
NationsBanc Montgomery Securities, Inc. ("NMSI") is pleased to advise you of its
commitment, as Arranger and Syndication Agent for the Senior Credit Facilities,
to form a syndicate of financial institutions (the "Lenders") reasonably
acceptable to you for the Senior Credit Facilities. All capitalized terms used
and not otherwise defined herein shall have the meanings set forth in the Term
Sheet, and this letter agreement.
<PAGE>
Kevco, Inc.
October 26, 1997
Page 2
The commitments of NationsBank and NMSI hereunder are subject to each of the
terms and conditions set forth herein and in the Term Sheet, and to the
satisfaction of each of the following conditions precedent in a manner
acceptable to NationsBank and NMSI:
(a) execution by the Borrower, the Acquired Company and/or other appropriate
parties of the definitive purchase agreement and other related
documentation relating to the Acquisition (the "Purchase Agreement"), in
form and substance reasonably satisfactory to NationsBank and NMSI;
(b) the negotiation, execution and delivery of definitive documentation with
respect to the Senior Credit Facilities consistent with the Term Sheet and
otherwise reasonably satisfactory to NationsBank and NMSI; and
(c) there not having occurred and being continuing since the date hereof a
material disruption of, or a material adverse change in, financial, banking
or capital market conditions, in each case as determined by NationsBank and
NMSI in their reasonable discretion.
NationsBank will act as Agent for the Senior Credit Facilities and NMSI will act
as Arranger and Syndication Agent for the Senior Credit Facilities. No
additional agents will be appointed without the prior approval of the Borrower,
NationsBank and NMSI.
Furthermore, the commitments of NationsBank and NMSI hereunder are based upon
the financial and other information regarding the Borrower, the Acquired Company
and their respective subsidiaries previously provided to NationsBank and NMSI
and are subject to the condition, among others, that there shall not have
occurred after the date of such information, in the reasonable opinion of
NationsBank and NMSI, any material adverse change in the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of the Borrower, the Acquired Company and their
subsidiaries taken as a whole. If the continuing review by NationsBank and NMSI
of the Borrower and the Acquired Company discloses information relating to
conditions or events not previously disclosed to NationsBank and NMSI or
relating to new information or additional developments concerning conditions or
events previously disclosed to NationsBank and NMSI which NationsBank and NMSI
in their reasonable discretion believe may have a material adverse effect on the
condition (financial or otherwise), assets, properties, business, operations or
prospects of the Borrower, the Acquired Company, and their subsidiaries taken as
a whole, NationsBank and NMSI may, in their reasonable discretion, suggest
alternative financing amounts or structures that ensure adequate protection for
the Lenders or decline to participate in the proposed financing.
You agree to use reasonably commercial efforts to assist NationsBank and NMSI in
achieving syndication of the Senior Credit Facilities in a manner reasonably
satisfactory to NationsBank, NMSI and you. In the event that such syndication
cannot be achieved in a manner reasonably satisfactory to NationsBank, NMSI and
you under the structure outlined in the Term Sheet you agree to cooperate with
NationsBank and NMSI in developing an alternative structure that will permit
syndication of the Senior Credit Facilities in a manner reasonably satisfactory
to NationsBank, NMSI and you. Syndication of the Senior Credit Facilities will
be accomplished by a variety of means, including direct contact during the
syndication between senior management and advisors of the Borrower and the
proposed Lenders. To assist NationsBank and NMSI in the syndication efforts, you
<PAGE>
Kevco, Inc.
October 26, 1997
Page 3
hereby agree to (a) provide and cause your advisors to provide NationsBank and
NMSI and the other Lenders upon request with all information reasonably deemed
necessary by NationsBank and NMSI to complete syndication, including but not
limited to information and evaluations prepared by the Borrower and its
advisors, or on their behalf, relating to the Acquisition, (b) assist
NationsBank and NMSI upon their reasonable request in the preparation of an
Information Memorandum to be used in connection with the syndication of the
Senior Credit Facilities and (c) otherwise assist NationsBank and NMSI in their
syndication efforts, including making available officers and advisors of the
Borrower and its subsidiaries from time to time to attend and make presentations
regarding the business and prospects of the Borrower and the Acquired Company
and their subsidiaries, as appropriate, at a meeting or meetings of prospective
Lenders. You further agree to refrain from engaging in any additional debt
financings for the Acquired Company (except as described in this letter and
except for the Subordinated Debt) during such syndication process unless
otherwise agreed to by NationsBank and NMSI.
It is understood and agreed that NationsBank and NMSI, after consultation with
you, will manage and control all aspects of the syndication, including
decisions as to the selection of proposed Lenders (which shall be reasonably
satisfactory to you) and any titles offered to proposed Lenders, when
commitments will be accepted and the final allocations of the commitments among
the Lenders. It is understood that no Lender participating in the Senior Credit
Facilities will receive compensation from you outside the terms contained herein
and in the Term Sheet in order to obtain its commitment. It is also understood
and agreed that the amount and distribution of the fees among the Lenders will
be at the sole discretion of NationsBank and NMSI and that any syndication prior
to execution of definitive documentation will reduce the commitment of
NationsBank.
You hereby represent, warrant and covenant that to the best of your knowledge
(a) all information, other than Projections (as defined below), which has been
or is hereafter made available to NationsBank and NMSI or the Lenders by you or
any of your representatives in connection with the transactions contemplated
hereby ("Information") is and will be complete and correct in all material
respects and does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein not misleading, and (b) all financial projections concerning the
Borrower and the Acquired Company that have been or are hereafter made available
to NationsBank and NMSI or the Lenders by you or any of your representatives
(the "Projections") have been or will be prepared in good faith based upon
reasonable assumptions. You agree to furnish us with such Information and
Projections as we may reasonably request and to supplement the Information and
the Projections from time to time until the closing date for the Senior Credit
Facilities so that the representation and warranty in the preceding sentence is
correct in all material respects on the such date. In arranging and syndicating
the Senior Credit Facilities, NationsBank and NMSI will be using and relying on
the Information and the Projections without independent verification thereof.
By executing this Commitment Letter you also agree to reimburse NationsBank and
NMSI from time to time on demand for all reasonable out-of-pocket fees and
expenses (including, but not limited to, the reasonable fees, disbursements and
other charges of legal counsel to NationsBank) incurred in connection with the
Senior Credit Facilities and the preparation of the definitive documentation for
the Senior Credit Facilities and the other transactions contemplated hereby.
<PAGE>
Kevco, Inc.
October 26, 1997
Page 4
IN THE EVENT THAT NATIONSBANK OR NMSI BECOMES INVOLVED IN ANY CAPACITY IN ANY
ACTION, PROCEEDING OR INVESTIGATION IN CONNECTION WITH ANY MATTER CONTEMPLATED
BY THIS LETTER, THE BORROWER WILL REIMBURSE NATIONSBANK AND NMSI FOR THEIR
REASONABLE LEGAL AND OTHER EXPENSES (INCLUDING THE COST OF ANY INVESTIGATION AND
PREPARATION) AS THEY ARE INCURRED BY NATIONSBANK OR NMSI. THE BORROWER ALSO
AGREES TO INDEMNIFY AND HOLD HARMLESS NATIONSBANK, NMSI AND THEIR AFFILIATES AND
THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (THE "INDEMNIFIED
PARTIES") FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES AND LIABILITIES,
JOINT OR SEVERAL, RELATED TO OR ARISING OUT OF ANY MATTERS CONTEMPLATED BY THIS
LETTER (INCLUDING ANY ARISING OUT OF THE NEGLIGENCE OF ANY INDEMNIFIED PARTY),
UNLESS AND ONLY TO THE EXTENT THAT IT SHALL BE FINALLY JUDICIALLY DETERMINED
THAT SUCH LOSSES, CLAIMS, DAMAGES OR LIABILITIES RESULTED PRIMARILY FROM THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF NATIONSBANK, NMSI OR SUCH OTHER
INDEMNIFIED PARTY.
The provisions of the immediately preceding two paragraphs shall remain in full
force and effect regardless of whether definitive financing documentation shall
be executed and delivered and notwithstanding the termination of this letter
agreement or the commitment of NationsBank and NMSI hereunder, provided,
however, that the provisions of the immediately preceding two paragraphs shall
be superseded by the provisions of the definitive financing documentation.
As described herein and in the Term Sheet, NMSI will act as Arranger and
Syndication Agent for the Senior Credit Facilities. NationsBank reserves the
right to allocate, in whole or in part, to NMSI certain fees payable to
NationsBank in such manner as NationsBank and NMSI agree in their sole
discretion. You acknowledge and agree that NationsBank may share with any of its
affiliates (including specifically NMSI) any information relating to the Senior
Credit Facilities, the Borrower, the Acquired Company and their subsidiaries and
affiliates, subject to a confidentiality agreement reasonably acceptable to you.
This Commitment Letter may not be assigned without the prior written consent of
NationsBank and NMSI.
If you are in agreement with the foregoing, please execute and return the
enclosed copy of this letter agreement no later than 5:00 p.m. Dallas, Texas
time on October 28, 1997. This letter agreement will become effective upon your
delivery to us of executed counterparts of this letter agreement and the fee
letter of even date herewith (the "Fee Letter") and, without limiting the more
specific terms hereof and of the Term Sheet, you agree upon acceptance of this
commitment to pay the fees set forth in the Term Sheet and in the Fee Letter.
This commitment shall terminate if not so accepted by you prior to that time.
Following acceptance by you, this commitment will terminate on December 31,
1997, unless the Senior Credit Facilities are closed by such time.
Except as required by applicable law, this Commitment Letter, the Term Sheet,
and the Fee Letter and the contents hereof and thereof shall not be disclosed by
you to any third party without the prior consent of NationsBank and NMSI, other
than to your attorneys, financial advisors and accountants, in each case to the
extent necessary in your reasonable
<PAGE>
Kevco, Inc.
October 26, 1997
Page 5
judgment; provided, however, it is understood and agreed that you may disclose
the terms of this letter and the Term Sheet (but not the Fee Letter) to the
Acquired Company and its attorneys and financial advisors and accountants in
connection with the Acquisition, in filings with the SEC and other applicable
regulatory authorities and stock exchanges, and in proxy and other materials
disseminated to stockholders and other purchasers of securities of the Borrower.
Without limiting the foregoing, in the event that you disclose the contents of
this letter or the Fee Letter in contravention of the preceding sentence, you
shall be deemed to have accepted the terms of this Commitment Letter and Term
Sheet, and the Fee Letter.
THIS COMMITMENT LETTER (INCLUDING THE TERM SHEET) AND THE FEE LETTER AND ANY
OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS COVERED HEREIN AND THEREIN AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF.
THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
This letter may be executed in counterparts which, taken together, shall
constitute an original.
Very truly yours,
NATIONSBANK OF TEXAS, N.A.
By: /s/ T. SHIPLEY
--------------------------------
Title: Senior Vice President
NATIONSBANC MONTGOMERY
SECURITIES, INC.
By: /s/ HOWARD BEATTIE, JR.
--------------------------------
Title: Managing Director
ACCEPTED AND AGREED TO:
KEVCO, INC.
By: /s/ ELLIS McKINLEY, JR.
-----------------------------
Title: CFO
--------------------------
Date: October 27, 1997
---------------------------
<PAGE>
EXHIBIT A
---------
KEVCO, INC.
SUMMARY OF INDICATIVE TERMS AND CONDITIONS
OCTOBER 27, 1997
================================================================================
BORROWER: Kevco, Inc. (or Kevco Delaware, Inc. if mutually
determined to be advantageous).
GUARANTORS: The Senior Credit Facilities shall be guaranteed by
all existing and hereafter acquired domestic
subsidiaries of the Borrower, (excluding the
Acquired Company and its subsidiaries prior to the
Merger and including the Acquired Company and its
subsidiaries after completion of the Merger) (the
"Guarantors"). All guarantees shall be guarantees
of payment and not of collection.
AGENT: NationsBank of Texas, N.A. (the "Agent" or
"NationsBank") will act as sole and exclusive
administrative and collateral agent. As such,
NationsBank will negotiate with the Borrower, act
as the primary contact for the Borrower and perform
all other duties associated with the role of
exclusive administrative agent. No other agents or
co-agents may be appointed without the prior
written consent of the Borrower, NationsBank and
NMSI.
ARRANGER &
SYNDICATION AGENT: NationsBanc Montgomery Securities, Inc. ("NMSI").
LENDERS: A syndicate of financial institutions (including
NationsBank) arranged by NMSI, which institutions
shall be reasonably acceptable to the Borrower and
the Agent (collectively, the "Lenders").
SENIOR CREDIT FACILITIES: An aggregate principal amount of up to $130 million
(with such amount being reduced by Subordinated
Debt proceeds in excess of $100 million at Closing)
will be available under the conditions hereinafter
set forth:
Revolving Credit Facility: $35 million revolving
--------------------------
credit facility, which will include a $5 million
sublimit for the issuance of standby and commercial
letters of credit (each a "Letter of Credit").
Letters of Credit will be issued by NationsBank (in
such capacity, the "Fronting Bank"), and each
Lender will purchase an irrevocable and
unconditional participation in each Letter of
Credit.
Term Loan Faci1ity: $95 million term loan facility
-------------------
(with such amount being reduced by Subordinated
Debt proceeds in excess of $100 million at Closing)
comprised of two separate term loan tranches:
A-l
<PAGE>
(i) $40 million Tranche A Term Loan.
(ii) $55 million Tranche B Term Loan. The Tranche B
Term Loan shall be reduced by Subordinated
Debt proceeds received by the Borrower at
Closing in excess of $100 million.
PURPOSE: The proceeds of the Senior Credit Facilities shall
be used: (i) to refinance and/or redeem certain
existing indebtedness of the Borrower and the
Acquired Company (ii) to purchase the capital stock
of the Acquired Company pursuant to the Tender
Offer, Merger and Purchase Agreement; (iii) to pay
fees and expenses incurred in connection with the
Acquisition, and (iv) to provide for working
capital and general corporate purposes of the
Borrower and its subsidiaries.
INTEREST RATES: The Senior Credit Facilities shall bear interest,
at the option of the Borrower, at a rates per annum
equal to either (i) the LIBOR interbank rate,
adjusted for reserves, or (ii) the Base Rate
(defined as the higher of (a) the NationsBank prime
rate and (b) the Federal Funds rate plus 1/2%), in
each case plus the "Applicable Margins" set forth
below.
x = Ratio of
------------
Funded Debt/EBITDA LIBOR + * Base Rate + *
------------------ --------- -------------
x is greater than
or equal to 5.00 225 bps 75 bps
4.50 is less than
or equal to x is
less than 5.00 200 bps 50 bps
3.75 is less than
or equal to x is
less than 4.50 l75 bps 25 bps
3.00 is less than
or equal to x is
less than 3.75 l50 bps 0 bps
x is less than 3.00 l25 bps 0 bps
* The Applicable Margins shown above are applicable
only to the Revolving Credit Loans and Tranche A
Term Loan. The Applicable Margins with respect to
the Tranche B Term Loan shall be equal to the
Applicable Margins shown above, plus 50 bps.
The Borrower's initial Applicable Margins shall
assume a ratio of Funded Debt/EBITDA is greater
than or equal to 5.00. Changes in the Borrower's
Applicable Margin will be effective two business
days following the Agent's receipt of financial
statements indicating a change, commencing with the
receipt of the Borrower's 6-30-98 financial
statements.
If during the 180 day period following the Closing,
any breakage costs, charges or fees are incurred
with respect to LIBOR loans on account of the
syndication of the Senior Credit Facilities, the
Borrower shall immediately reimburse the Agent for
any such costs, charges or fees. Such right of
reimbursement to be in addition to and not in
limitation of customary cost and yield protection.
The Borrower may select interest periods of 1, 2, 3
or 6 months for LIBOR loans, subject to
availability.
A-2
<PAGE>
A penalty rate shall apply on all loans in the
event of default at a rate per annum of 2% above
the applicable interest rate.
The loan documentation shall include cost and yield
protection customary for transaction and facilities
of this type, including without limitation changes
in capital adequacy and capital requirements or
their interpretation, illegality, unavailability,
and reserves, all without proration or offset.
LETTER OF CREDIT FEES: Letter of Credit fees are due quarterly in arrears
to be shared proportionately by the Lenders. Letter
of Credit Fees will be equal to (i) for standby
Letters of Credit 100%, and (ii) for commercial
Letters of Credit 50%, of the LIBOR Applicable
Margin for Revolving Credit Loans in effect from
time to time on a per annum basis, plus a fronting
fee of 12.5 bps per annum to be paid to Fronting
Bank for its own account. Fees will be calculated
on the aggregate stated amount for each letter of
credit for the stated duration thereof.
COMMITMENT FEE A 50 bps. per annum (calculated on the basis of
actual number of days elapsed in a year of 360
days) Commitment Fee calculated on the unused
portion of the Senior Credit Facilities shall
commence to accrue upon the closing of a definitive
credit agreement, and shall thereafter be payable
quarterly in arrears. Commencing with the Agent's
receipt of the Borrower's 6-30-98 financial
statements, the Commitment Fee shall be reduced to
37.5 basis points per annum for any period where
the Borrower's ratio of Funded Debt/EBITDA is less
than 3.00. For purposes of determining the
Commitment Fee, Revolving Credit Loans and Letters
of Credit constitute usage.
MATURITY: The Revolving Credit Facility shall terminate and
all amounts outstanding thereunder shall be due and
payable in full six years from 12/31/97.
The Term Loan Facility shall be subject to
repayment according to the Scheduled Amortization,
with the final payment of all amounts outstanding,
plus accrued interest, being due six years from
12/31/97 for the Tranche A Term Loan and seven
years from 12/31/97 for the Tranche B Term Loan.
AVAILABILITY/SCHEDULED
AMORTIZATION: Revolving Credit Facility: Loans under the
--------------------------
Revolving Credit Facility ("Revolving Credit
Loans", and together with the Term Loans, the
"Loans") may be made, and Letters of Credit may be
issued subject to availability.
Term Loan Facility: Loans under the Term Loan
-------------------
Facility ("Term Loans") will be available in two
pro-rata borrowings occurring (i) at the funding of
the Tender Offer and (ii) at the completion of the
Merger. The Term Loans will be subject to quarterly
amortization of principal, based upon the annual
amounts shown below (the "Scheduled Amortization").
A-3
<PAGE>
<TABLE>
<CAPTION>
Tranche A Tranche B
Year Ending Term Loan Term Loan
----------- --------- ---------
<S> <C> <C>
12/31/98 $ 0 $ 550,000
12/31/99 $ 5,000,000 $ 550,000
12/31/00 $ 7,500,000 $ 550,000
12/31/01 $ 7,500,000 $ 550,000
12/31/02 $10,000,000 $ 550,000
12131/03 $10,000,000 $ 550,000
12/31/04 $ 0 $51,700,000
</TABLE>
SECURITY: The Agent (on behalf of the Lenders) shall receive
a first priority perfected security interest in all
of the capital stock of each of the domestic
subsidiaries (direct or indirect) of the Borrower
(including the Acquired Company to maximum extent
permitted by Regulation U, but excluding
subsidiaries of the Acquired Company prior to
completion of the Merger and including subsidiaries
of the Acquired Company following completion of the
Merger) and 65% of the capital stock of each
foreign subsidiary (direct or indirect) of the
Borrower (excluding foreign subsidiaries of the
Acquired Company prior to completion of the Merger
and including foreign subsidiaries of the Acquired
Company subsequent to the Merger), which capital
stock shall not be subject to any other lien or
encumbrance. The Agent (on behalf of the Lenders)
shall also receive a first priority perfected
security interest in all other presently
unencumbered and future domestic assets and
properties of the Borrower and its subsidiaries
(excluding the Acquired Company and its domestic
subsidiaries prior to completion of the Merger and
including the Acquired Company and its domestic
subsidiaries subsequent to completion of the
Merger), including, without limitation, accounts
receivable, notes receivable, inventory, material
real property, machinery, equipment, contracts,
trademarks, copyrights, patents, license
agreements, and general intangibles. Any note
receivable evidencing loans by the Borrower to the
Acquired Company prior to the completion of the
Merger shall be secured by all substantially all
domestic assets of the Acquired Company and its
subsidiaries and be guaranteed by all domestic
subsidiaries of the Acquired Company.
The foregoing security shall ratably secure the
Senior Credit Facilities and any interest rate
swap/foreign currency swap or similar agreements
with a Lender under the Senior Credit Facilities.
MANDATORY PREPAYMENTS
AND COMMITMENT
REDUCTIONS: Until the Borrower's ratio of Funded Debt/EBITDA
is less than 3.75, in addition to the amortization
set forth above, the Term Loan Facility will be
prepaid by an amount equal to (a) 100% of the net
cash proceeds of all asset sales by the Borrower or
any subsidiary of the Borrower (including stock of
subsidiaries), subject to de minimus baskets and
reinvestment provisions to be agreed upon and net
of selling expenses and taxes to the extent such
taxes are paid; (b) 75% of Excess Cash Flow (to be
defined) pursuant to an annual cash sweep
arrangement; (c)
A-4
<PAGE>
100% of the net cash proceeds from the issuance of
any debt after the Closing by the Borrower or any
subsidiary (excluding certain permitted debt); and
(d) 50% of the net cash proceeds from the issuance
of equity by the Borrower or any subsidiary after
the Closing. Prepayments after the Closing shall be
applied pro rata to reduce the Tranche A Term Loan
and the Tranche B Term Loan, and within each
tranche, pro rata with respect to each remaining
installment of principal.
OPTIONAL PREPAYMENTS
AND COMMITMENT
REDUCTIONS: The Borrower may prepay the Senior Credit
Facilities in whole or in part at any time without
premium or penalty, subject to reimbursement of the
Lenders' breakage and re-deployment costs in the
case of prepayment of LIBOR borrowings. Optional
Prepayments of the Term Loans shall be applied
pro rata to reduce the Tranche A Term Loan and the
Tranche B Term Loan, and within each tranche,
pro rata with respect to each remaining installment
of principal.
CONDITIONS PRECEDENT
TO CLOSING: The initial funding of the Senior Credit Facilities
will be subject to the satisfaction of conditions
precedent usual and customary for leveraged
financings generally and for this transaction in
particular, including but not limited to the
following:
(i) The negotiation, execution and delivery of
definitive documentation with respect to the
Senior Credit Facilities reasonably
satisfactory to NMSI, the Agent and the
Lenders.
(ii) The execution by the Borrower, the acquired
Company and/or other appropriate parties of
a definitive purchase agreement and other
related documentation relating to the
Acquisition (the "Purchase Agreement"), in
form and substance reasonably satisfactory
to NationsBank and NMSI, and the successful
tender by the Borrower for not less than a
majority of the common stock of Acquired
Company pursuant to the Tender Offer.
(iii) After giving effect to the transactions
contemplated hereby, at Closing (a) the
Borrower shall have issued not less than
$100 million of Subordinated Debt on terms
satisfactory to the Agent, (b) total debt of
the Borrower and its subsidiaries, plus the
unfunded purchase price of all common stock
of the Acquired Company not tendered
pursuant the Tender Offer, shall not exceed
$215 million in the aggregate, (c) the
Borrower shall have unused availability
under the Senior Credit Facilities of not
less than $15 million, plus the unfunded
purchase price of all common stock of the
Acquired Company not tendered pursuant to
the Tender Offer.
(iv) The Agent shall have received a pro forma
balance sheet of the Borrower and its
subsidiaries (including the Acquired Company
and its subsidiaries) as of the
A-5
<PAGE>
Closing Date giving effect to the
Acquisition and the transactions
contemplated hereby and reflecting estimated
purchase price accounting adjustments, and
such other information relating to the
Acquisition as the Agent may require.
(v) There shall not have occurred a material
adverse change since December 31, 1996 in
the business, assets, operations, condition
(financial or otherwise) or prospects of the
Borrower and its subsidiaries and the
Acquired Company and its subsidiaries taken
as a whole, or in the facts and information
regarding such entities as represented to
date.
(vi) The Agent shall have completed a field
examination of the accounts receivable,
inventory, payables, controls and systems of
the Borrower and its subsidiaries (including
the Acquired Company and its subsidiaries).
(vii) Certification as to the financial condition
and solvency of the Borrower and its
subsidiaries (after giving effect to the
Acquisition and the incurrence of
indebtedness related thereto) from an
independent firm acceptable to the Agent.
(viii) The Agent shall have received (a)
satisfactory opinions of counsel to the
Borrower (which shall cover, among other
things, authority, legality, validity,
binding effect and enforceability of the
documents for the Senior Credit Facilities)
and such corporate resolutions, certificates
and other documents as the Agent shall
reasonably require and (b) satisfactory
evidence that the Agent (on behalf of the
Lenders) holds a perfected, first priority
lien in all collateral for the Senior Credit
Facilities, subject to no other liens except
for permitted liens to be determined.
(ix) Receipt of all governmental, shareholder and
third party consents (including Hart-Scott
Rodino clearance) and approvals necessary
or, in the opinion of the Agent, desirable
in connection with the purchase of the
Acquired Company and the related financings
and other transactions contemplated hereby
and expiration of all applicable waiting
periods without any action being taken by
any authority that could restrain, prevent
or impose any material adverse conditions on
the Borrower and its subsidiaries (including
the Acquired Company and its subsidiaries),
or such other transactions, or that could
seek or threaten any of the foregoing, and
no law or regulation shall be applicable
which in the judgment of the Agent could
have such effect.
(x) The absence of any action, suit,
investigation or proceeding pending or
threatened in any court or before any
arbitrator or governmental authority that
purports to affect the Borrower and its
subsidiaries (including the Acquired Company
and its subsidiaries) or any
A-6
<PAGE>
transaction contemplated hereby that could
have a material adverse effect on the
Borrower and its subsidiaries (including the
Acquired Company and its subsidiaries) or
any transaction contemplated hereby, or that
could have an adverse affect on the ability
of the Borrower and its subsidiaries
(including the Acquired Company and its
subsidiaries) to perform their obligations
under the documents to be executed in
connection with the Senior Credit
Facilities.
(xi) The Borrower and its subsidiaries (including
the Acquired Company and its subsidiaries)
shall be in compliance with all existing
financial obligations (after giving effect
to the Acquisition).
(xii) NationsBank and NMSI shall have completed
their due diligence investigation of the
Borrower and the Acquired Company and their
respective subsidiaries with respect to
environmental matters in scope, and with
results, satisfactory to NationsBank and
NMSI.
REPRESENTATIONS &
WARRANTIES: Usual and customary for transactions of this type,
to include without limitation: (i) corporate
status; (ii) corporate power and
authority/enforceability; (iii) no violation of law
or contracts or organizational documents; (iv) no
material litigation; (v) correctness of specified
financial statements and no material adverse
change; (vi) no required governmental or third
party approvals; (vii) use of proceeds/compliance
with margin regulations; (viii) status under
Investment Company Act; (ix) ERISA; (x)
environmental matters; (xi) perfected liens and
security interests; (xii) payment of taxes; and
(xiii) consummation of the Acquisition.
COVENANTS: Usual and customary for transactions of this type,
to include without limitation: (i) delivery of
financial statements and other reports; (ii)
delivery of compliance certificates; (iii) notices
of default, material litigation and material
governmental and environmental proceedings; (iv)
compliance with laws; (v) payment of taxes; (vi)
maintenance of insurance; (vii) limitation on
liens; (viii) limitations on mergers,
consolidations and sales of assets; (ix)
limitations on incurrence of debt; (x) limitations
on dividends and stock redemptions and the
redemption and/or prepayment of other debt; (xi)
limitations on investments; (xii) ERISA; (xiii)
limitation on transactions with affiliates; and
(xiv) limitation on capital expenditures.
Financial covenants to include (but not limited
to):
. Maintenance at all times of a Minimum Net
Worth, with step-up provisions to be agreed
upon,
. Maintenance on a rolling four quarter basis of
a Maximum Leverage Ratio (total funded
debt/EBITDA), and
. Maintenance on a rolling four quarter basis of
a Minimum Fixed Charge Coverage Ratio (EBITDA
less capital
A-7
<PAGE>
expenditures)/(interest expense + scheduled
principal repayments).
EVENTS OF DEFAULT: Usual and customary in transactions of this nature,
and to include, without limitation: (i) nonpayment
of principal; interest, fees or other amounts; (ii)
violation of covenants; (iii) inaccuracy of
representations and warranties; (iv) cross-default
to other material agreements and indebtedness; (v)
bankruptcy; (vi) material judgments; (vii) ERISA,
(viii) actual or asserted invalidity of any loan
documents or security interests; or (ix) Change in
Control of the Borrower.
ASSIGNMENTS/
PARTICIPATIONS: Each Lender will be permitted to make assignments
to other financial institutions approved by the
Borrower and the Agent, which approval shall not be
unreasonably withheld. Lenders will be permitted to
sell participations with voting rights limited to
significant matters such as changes in amount,
rate, and maturity date. An assignment fee of
$3,500 is payable by the Lender to the Agent upon
any such assignment occurring (including, but not
limited to an assignment by a Lender to another
Lender).
WAIVERS & AMENDMENTS: Amendments and waivers of the provisions of the
loan agreement and other definitive credit
documentation will require the approval of Lenders
holding loans and commitments representing more
than 50% of the aggregate amount of loans and
commitments under the Senior Credit Facilities,
except that (a) the consent of all the Lenders
affected thereby shall be required with respect to
(i) increases in commitment amounts, (ii)
reductions of principal, interest, or fees, (iii)
extensions of scheduled maturities or times for
payment, (iv) releases of all or substantially all
collateral and (v) releases of all or substantially
all guarantors and (b) the consent of the Lenders
holding at least 50% of the Tranche A Term Loan
Facility and at least 50% of the Tranche B Term
Loan Facility shall be required with respect to any
amendment that changes the allocation of any
payment between the Tranche A and Tranche B Term
Loan Facilities.
INDEMNIFICATION: The Borrower shall indemnify the Lenders from and
against all losses, liabilities, claims, damages or
expenses relating to their loans, the Borrower's
use of loan proceeds or the commitments, including
but not limited to reasonable attorneys' fees and
settlements costs. This indemnification shall
survive and continue for the benefit of the Lenders
at all times after the Borrower's acceptance of the
Lenders' commitment for the Senior Credit
Facilities, notwithstanding any failure of the
Senior Credit Facilities to close.
CLOSING: The closing of the Tender Offer which shall not
occur later than December 31, 1997.
GOVERNING LAW: Texas
EXPENSES: Borrower will pay all reasonable out-of-pocket
costs and expenses associated with the preparation,
due diligence,
A-8
<PAGE>
administration, syndication and enforcement of all
documents executed in connection with the Senior
Credit Facilities, including without limitation,
the reasonable legal fees of the Agent's counsel
regardless of whether or not the Senior Credit
Facilities are closed.
OTHER: This term sheet 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 definitive
legal documentation for the Senior Credit
Facilities contemplated hereby. The Borrower shall
waive its right to a trial by jury.
A-9
<PAGE>
EXHIBIT (c)(1)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of the 21/st/ day of October, 1997 by and among Kevco, Inc., a Delaware
corporation ("Parent"), SCC Acquisition Corp., an Indiana corporation and
wholly-owned Subsidiary of Parent ("Newco"), and Shelter Components Corporation,
an Indiana corporation (the "Company"). Certain initially capitalized terms used
in this Agreement which are not defined herein have the meaning set forth in
Exhibit "A" attached hereto.
- - -----------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, upon the terms and subject to the conditions set forth herein, the
respective boards of directors of Parent, Newco and the Company have unanimously
approved this Agreement and the transactions contemplated hereby including the
acquisition of the Company by Parent pursuant to a tender offer (as it may be
amended from time to time as permitted under this Agreement, the "Offer") by
Newco for all of the issued and outstanding shares of common stock of the
Company, $.01 par value per share (the "Company Common Stock"), at a price of
$17.50 per share (as it may be modified as provided herein, from time to time,
the "Offer Price"), net to the selling shareholders in cash, without interest
thereon, followed by a Merger (the "Merger") of Newco with and into the Company
upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises, and the representations,
warranties, covenants and agreements contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows, intending to be legally bound thereby:
ARTICLE I
The Offer
---------
1.1 The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 10.1 and subject to the provisions of this Agreement, as
promptly as practicable but
<PAGE>
in no event later than five (5) Business Days after the date of the public
announcement by Parent and the Company of this Agreement, Newco shall, and
Parent shall cause Newco to, commence the Offer. The obligation of Newco to,
and of Parent to cause Newco to, commence the Offer and accept for payment, and
pay for, any shares (the "Shares") of Company Common Stock properly tendered
pursuant to the Offer shall be subject only to the conditions (the "Offer
Conditions") set forth in Exhibit "B" any of which may be waived in whole or in
-----------
part by Newco in its sole discretion, provided that, without the prior written
consent of the Company, Newco shall not waive the Minimum Condition (as defined
in Exhibit "B"). Newco expressly reserves the right to modify the terms of the
-----------
Offer in a manner not inconsistent with this Agreement, except that, without the
prior written consent of the Company, Newco shall not (i) reduce the number of
Shares to be purchased in the Offer, (ii) reduce the Offer Price, (iii) impose
any conditions to the Offer in addition to the Offer Conditions or modify the
Offer Conditions (other than to waive any Offer Conditions to the extent
permitted by this Agreement), (iv) except as provided in the next sentence,
extend the Offer, (v) change the form of consideration payable in the Offer, or
(vi) make any other change or modification in any of the terms of the Offer in
any manner that could reasonably be expected to be adverse to the holders of
Shares. Notwithstanding the foregoing, Newco may, without the consent of the
Company, (i) extend the Offer, if at the scheduled or extended expiration date
of the Offer, any of the Offer Conditions shall not be satisfied or waived,
until such time as such conditions are satisfied or waived but in any event,
Newco shall not, without the prior written consent of the Company, extend the
Offer beyond the Cut-Off Date (as defined in Section 10.1(b) hereof), (ii)
extend the Offer for any period required by any rule, regulation, interpretation
or position of the SEC or the staff thereof applicable to the Offer, or (iii)
extend the Offer for a period of up to five Business Days if, on any scheduled
expiration date on which the Offer Conditions shall have been satisfied or
waived, the number of Shares which have been validly tendered and not withdrawn
represent more than 50% of the aggregate outstanding Shares (assuming the
exercise of all options to purchase, and the conversion or exchange of all
securities convertible or exchangeable into Shares which are outstanding as of
the consummation of the Offer), but less than 90% of the then issued and
outstanding Shares. Parent and Newco each agree that Newco will not terminate
the Offer between scheduled expiration dates (except in the event that this
Agreement is terminated) and that, in the event that Newco will otherwise be
entitled to terminate the Offer at any scheduled expiration date thereof due to
the failure of one or more of the Offer Conditions, unless this Agreement shall
have been, terminated, Newco shall, and Parent shall cause Newco to, extend the
Offer until such date as the Offer Conditions have been satisfied or such later
date as required by Applicable Law; provided however, that nothing herein shall
require Newco to extend the Offer beyond the Cut-Off Date (as defined in Section
10.1(b) hereof). Subject to the terms and conditions of the Offer in this
Agreement, Newco shall, and Parent shall cause Newco to accept for payment, all
Shares validly tendered and not withdrawn pursuant to the Offer as soon as Newco
is permitted to accept such Shares for payment pursuant to the Offer, and then
pay for such Shares promptly as required by SEC Rule 14(e) - 1(c). If this
Agreement is terminated by either Parent or Newco or by the Company, Newco
shall, and Parent shall cause Newco to, terminate promptly the Offer.
<PAGE>
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Parent and Newco shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer, which shall
contain an Offer to Purchase and a related letter of transmittal and summary
advertisement (such Schedule 14D-1 and the documents included therein pursuant
to which the Offer would be made, together with any supplements or amendments
thereto, the "Offer Documents"), and Parent and Newco shall cause the Offer
Documents to be disseminated to holders of Shares as and to the extent required
by SEC Rule 14d-5 and other applicable federal and state securities laws and the
rules of any stock exchange or stock market in which the Shares are then traded.
Parent, Newco and the Company each agree promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Parent and Newco further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be promptly filed with the SEC and the other Offer
Documents as so corrected to be promptly disseminated to holders of Shares, in
each case as and to the extent required by applicable federal and state
securities laws and the rules of any stock exchange or stock market in which the
Shares are then traded. The Company and its counsel shall be given reasonable
opportunity to review and comment upon the Offer Documents prior to their filing
with the SEC or dissemination to the shareholders of the Company. Parent and
Newco agree to provide the Company and its counsel any comments Parent, Newco or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) Parent shall provide or cause to be provided to Newco on a timely
basis all forms necessary to accept for payment, and pay for, any Shares that
Newco is permitted to accept for payment under Applicable Law and pay for,
pursuant to the Offer.
1.2 Company Actions.
---------------
(a) Subject to the terms and conditions set forth herein, the Company
hereby approves of and consents to the Offer and represents and warrants that
the board of directors of the Company, at a meeting duly called and held, in
which a quorum of directors were present, duly and adopted by the affirmative
vote of all directors present, the resolutions set forth as Exhibit "C" attached
-----------
hereto, which in the manner set forth therein, approve this Agreement, the Offer
and the Merger, determine that, in the opinion of the board of directors, the
Offer, the Merger and the related transactions contemplated herein are in the
best interests of, the Company and its shareholders and are fair to the
shareholders and recommend that holders of Shares accept the Offer and, if
required by Applicable Law, approve the Merger (it being understood that,
notwithstanding anything in this Agreement to the contrary, if the Company's
board of directors modifies or withdraws its recommendation in accordance with
the terms of Section 7.3(b), such modification or withdrawal shall not
constitute a breach of this Agreement). The Company represents and warrants
that its board of directors has received the written opinion of SBC Warburg
Dillon Read Inc., the form of which is attached as Exhibit "D" attached hereto.
-----------
The Company has been authorized by SBC Warburg Dillon Read Inc. to permit,
subject to prior
<PAGE>
review and consent by SBC Warburg Dillon Read Inc., the inclusion of such
fairness opinion (or a reference thereto) in the Offer Documents and in the
Schedule 14D-9 referred to below. The Company hereby consents to the inclusion
in the Offer Documents of the recommendation of the Company's board of directors
described in this Section 1.2 subject to the right of the board of directors to
modify or withdraw such recommendation in accordance with Section 7.3(b).
(b) As soon as reasonably practicable after the Offer Documents are
filed with the SEC and as otherwise required by Applicable Law, the Company
shall pursuant to SEC Rule 14d-9 file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as
amended from time to time, the "Schedule 14D-9") containing the recommendation
described in Section 1.2(a) (subject to a right of the board of directors to
modify or withdraw such recommendation in accordance with Section 7.3(b)) and
shall mail a copy of Schedule 14D-9 to the shareholders of the Company. The
Company shall cooperate with Parent in mailing or otherwise disseminating the
Schedule 14D-9 with the appropriate Offer Documents to the Company's
shareholders. Each of the Company, Parent and Newco agrees promptly to correct
any information provided by it for use in the Schedule 14D-9 if and to the
extent that such information shall become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be promptly filed with the SEC and promptly disseminated to the
Company's shareholders, in each case as and to the extent required by applicable
federal and state securities laws and the rules of any stock exchange or stock
market in which the Shares are then traded. Parent and its counsel shall be
given reasonable opportunity to review and comment upon the Schedule 14D-9 prior
to its filing with the SEC or dissemination to the Company's shareholders. The
Company agrees to provide Parent and its counsel any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Newco promptly with mailing labels containing the
names and addresses of the recordholders of Shares as of a recent date and of
those persons becoming recordholders subsequent to such date, together with
copies of all lists indicating current shareholders, security position listings
and related computer files, if available, and all information in the Company's
possession or control regarding the names, addresses and holdings of beneficial
owners of Shares, and shall furnish to Newco such information and assistance
(including updated lists of shareholders, security position listings and
computer files) as Parent or Newco may reasonably request in communicating the
Offer to the Company's shareholders. Subject to the requirements of Applicable
Law and subject to the terms of the August Confidentiality Agreement, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent and Newco and their
Affiliates, associates and agents shall hold in confidence the information
contained in any such labels, listings and files, will use such information only
in connection with the Offer and the Merger and, if this Agreement shall
<PAGE>
be terminated, will promptly, upon request, deliver to the Company or destroy,
and will use their commercially reasonable efforts to cause their Affiliates,
associates and agents to deliver or destroy, all copies of such information then
in their possession or control.
ARTICLE II
The Merger
----------
2.1 The Merger. Upon the terms and subject to the conditions hereof, and
----------
in accordance with Indiana Law, Newco shall be merged with and into the Company
at the Effective Time as defined in Section 2.2. Following the Merger, the
separate corporate existence of Newco shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Newco and the Company in accordance
with Indiana Law. Company and Newco are herein sometimes referred to
collectively as the "Constituent Corporations."
2.2 Effective Time. The Merger shall become effective, pursuant to the
--------------
provisions of Indiana Law, at the Effective Time. When used in this Agreement,
the term "Effective Time" shall mean the later of the date and time at which the
Articles of Merger are duly filed with the Secretary of State of the State of
Indiana. The filing of the Articles of Merger shall be made as soon as
practicable after the satisfaction or waiver of the conditions to the Merger set
forth in this Agreement.
2.3 Effects of the Merger. The Merger shall have the effects set forth in
---------------------
the Indiana Law.
2.4 Name and Continued Existence of Surviving Corporation. The corporate
-----------------------------------------------------
name of the Company, as the Surviving Corporation in the Merger, shall continue
as the corporate name of the Surviving Corporation, the Constituent Corporation
whose corporate existence is to survive the Merger provided for herein and
continue thereafter as the Surviving Corporation. The identity, existence,
purposes, powers, objects, franchises, rights, privileges and immunities of the
Surviving Corporation shall continue unaffected and unimpaired by the Merger and
the corporate identity, existence, purposes, powers, objects, franchises,
rights, privileges and immunities of Newco shall be merged with and into the
Company, and the Company shall be fully vested therewith. At and after the
Effective Time, the separate existence of Newco, except insofar as continued by
statute, shall cease.
2.5 Governing Laws; Articles of Incorporation.
-----------------------------------------
(a) The laws of the State of Indiana shall govern the Surviving
Corporation.
<PAGE>
(b) The Restated Articles of Incorporation of the Company, as amended, and
in effect at the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation.
(c) In addition to the powers conferred upon it by law, the Surviving
Corporation shall have the powers set forth in the Restated Articles of
Incorporation of the Company and be governed by the provisions thereof. From
and after the Effective Time, and until further amended, as provided by law, the
Restated Articles of Incorporation of the Company may be certified, separate and
apart from this Agreement, as the Articles of Incorporation of the Surviving
Corporation.
2.6 Bylaws of Surviving Corporation. From and after the Effective Time,
-------------------------------
the Bylaws of the Company in effect at the Effective Time shall be the Bylaws of
the Surviving Corporation until the same shall be altered, amended or repealed,
or until new Bylaws shall be adopted in accordance with the provisions of law.
2.7 Directors and Officers. The directors and officers of Newco shall
----------------------
continue in office after the Effective Time as the directors and officers of the
Surviving Corporation. The directors and officers of the Surviving Corporation
shall serve in such capacities until their successors are duly elected and
qualified in accordance with law and the Bylaws of the Surviving Corporation.
2.8 Capital Stock of Surviving Corporation. The authorized capital stock
--------------------------------------
of the Company from and after the Effective Time shall be the authorized capital
stock of the Surviving Corporation.
2.9 Conversion of Shares. As of the Effective Time, by virtue of the
--------------------
Merger and without any action on the part of any holder of Shares or any shares
of common stock of Newco:
(a) Each issued and outstanding share of common stock of Newco and
owned by Parent shall be converted into and become one validly issued, fully
paid and non-assessable share of Common Stock of the Surviving Corporation.
(b) Subject to Sections 2.9(d) and 2.10, each Share issued and
outstanding (other than Shares to be canceled in accordance with Section 2.9(c))
shall be canceled and become the right to receive in cash, without interest, the
Offer Price set forth in the Offer (the "Merger Consideration"). As of the
Effective Time, all such Shares shall be canceled in accordance with this
paragraph, and when so canceled, shall no longer be outstanding and shall
automatically be retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration, without
interest.
<PAGE>
(c) Each share of Company Common Stock (including without limitation the
Shares purchased pursuant to the Offer) owned by the Company, any Company
Subsidiary, Parent, or Newco shall automatically be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(d) Options to purchase Company Common Stock will be treated as provided
in Section 7.4.
2.10 Shares of Dissenting Shareholders. Notwithstanding anything in this
---------------------------------
Agreement to the contrary, to the extent required by Indiana Law, any issued and
outstanding Shares held by a Person (a "Dissenting Shareholder") who has not
voted in favor of or consented to the Merger and complies with all the
provisions of Indiana Law concerning the right of holders of Shares to require
appraisal of their shares ("Dissenting Shares") shall not be converted as
described in Section 2.9(b), but shall become the right to receive such
consideration as may be determined to be due to such Dissenting Shareholder
pursuant to Indiana Law. If, after the Effective Time, such Dissenting
Shareholder withdraws his demand for appraisal or fails to perfect or otherwise
loses his right of appraisal, in any case pursuant to Indiana Law, his Shares
shall be deemed to be canceled as of the Effective Time and become the right to
receive the Merger Consideration determined as provided in Section 2.9(b). The
Company shall give Parent (i) prompt notice of any demands for appraisal of
Shares received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
2.11 Surrender of Certificates.
-------------------------
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company who shall be reasonably satisfactory to the Company to act as
paying agent in the Merger (the "Paying Agent"), and on or prior to the
Effective Time, Parent shall make available, or cause the Surviving Corporation
to make available, to the Paying Agent, cash in an amount necessary for the
payment of the Merger Consideration as provided in Section 2.9(b) upon surrender
of certificates representing Shares as part of the Merger. Funds made available
to the Paying Agent shall be invested by the Paying Agent as directed by Newco
or, after the Effective Time, the Surviving Corporation, provided that such
investments shall only be in obligations of or guaranteed by the United States
of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1 billion (it being
understood that any and all interest or income earned on funds made available to
the Paying Agent pursuant to this Agreement shall be turned over to Parent).
<PAGE>
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail to each holder of
record of a certificate or certificates that immediately prior to the Effective
Time represented Shares (the "Certificates"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify), and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration as provided in Section
2.9(b). Upon surrender of a Certificate for cancellation to the Paying Agent or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the amount of cash into which the
Shares theretofore represented by such Certificate shall have been canceled and
become the right to receive pursuant to Section 2.9(b), and the Certificate so
surrendered shall forthwith be canceled. The Company will act in a commercially
reasonable manner in regard to payment of cash upon receipt of Shares. In the
event of a transfer of ownership of Shares that is not registered on the
transfer records of the Company, payment may be made to a person other than the
Person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.11, each Certificate (other than Certificates
representing Dissenting Shares) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the shares of stock theretofore represented
by such Certificate shall have been converted pursuant to Section 2.9(b). No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate. Parent or the Paying Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of Shares such amounts as Parent or the Paying Agent is required to
deduct and withhold with respect to the making of such payment under the Code or
under any provision of Applicable Law. To the extent that amounts are so
withheld by Parent or the Paying Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Shares in respect of which such deduction and withholding was made by the Parent
or the Paying Agent.
(c) All cash paid upon the surrender of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares theretofore represented by
such Certificates. At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Paying
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II.
<PAGE>
(d) Any portion of the funds made available to Paying Agent to pay the
Merger Consideration which remains undistributed to the holders of Shares for
one year after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Shares who have not theretofore
complied with this Article II and the instructions set forth in the letter of
transmittal mailed to such holders after the Effective Time shall thereafter
look only to the Surviving Corporation (subject to abandoned property, escheat
or other similar Laws) for payment of the Merger Consideration to which they are
entitled, without interest.
(e) None of Parent, Newco, the Company or the Paying Agent shall be
liable to any Person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
ARTICLE III
Closing and Closing Date
------------------------
If the Offer is consummated, the Closing of the Merger (the "Closing")
shall take place (i) at the offices of Jackson Walker L.L.P., 777 Main St.,
Suite 1800, Fort Worth, Texas 76102, (ii) on the date not later than five
Business Days after each of the conditions precedent set forth in ARTICLES VIII
and IX have been satisfied or waived.
ARTICLE IV
Representations and Warranties of Parent and Newco
--------------------------------------------------
Except as set forth in the disclosure letter delivered by Parent and Newco
to the Company (the "Parent Disclosure Letter"), Parent and Newco hereby
represent and warrant to the Company, that:
4.1 Organization; Authority. Parent is a corporation duly organized,
-----------------------
validly existing and in good standing under the laws of the state of Texas and
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted by it.
4.2 Constituent Documents. Parent has delivered to the Company accurate
---------------------
and complete copies of the Articles of Incorporation and Bylaws of each of
Parent and Newco as currently in effect.
<PAGE>
4.3 Authority Relative to This Agreement.
------------------------------------
(a) Parent and Newco each have all requisite corporate power and
authority to execute, deliver, and perform their respective obligations under
this Agreement. The execution and delivery by Parent and Newco of this
Agreement to which they are parties, and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Parent and Newco.
(b) This Agreement constitutes the legal, valid and binding obligation
of Parent and Newco, enforceable in accordance with its terms, except to the
extent such enforcement may be limited by: (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances. Except as described on Schedule 4.3(b) of the Parent Disclosure
Letter, the execution, delivery and performance by Parent and Newco of this
Agreement, and the consummation of the transactions contemplated hereby, do not
require the consent, waiver, approval, license or authorization of any Person
(except as already obtained).
4.4 Non-Contravention. Except as set forth on Schedule 4.4 of the Parent
-----------------
Disclosure Letter, the execution, delivery, and performance by Parent and Newco
of this Agreement and the consummation by each of them of the transactions
contemplated hereby do not and will not (i) conflict with, or result in a
violation of any provision of, the charter or bylaws of Parent or Newco, (ii)
conflict with, or result in a violation of any provision of, or constitute (with
or without the giving of notice or the passage of time or both) a default under,
or give rise (with or without the giving of notice or the passage of time or
both) to any right of termination, cancellation, or acceleration under, any
bond, debenture, note, mortgage, indenture, lease or other Contract to which
Parent or Newco is a party or by which Parent or Newco or their respective
business or any of their respective owned or leased assets may be bound, (iii)
conflict with or result in a violation of any provision of any shareholders
agreement, voting agreement, voting trust agreement, stock pledge agreement,
loan agreement or other Contract by which Parent or Newco may be bound, (iv)
result in the creation or imposition of any Lien upon any of the assets of
Parent or Newco, or (v) assuming compliance with the matters referred to in
Section 4.5 of the Parent Disclosure Letter, violate any Applicable Law binding
upon Parent and Newco.
4.5 Governmental Approvals. No consent, approval, order, or authorization
----------------------
of, or declaration, filing, or registration with, any Governmental Entity is
required to be obtained or made by Parent or Newco in connection with the
execution, delivery, or performance by Parent or Newco of this Agreement or the
consummation by either Parent or Newco of any of the transactions contemplated
hereby, other than (i) as set forth on Schedule 4.5 of the Parent Disclosure
Letter; and (ii) such consents, approvals, orders, or authorizations which, if
not obtained, and such declarations, filings, or registrations which, if not
made, would not,
<PAGE>
individually or in the aggregate, have a Material Adverse Effect on the
business, assets, results of operations, or financial condition of Parent and
Newco considered as a whole or on the ability of Parent or Newco to consummate
the transactions contemplated hereby.
4.6 Legal Proceedings. There are no Proceedings pending or, to the best
-----------------
Knowledge of Parent and Newco, threatened, seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or the
transactions contemplated hereby.
4.7 Brokerage Fees. Except as set forth on Schedule 4.7 of the Parent
--------------
Disclosure Letter, neither Parent, Newco nor any of their Affiliates has
retained any financial advisor, broker, agent, or finder or paid or agreed to
pay any financial advisor, broker, agent, or finder on account of this Agreement
or of the transactions contemplated hereby.
4.8 Representations and Warranties. The representations and warranties
------------------------------
made in this Article IV that are qualified as to materiality shall be true and
correct and the representations and warranties that are not so qualified shall
be true and correct in all material respects, in each case, as if such
representations and warranties had been made as of the date of the consummation
of the Offer; provided such representations and warranties which expressly
relate only to an earlier date, shall only be true and correct as of such
earlier date.
ARTICLE V
Representations and Warranties of the Company
---------------------------------------------
Except as set forth in the disclosure letter delivered by the Company to
Parent at or prior to the execution hereof (the "Company Disclosure Letter") the
Company represents and warrants to Parent and Newco, that:
5.1 Organization; Authority. The Company is a corporation duly organized,
-----------------------
validly existing and in good standing under the laws of the State of Indiana and
has all requisite corporate power and authority to carry on its Business. Each
Company Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction of organization indicated on Schedule 5.1 to
the Company Disclosure Letter. Each of the Company Subsidiaries has all
requisite corporate power and authority to carry on its business as now being
conducted by it.
5.2 Qualification. The Company and each Company Subsidiary is duly
-------------
qualified and licensed to do business and each is in good standing in each
jurisdiction except where the failure to be so qualified or licensed would not
have a Material Adverse Effect on the Company.
5.3 Constituent Documents. The Company has delivered to Parent accurate
---------------------
and complete copies of the Articles of Incorporation and Bylaws of the Company
and each Company Subsidiary as currently in effect.
<PAGE>
5.4 Authority Relative to This Agreement.
------------------------------------
(a) The Company has all requisite corporate power and authority to
execute, deliver, and perform its obligations under this Agreement. The
execution and delivery by the Company of this Agreement, and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company.
(b) This Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, except to
the extent such enforcement may be limited by (i) fiduciary obligations of the
board of directors of the Company, (ii) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (iii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
5.5 Non-Contravention. Except as set forth on Schedule 5.5 to the Company
-----------------
Disclosure Letter, the execution, delivery, and performance by the Company of
this Agreement and the consummation by it of the transactions contemplated
hereby do not and will not (i) conflict with, or result in a violation of any
provision of, the charter or bylaws of the Company or any Company Subsidiary,
(ii) conflict with, or result in a violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the passage of time
or both) to any right of termination, cancellation, or acceleration under, any
bond, debenture, note, mortgage, indenture, lease or other Contract to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary or their respective owned or leased assets may be bound which
would have a Material Adverse Effect on the Company or require the consent,
waiver, approval, license or authorization of any Person (except as already
obtained) except where the failure to obtain such consent, waiver, approval,
license or authorization would not have a Material Adverse Effect on the
Company, (iii) conflict with or result in a violation of any provision of any
shareholders agreement, voting agreement, voting trust agreement, stock pledge
agreement, loan agreement or other Contract by which the Company or any Company
Subsidiary may be bound which would have a Material Adverse Effect on the
Company, (iv) result in the creation or imposition of any Lien upon any of the
assets of the Company or any Company Subsidiary which would have a Material
Adverse Effect on the Company, or (v) assuming compliance with the matters
referred to in Section 5.6, violate any Applicable Law binding upon the Company
or any Company Subsidiary which would have a Material Adverse Effect on the
Company.
5.6 Governmental Approvals. No consent, approval, order, or authorization
----------------------
of, or declaration, filing, or registration with, any Governmental Entity is
required to be obtained or made by the Company in connection with the execution,
delivery, or performance by the Company of this Agreement or the consummation by
the Company of any of the transactions contemplated hereby, other than (i) as
set forth on Schedule 5.6 to the Company Disclosure Letter; and (ii) such
consents, approvals, orders, or authorizations which, if not obtained, and
<PAGE>
such declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or on the ability of the Company to consummate the transactions contemplated
hereby.
5.7 [Intentionally Omitted].
-----------------------
5.8 Brokerage Fees. Except as set forth on Schedule 5.8 to the Company
--------------
Disclosure Letter to the Company Disclosure Letter, neither the Company nor, to
the Knowledge of the Company, any of its Affiliates has retained any financial
advisor, broker, agent, or finder or paid or agreed to pay any financial
advisor, broker, agent, or finder on account of this Agreement or any
transaction contemplated hereby.
5.9 SEC Filings. The Company has delivered or made available to Parent
-----------
each effective registration statement, report, filing, proxy statement or
information statement prepared by it and filed with the SEC within the past
three years (the "Public Reports"). The Company has timely made all required
filings with the SEC and with any exchange on which Shares of Company Common
Stock are listed within the past three years pursuant to the provisions of the
1933 Act, the 1934 Act and the rules and regulations of any such exchange except
where the failure to make such timely filings has not had or would not have a
Material Adverse Effect on the Company. Each of the Public Reports was, at the
time filed with the SEC, prepared in accordance with and was in compliance in
all material respects with the 1933 Act, the 1934 Act and the rules and
regulations of such exchange. None of the Public Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
5.10 Capital Stock.
-------------
(a) The authorized capital stock of the Company consists of
26,000,000 shares, 1,000,000 of which are shares of Company Special Stock, $.01
par value per share ("Company Special Stock"), none of which shares are issued
or outstanding, and 25,000,000 shares of Company Common Stock, of which
7,755,854 Shares are issued, outstanding and entitled to vote as of October 15,
1997. Each of the outstanding Shares has been duly authorized, is validly
issued, fully paid and non-assessable. None of such shares was issued in
violation of any preemptive or other preferential rights of any shareholder of
the Company or any other Person.
(b) The authorized capital stock of each Company Subsidiary is set
forth on Schedule 5.10(b) to the Company Disclosure Letter. Each of the
outstanding shares of each Company Subsidiary has been duly authorized, is
validly issued, fully paid and non-assessable. None of such shares of a Company
Subsidiary was issued in violation of any preemptive or other
<PAGE>
preferential rights of any Person. The Company is not a party to any voting
trust, proxy, other agreement, understanding or Contract with respect to the
voting of any shares of the equity securities of any Company Subsidiary.
(c) (i) Except as set forth on Schedule 5.10(c)(i) to the Company
Disclosure Letter, there are no outstanding subscriptions, options, warrants,
calls, demands or other Contracts of any kind or nature whatsoever, under which
the Company is or may be obligated to sell or issue to any Person any shares of
Company Stock or any other securities which are convertible into, or otherwise
have a right to subscribe for, any shares of Company Stock.
(ii) Except as set forth on Schedule 5.10(c)(ii) to the Company
Disclosure Letter, there are no outstanding subscriptions, options, warrants,
calls, or other Contracts of any kind, under which the Company or any Company
Subsidiary is or may be obligated to sell or issue to any Person any shares of
common stock of a Company Subsidiary or any other securities which are
convertible into, or otherwise have a right to subscribe for, any shares of
common stock or other equity securities of any Company Subsidiary.
(d) Except as set forth on Schedule 5.10(d) to the Company Disclosure
Letter, the Company has no outstanding bonds, debentures, notes or other
obligations, the holders of which are convertible into or exercisable for
Shares.
(e) Except for those matters expressly covered by Section 5.9 the
Company has not violated, any applicable federal or state securities laws or
regulations in connection with the offer, sale or issuance of any of its
securities except where such violation would not have a Material Adverse Effect
on the Company.
5.11 Subsidiaries. Schedule 5.11 to the Company Disclosure Letter sets
------------
forth each Company Subsidiary or other Person controlled, directly or
indirectly, by the Company or in which the Company has any direct or indirect
equity interest.
5.12 Financial Statements. The Company has delivered to Parent true,
--------------------
correct and complete copies of (i) the Company's audited financial statements
set forth on Schedule 5.12(a) to the Company Disclosure Letter (the "Audited
Financial Statements"), and (ii) the Company's unaudited financial statements
set forth on Schedule 5.12(a) to the Company Disclosure Letter (the "Company's
Unaudited Financial Statements"), certified, on behalf of the Company, by the
Company's chief financial officer (the financial statements referred to in (i)
and (ii) being collectively referred to as the "Financial Statements"). As used
herein, the term "Financial Statements" shall mean the Financial Statements and
the Supplementary Unaudited Financial Statements. The Financial Statements have
been prepared from the books and records of the Company in conformity with GAAP,
applied on a basis consistent with preceding years throughout the periods
involved and fairly present the Company's financial position as of the
respective dates thereof and its results of operations, retained earnings and
cash flows for the
<PAGE>
periods then ended in conformity with GAAP; provided, however, the unaudited
Financial Statements lack the footnote disclosure otherwise required by GAAP and
lack normal and recurring year-end adjustments, none of which would reasonably
be expected to have a Material Adverse Effect on the Company.
5.13 Business Information; Disclosure. The Company has delivered to Parent
--------------------------------
accurate and complete copies of the information with respect to the Company and
the Company Subsidiaries set forth on Schedule 5.13 to the Company Disclosure
Letter (collectively the "Business Information"). As of the date actually
prepared, the most recent versions of the information delivered to the Parent,
taken as a whole, contained in the Business Information is true and correct in
all material respects and does not omit any material fact necessary to be stated
therein or required to be stated therein in order to make any statement
contained therein not misleading. No representation or warranty made by the
Company in this Agreement, contains or will contain, at the time of delivery,
any untrue statement of a material fact.
5.14 Absence of Certain Changes. Except as disclosed on Schedule 5.14 to
--------------------------
the Company Disclosure Letter, since the date of the Company's Audited Financial
Statements (i) other than changes, events or conditions generally affecting the
industry in which the Company and Parent operate, there has not been any change
in, or an event or condition that would reasonably be expected to result in any
change in, the Business, or the ownership or operation of the Company's assets
that would have a Material Adverse Effect on the Company; (ii) the Company's
Business has been conducted in all material respects in the ordinary course of
business consistent with past practice; and (iv) as of the date of this
Agreement neither the Company nor any Company Subsidiary has, in respect of its
Business, taken any of the actions expressly prohibited by Section 6.1. Without
limiting the generality of the foregoing and except as disclosed in the Public
Reports or Schedule 5.14 to the Company Disclosure Letter, since December 31,
1996: (i) no Person, including the Company, has accelerated, terminated,
modified or canceled any material Contract, (or material series of related
Contracts) to which the Company is a party or by which it may be bound; (ii) the
Company has not permitted or allowed to be imposed upon any of its material
assets, tangible or intangible, any Lien except for Permitted Liens; (iii) the
Company has not made any capital expenditures (or series of related capital
expenditures) involving more than $500,000.00 as to any one item; (iv) the
Company has not made any capital investment in, any loan to, or any acquisition
of, the securities or assets of any other Person (or series of related capital
investments, loans (excluding trade payables), or acquisitions) exceeding
$500,000 in the aggregate or outside the ordinary course of business; (v) the
Company has not created, incurred, assumed or guaranteed any Indebtedness
(including capitalized lease obligations); (vi) the Company has not delayed or
postponed (beyond its normal practice) in any material respect, the payment of
accounts payable and other liabilities or obligations; (vii) the Company has
not, as of the date of this Agreement, canceled, compromised, waived, or
released any right or claim (or series of related rights or claims) involving
more than $250,000.00; (viii) the Company has not declared, set aside or paid
any dividend or distribution with respect to any of its equity securities or
redeemed, purchased or otherwise acquired any of its equity securities;
<PAGE>
(ix) the Company has not, as of the date of this Agreement, experienced any
damage, destruction or loss (whether or not covered by insurance) to any of its
property exceeding $250,000.00 in the aggregate; (x) the Company has not granted
any increase in the base compensation of any of its directors, or executive
officers except in the ordinary course of business consistent with past
practice; (xi) the Company has not adopted any bonus, profit-sharing, incentive
compensation, pension, retirement, medical, hospitalization, life or other
insurance, severance or other plan, Contract or commitment for any of its
shareholders, directors, officers, or employees or modified or terminated any
existing such plan, Contract or commitment except in the ordinary course of
business consistent with past practice; (xii) the Company has not made any other
change in employment terms for any of its directors, or executive officers
except in the ordinary course of business consistent with past practice; and
(xiii) the Company has not committed to any of the foregoing.
5.15 Compliance With Laws. Except as set forth on Schedule 5.15 to the
--------------------
Company Disclosure Letter, the Company is in compliance with all Applicable Laws
relating to the ownership or operation of its assets and properties or the
operation of its Business, except for noncompliance with such Applicable Laws
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company. The Company is not charged with or, to the Knowledge of
the Company, threatened with, or, under investigation with respect to, any
violation of any Applicable Law relating to any aspect of the ownership or
operation of its assets or the operation of its Business except for any
violation which would not have a Material Adverse Effect on the Company. To the
Company's Knowledge, the Company has not made any illegal payment to officers or
employees of any Governmental Entity or to customers or suppliers, engaged in
any other illegal or reciprocal practices or illegally given any consideration
to purchasing agents or other representatives of customers with respect to sales
made or to be made by the Company, and no written notification has been received
by the Company alleging any violation of any of the foregoing.
5.16 Affiliate Agreements. Except as set forth on Schedule 5.16 to the
--------------------
Company Disclosure Letter, there are no material written or oral Contracts
between the Company and/or the Company's Affiliates in connection with its
Business, including, without limitation, any such Contracts relating to the
provision of any services by the Company to any such Affiliate, or by any such
Affiliate to the Company.
5.17 Liabilities. Except for liabilities or obligations reflected or
-----------
reserved against in the latest of the Financial Statements delivered to Parent
and current liabilities incurred in the ordinary course of the Company's
Business since the date of such Financial Statements and as expressly set forth
on Schedule 5.17 to the Company Disclosure Letter, the Company has no
liabilities except for those liabilities which would not have a Material Adverse
Effect on the Company.
<PAGE>
5.18 Labor Relations.
---------------
(a) Except as set forth on Schedule 5.18 to the Company Disclosure
Letter, the Company is not a party to any collective bargaining agreement.
Except as set forth on Schedule 5.18 to the Company Disclosure Letter, there are
no controversies or unfair labor practice proceedings pending or, to the
Knowledge of the Company, threatened between the Company and any of its current
or former employees or any labor or other collective bargaining unit
representing any current or former employee of the Company that would likely
result in a labor strike or work stoppage or otherwise have a Material Adverse
Effect on the Company. Except as set forth on Schedule 5.18 to the Company
Disclosure Letter, no organizational effort is presently being made or, to the
Knowledge of the Company, threatened by or on behalf of any labor union with
respect to employees of the Company (a) which, with respect to efforts commenced
on or prior to the date hereof, if successful, would have a Material Adverse
Effect on the Company or (b) with respect to efforts commenced after the date
hereof would have a Material Adverse Effect on the Company. As of the date of
this Agreement, to the Knowledge of the Company, no officer of the Company has
any announced plan to terminate employment with the Company.
(b) The Company is in compliance with all Applicable Laws pertaining
to employment and employment practices and wages, hours, and other terms and
conditions of employment in respect of the employees of its Business except for
noncompliance with such Applicable Laws which, individually or in the aggregate,
would not have a Material Adverse Effect on the Company and is not, in respect
of its business or the employees thereof, engaged in any unfair labor practices
or unlawful employment practices which would have a Material Adverse Effect on
the Company. Except as set forth on Schedule 5.18 to the Company Disclosure
Letter, there is no pending or, to the Knowledge of the Company, threatened
Proceeding by or before, and the Company is not subject to any judgment, order,
writ, injunction, or decree of or inquiry from, the National Labor Relations
Board, the Equal Employment Opportunity Commission, the Department of Labor, or
any other Governmental Entity in connection with any current, former, or
prospective employee of the Company's Business, which would have a Material
Adverse Effect on the Company.
5.19 Employee Benefits.
-----------------
(a) Employee Benefit Plans. Schedule 5.19 to the Company Disclosure
----------------------
Letter lists all material Employee Benefit Plans whether or not covered by
ERISA, and, to the extent covering any employee, any executive compensation
arrangement, change in control agreement or severance plan or arrangement that
the Company or any Company Subsidiary maintains or to which the Company or any
Company Subsidiary contributes for the benefit of any current or former employee
of the Company or any Company Subsidiary.
<PAGE>
(b) Multi-Employer Plans. Neither the Company nor any Company
--------------------
Subsidiary has any current obligation, fixed or contingent, to contribute to any
Multi-Employer Plan for the benefit of any current or former employee of the
Company.
(c) Documents. The Company has delivered to Parent true, correct and
---------
complete copies of all current plans or summary plan descriptions for each
Employee Benefit Plan listed on Schedule 5.19 to the Company Disclosure Letter.
(d) Post-Employment Benefits Other Than Pensions. Neither the Company
--------------------------------------------
nor any Affiliate has any obligation to provide post-employment benefits to
former employees other than as provided under Code Section 4980B or as a pension
pursuant to the terms of an Employee Pension Benefit Plan.
(e) Liabilities. Neither the Company nor any of its Affiliates
-----------
maintains or contributes to, or has maintained or contributed to, an Employee
Benefit Plan subject to Title IV of ERISA during the last five years. Nothing
done or omitted to be done and no transaction or holding of any asset under or
in connection with any Employee Benefit Plan has or will make the Company or any
director or officer of the Company subject to any liability under ERISA or any
liability for any Tax pursuant to Section 4975 of the Code that would have a
Material Adverse Effect on the Company. There are no pending, or to the
Knowledge of the Company, threatened claims by, or on behalf of the Employee
Benefit Plans, or by any participant therein, alleging a breach or breaches of
fiduciary duties or violations of Applicable Laws which would result in any
liability on the part of the Company, its officers or directors, or such
Employee Benefit Plans, under ERISA or any other Applicable Law which would
result in a Material Adverse Effect on the Company and, to the Knowledge of the
Company, there is no reasonable Basis for any such claim.
5.20 Litigation. Except as set forth on Schedule 5.20 to the Company
----------
Disclosure Letter, there are no actions, causes of action, claims, suits, or
Proceedings pending or, to the Knowledge of the Company, threatened, against the
Company or affecting the operation by the Company of its Business at law, in
equity, or before or by any Governmental Entity, which (i) seeks to restrain or
enjoin the consummation of the transactions contemplated hereby or (ii) (a) with
respect to matters pending or threatened on or prior to the date hereof, if
adversely determined, would have a Material Adverse Effect on the Company or (b)
with respect to matters arising after the date hereof, would have a Material
Adverse Effect on the Company. Except as set forth in Schedule 5.20 to the
Company Disclosure Letter, the Company is not subject to, or in default with
respect to, any order, writ, injunction, or decree of any Governmental Agency
which would have a Material Adverse Effect on the Company.
5.21 Environmental Matters. Except as set forth on Schedule 5.21 to the
---------------------
Company Disclosure Letter: (i) the Company is in compliance in all respects
with all Environmental Laws in connection with the ownership, use, maintenance
and operation of its assets, pertaining to
<PAGE>
health, safety, the environment, Hazardous Materials, and otherwise in
connection with the conduct of its Business except where the failure to be in
compliance would not have a Material Adverse Effect on the Company; (ii) the
Company has no liability, whether contingent or otherwise, under any
Environmental Law with respect to its operations, properties or assets
(including those properties or assets acquired from another Person) which would
have a Material Adverse Effect on the Company; (iii) no written notices or
written notification of violation or alleged violation of, non-compliance or
alleged non-compliance with or any liability under, any Environmental Law
relating to the operations or properties of the Company have been received by
the Company since January 1, 1992 which would have a Material Adverse Effect on
the Company; (iv) there are no administrative, civil or criminal writs,
injunctions, decrees, orders, or judgments outstanding, or any Proceedings
pending or, to the Knowledge of the Company threatened, relating to compliance
with or liability under any Environmental Law affecting the Company (a) as to
such matters pending as of the date hereof, if decided adversely to the Company,
would have a Material Adverse Effect on the Company and (b) as to such matters
arising after the date hereof would have a Material Adverse Effect on the
Company; (v) there are no (a) underground storage tanks on any Owned Real
Property (as hereinafter defined) and the Company has not, to the Knowledge of
the Company, operated any underground storage tanks on any Leased Property (as
hereinafter defined), or (b) to the Knowledge of the Company, asbestos
containing materials on or in the improvements or fixtures located thereon
requiring removal or remediation under Applicable Laws which removal or
remediation would cost in excess of $250,000; (vi) the Company has obtained or
applied for all Permits required under any Environmental Law for the conduct of
its Business or necessary or required in respect of its owned or leased real
property, or improvements or equipment located thereon except where the failure
to have such Permit would not have a Material Adverse Effect on the Company;
(vii) the Company has no Knowledge of any other Person who has caused any
Release or threatened Release of any Hazardous Material on or from any Owned
Real Property or Leased Property at or to which the Company disposed,
transported, treated or arranged to dispose of Hazardous Materials which would
have a Material Adverse Effect on the Company; and (viii) except as set forth
on Schedule 5.21 to the Company Disclosure Letter, as of the date hereof the
Company is not required to give notice of or record or deliver to any
Governmental Entity an environmental disclosure document or statement by virtue
of the transactions set forth herein and contemplated hereby except where the
failure to give notice, record or delivery would have a Material Adverse Effect
on the Company.
5.22 Tax Matters. For purposes of this Section 5.22, references to the
-----------
"Company" includes the Company, each Company Subsidiary, and each other member
of any affiliated, consolidated or combined group of corporations of which the
Company or any Company Subsidiary is or ever has been a member.
(a) Tax Returns. All Tax Returns (including information returns)
-----------
including all schedules or attachments thereto, required by the United States or
any state or any political subdivision thereof or any foreign jurisdiction to
have been filed by the Company with respect to
<PAGE>
Taxes owned by the company in excess of $100,000, have been timely filed. All
information provided in such Tax Returns is true, complete and accurate in all
material respects. All Taxes owed by the Company by law or pursuant to any Tax
sharing agreement (whether or not shown on any Tax Return and whether or not
assessed) have been paid or a full reserve has been made for such Taxes on the
books and records of the Company, including the Financial Statements except
where the failure to pay would not have a Material Adverse Effect. Except as
set forth on Schedule 5.22(a) to the Company Disclosure Letter, the Company is
not currently the beneficiary of any extension of time within which to file any
Tax Return.
(b) Additional Taxes. There is no dispute or claim concerning any Tax
----------------
liability of the Company either claimed or raised by any authority in writing or
as to which the Company has Knowledge based upon direct inquiry by any agent of
such authority which would have a Material Adverse Effect. Except as described
in Schedule 5.22(c) to the Company Disclosure Letter, no Tax deficiency or
delinquency is being asserted as of the date of this Agreement against the
Company; there is no unpaid assessment, proposal for additional Taxes,
deficiency or delinquency in the payment of any of the Taxes of the Company
that, to the Knowledge of the Company, could be asserted by any authority.
Schedule 5.22(c) to the Company Disclosure Letter lists as of the date of this
Agreement all federal and state income Tax Returns of the Company with respect
to Taxes owed by the Company in excess of $100,000 for taxable periods ended on
or after_December 31, 1994, indicates those Tax Returns that have been audited
and indicates those Tax Returns that currently are the subject of audit, if any.
The Company has made available to Parent correct and complete copies of all Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company, for any taxable period ended on or after December 31,
1994.
(c) Other Tax Matters. Except as set forth on Schedule 5.22(c) to the
-----------------
Company Disclosure Letter, as of the date of this Agreement no Person has waived
any statute of limitations in respect of Taxes of the Company to any extension
of time with respect to a Tax assessment or deficiency affecting the liability
of the Company for Taxes. There are no outstanding requests by the Company for
rulings with any Tax authority that would effect in any material respect the
operations of the Company.
5.23 Product Liability. Except as disclosed in Schedule 5.23 to the
-----------------
Company Disclosure Letter, (i) there is no written notice, demand, claim,
action, suit, inquiry, hearing, Proceeding, written notice of violation or
investigation of a civil, criminal or administrative nature by or before any
Governmental Entity against or involving any product, substance or material
(collectively, a "Product"), or claims or lawsuits by any Person involving the
same or similar Product manufactured, produced, distributed or sold by or on
behalf of the Company which is pending or, to the Knowledge of the Company,
threatened, resulting from a defect or alleged defect in design, manufacture,
materials or workmanship of any Product manufactured, produced, distributed or
sold by or on behalf of the Company, or any failure or alleged failure to warn,
or from any breach or alleged breach of implied warranties or representations
including, without
<PAGE>
limitation, polybutelene products, and (ii) there has not been, nor is there
under consideration or investigation by the Company, any Product recall, rework,
retrofit or post-sale warning (collectively, recalls, reworks, retrofits and
post-sale warnings are referred to in this Agreement as "Recalls") conducted by
or on behalf of the Company or any Recall conducted by or on behalf of any
entity as a result of any defect or alleged defect in any Product supplied by
the Company, which would have a Material Adverse Effect on the Company.
5.24 Product Warranty. Each Product manufactured by the Company during the
----------------
last five years has been manufactured in conformity with all Applicable Laws,
and all express and implied warranties except where the failure to do so would
not have a Material Adverse Effect on the Company, and the Company has no
liability for any present or future charge, complaint, action, suit, Proceeding,
hearing, investigation, claim or demand giving rise to any liability for
replacement or repair thereof or other damages in connection therewith, (i)
subject only to any reserve for product warranty claims set forth on the
Financial Statements as adjusted for the passage of time through the
consummation of the Offer in accordance with past customs and practices of the
Company and (ii) except for any liability which would not have a Material
Adverse Effect on the Company.
5.25 Real Property.
-------------
(a) Section 5.25(a) to the Company Disclosure Letter lists all real
property owned by the Company (the "Owned Real Property"). Other than
condemnation rights of Governmental Entities and Permitted Liens none of the
Owned Real Property is subject to any right or option of any other Person to
purchase or otherwise obtain title to all or any portion of such property.
(b) Schedule 5.25(b) to the Company Disclosure Letter contains a list
of all leases, licenses, Permits, subleases, and occupancy agreements, together
with any amendments thereto (the "Leases") with respect to (i) all real property
leased by the Company (as lessee and including those in the names of nominees or
other entities) in connection with the Company's Business (the "Leased
Property"), and (ii) all real property leased or subleased by the Company, as
lessor or sublessor, to third parties. Except as identified on Schedule 5.25(b)
to the Company Disclosure Letter, true, complete and accurate copies of the
Leases have been made available to Parent, and each of such Leases is in full
force and effect without modification or amendment from the form delivered
except for leases which expire by their terms prior to the Cut-off Date. No
option has been exercised under any of such Leases, except options whose
exercise has been evidenced by a written document, a true, complete and accurate
copy of which has been delivered to Parent with the corresponding Lease.
Neither the Company nor, to the Knowledge of the Company, any of the other
parties to the Leases is in default under any of the Leases, which would have a
Material Adverse Effect on the Company, and no amount due under the Leases
remains past due, no controversy, claim, dispute or agreement exists between the
parties to the Leases, and
<PAGE>
no default has occurred which with the giving of notice or with the passage of
time, or both, would constitute a default thereunder, which would have a
Material Adverse Effect on the Company.
(c) Except as set forth on Schedule 5.25(c) to the Company Disclosure
Letter:
(i) The Company has not received any written notice of any
violation of any Applicable Laws (including, without limitation, the Americans
with Disabilities Act) in respect of the Owned Real Property or Leased Property,
which has not been heretofore remedied, other than notices of violations which
would not have a Material Adverse Effect on the Company, and, to the Knowledge
of the Company, there does not exist any such violations which, individually or
in combination with any others, which would have a Material Adverse Effect on
the Company;
(ii) The Company has not received any written notice that any
operations on or uses of the Owned Real Property or Leased Property constitute
non-conforming uses under any Applicable Laws except for those which would not
have a Material Adverse Effect on the Company; and
(iii) The Company does not have any Knowledge, nor has it
received any written notice of, any pending, threatened or contemplated rezoning
proceeding affecting the Owned Real Property or Leased Property except for those
which would not have a Material Adverse Effect on the Company.
(d) Except as set forth in Schedule 5.25(d) to the Company Disclosure
Letter, the Company has not received any written notice from any insurance
carrier regarding defects or inadequacies in the Owned Real Property or Leased
Property, which, if not corrected, would result in termination of the Company's
insurance coverage therefor or an increase in the cost thereof or which would
result in a Material Adverse Effect on the Company.
(e) Except as set forth on Schedule 5.25(e) to the Company Disclosure
Letter, there is no pending or, to the Knowledge of the Company, threatened:
(i) Condemnation of any part of the Owned Real Property or the
Leased Property by any Governmental Entity which would have a Material Adverse
Effect on the Company;
(ii) Assessment against any part of the Owned Real Property or
the Leased Property which would have a Material Adverse Effect on the Company;
or
<PAGE>
(iii) Litigation against the Company for breach of any
restrictive covenant affecting any part of the Owned Real Property or Leased
Property which would have a Material Adverse Effect on the Company.
(f) The Company's Owned Real Property and Leased Property has been
maintained in accordance with any leases or other Contracts with respect thereto
and is in operating condition and repair sufficient for their intended use
except where the failure to be maintained or the sufficiency of the condition
would not have a Material Adverse Effect.
5.26 Contracts. Schedule 5.26 to the Company Disclosure Letter lists all
---------
material Contracts of the Company as of the date of this Agreement and
identifies those material contracts entered into since the date of the Company's
Audited Financial Statements.
5.27 [Intentionally omitted.]
---------------------
5.28 Intellectual Property. Schedule 5.28 to the Company Disclosure Letter
---------------------
contains a list of all material Intellectual Property (excluding trade secrets,
know-how, customer lists and brand names) in which the Company has any right,
title or interest or which has been used in connection with, or which relates
to, its Business. Except as set forth in Schedule 5.28 to the Company
Disclosure Letter, the Company or a Company Subsidiary either owns or has the
right to use (in the manner presently being used by the Company or a Company
Subsidiary) by license, sublicense, agreement, or permission all of the
Intellectual Property set forth on Schedule 5.28 to the Company Disclosure
Letter. Except as otherwise set forth in Schedule 5.28 to the Company
Disclosure Letter, the Company has not granted a license, nor reached an
understanding with any third party, nor entered into a written agreement,
relating in whole or in part, to any of the material Intellectual Property of
the Company used in connection with the conduct of its Business, and there has
been no assertion thereof by any Person. To the Knowledge of the Company, there
is no infringement or other adverse claim against the rights of the Company with
respect to any of the Intellectual Property used or owned by the Company in
connection with the conduct of its Business which would have a Material Adverse
Effect on the Company. Schedule 5.28 to the Company Disclosure Letter lists
separately the Company's trademarks and trade names which are material to the
conduct of its Business (the "Material Trademarks and Trade Names"). The Company
has not been charged with, nor, to the Knowledge of the Company, is it
threatened to be charged with respect to its Material Trademarks and Trade
Names, the infringement or other violation of the intellectual property rights
of any other Person. In connection with the conduct of its Business, the
Company, with respect to its Material Trademarks and Trade Names, has hot
infringed, nor is it infringing, any intellectual property right of any other
Person which would have a Material Adverse Effect on the Company.
<PAGE>
ARTICLE VI
Conduct of Business
-------------------
The Company covenants and agrees to and with Parent and Newco, as follows:
6.1 Conduct of the Company and Company Subsidiaries.
-----------------------------------------------
(a) Except as contemplated by this Agreement or as set forth on
Schedule 6.1 attached hereto, during the period from the date hereof until such
time as Parent's designees shall constitute a majority of the Board of Directors
of the Company, the Company shall, and the Company shall cause each Company
Subsidiary to: (i) conduct its business only in the ordinary course consistent
with past practice in all material respects; (ii) use commercially reasonable
efforts to preserve, maintain, and protect its assets and the Business of the
Company and each Company Subsidiary; (iii) use commercially reasonable efforts
to preserve intact the business organization of the Business of the Company and
each Company Subsidiary, to keep available the services of the employees of its
business, and to maintain existing relationships with licensors, licensees,
suppliers, contractors, distributors, customers, and others having business
relationships with its business; and (iv) comply in all material respects with
all Applicable Laws, including all applicable federal and state securities laws,
rules and regulations and including, without limitation, the timely filing of
all periodic reports with the SEC required to be filed pursuant to the 1934 Act.
(b) Without limiting the generality of the foregoing, and except as
set forth in Schedule 6.1 or otherwise expressly provided in this Agreement,
until such time as Parent's designees shall constitute a majority of the Board
of Directors of the Company, the Company shall not, and the Company shall cause
each Company Subsidiary not to, without the prior written consent of Parent
(which consent will not be unreasonably withheld):
(i) except in the ordinary course of business consistent with
past practice with respect to the purchase of inventory (including raw
materials) create, incur, guarantee, or assume any Indebtedness for borrowed
money in respect of the Business of the Company or any Company Subsidiary in
excess of $500,000;
(ii) mortgage or pledge any material portion or portions of its
properties or assets or create any Lien (other than Permitted Liens) thereupon;
(iii) (a) enter into, adopt, or (except as may be required by
Applicable Law) amend in any material respect any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, stock purchase, pension, retirement, deferred compensation,
employment, severance, or other Employee Benefit Plan, trust, fund, or other
arrangement for the benefit or welfare of any director or executive officer of
the Business of the Company or a Company Subsidiary; (b) except for normal
increases in the
<PAGE>
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company or Company Subsidiary, increase in any manner the
compensation or fringe benefits of any director or executive officer of the
Company or a Company Subsidiary; (c) pay to any employee of the Company or a
Company Subsidiary any benefit not required by any Employee Benefit Plan, trust,
fund, or other arrangement as in effect on the date hereof except for those paid
in the ordinary course of business and consistent with past practice; (d) pay
any bonus to any employee of the Company or a Company Subsidiary except for
bonuses paid in the ordinary course of business and consistent with past
practice; (e) other than pursuant to the contracts or agreements set forth on
Schedule 6.1 attached hereto declare, set aside or pay any dividend or
distribution with respect to Company Stock, or redeem, repurchase, or otherwise
acquire any of its Company Stock or other equity securities; or (f) offer, sell,
issue or commit to issue any shares of Company Stock, options to acquire Company
Stock or securities convertible into or having a right to acquire Company Stock;
except for the issuance of Common Stock upon the exercise of existing options,
warrants and convertible securities;
(iv) sell, lease, transfer, or otherwise dispose of, directly
or indirectly, any of its assets, other than (a) inventory and equipment sold in
the ordinary course of business consistent with past practice, (b) assets which
in the aggregate are not in excess of $2,000,000, and (c) assets presently
subject to a purchase agreement and set forth on Schedule 6.1 attached hereto;
(v) make any capital expenditures relating to the Business of
the Company or a Company Subsidiary which is in excess of $500,000.00 as to any
one item other than pursuant to existing commitments set forth on Schedule 6.1;
(vi) pay, discharge, or satisfy any material claims,
liabilities, or obligations relating to the Business of the Company or a Company
Subsidiary (whether accrued, absolute, contingent, unliquidated, or otherwise,
and whether asserted or unasserted), other than the payment, discharge, or
satisfaction in the ordinary course of business consistent with past practice,
or in accordance with their terms, of liabilities reflected or reserved against
in the Financial Statements or incurred since the latest of the Financial
Statements in the ordinary course of business consistent with past practice;
(vii) enter into any material Contract, or material transaction
relating to the Business of the Company or a Company Subsidiary, except in the
ordinary course of business consistent with past practice or except as set forth
on Schedule 6.1 attached hereto;
(viii) amend, modify, or change in any material respect any
existing material Contract relating to the Business of the Company or a Company
Subsidiary, other than in the ordinary course of business consistent with past
practice;
<PAGE>
(ix) waive, release, grant, or transfer any rights of material value
relating to the Business of the Company or a Company Subsidiary, other than in
the ordinary course of business consistent with past practice;
(x) permit any current insurance or reinsurance policy to be
canceled or terminated or any of the coverages thereunder to lapse if such
policy covers material assets or insures risks, contingencies, or liabilities of
the Business of the Company or a Company Subsidiary, unless simultaneously with
such cancellation, termination, or lapse, replacement policies providing
coverage equal to or greater than the coverage canceled, terminated, or lapsed
have been obtained;
(xi) change any of the accounting principles or policies used by it
relating to the preparation of its Financial Statements, except for any change
required by reason of a concurrent change in GAAP and notice of which is given
in writing by the Company to Parent;
(xii) enter into any Contract to acquire all or substantially all of
the assets or properties of any other Person or merge or consolidate with or
acquire all or substantially all of the securities of any other Person other
than transactions that are (i) in the ordinary course of business consistent
with past practice (ii) which would involve a purchase price not in excess of
$1,000,000 in the aggregate or (iii) set forth on Schedule 6.1;
(xiii) effect any change in the Restated Articles of Incorporation or
Bylaws of the Company or Company Subsidiary except as may be required to effect
the transactions contemplated by this Agreement;
(xiv) except with respect to transactions contemplated by subsections
(iv) and (xii) above,
(A) enter into a material line of business or discontinue a
material line of business, or
(B) open or close any material office, distribution or
manufacturing facilities other than pursuant to the expiration of an existing
lease; or
(xv) agree to take, any of the actions which would require the
Company to violate this Section unless the Company's obligation to take such
action arises only if the Offer is not consummated.
(c) Until Parent's designees constitute a majority of the board of
directors of the Company, the Company will deliver to Parent accurate and
complete copies of all documents filed with the SEC or any exchange on which the
Shares is listed for trading.
<PAGE>
(d) Until such time as Parent's designees shall constitute a
majority of the Board of Directors, or termination of this Agreement, the
Company will deliver to Parent as of the end of each calendar month preceding
such time as Parent's designees shall constitute a majority of the Board of
Directors, true and correct copies of the Company's Unaudited Financial
Statements of the type described on Schedule 5.12(a) to the Company Disclosure
Letter (the "Supplementary Unaudited Financial Statements").
ARTICLE VII
Additional Agreements
---------------------
7.1 Shareholder Approval; Preparation of Proxy Statement.
----------------------------------------------------
(a) If approval of the Merger by Shareholders of the Company (the
"Company Shareholder Approval") is required by Law, the Company shall as soon as
practicable following the consummation of the Offer in accordance with the terms
of Section 1.1 of this Agreement, so long as permitted by Law, duly call, give
notice of, convene and hold a meeting of its shareholders (the "Shareholders
Meeting") for the purpose of obtaining the Company Shareholder Approval. The
Company shall, through its board of directors (but subject to the right of the
board of directors to withdraw or modify its approval or recommendation of the
Offer, the Merger and this Agreement as set forth in Section 7.3(b)), recommend
to its shareholders that the Company Shareholder Approval be given.
Notwithstanding the foregoing, if Newco shall acquire Shares entitled to cast
90% or more of all the votes entitled to be cast on the Merger, the parties
shall take all necessary and appropriate action to cause the Merger to become
effective as soon as reasonably practicable after the consummation of the Offer
without a Shareholders Meeting in accordance with Section 23-1-40-4 of Indiana
Law. Without limiting the generality of the foregoing, so long as permitted by
law, the Company agrees that its obligations pursuant to the first sentence of
this Section 7.1 shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company of any Acquisition Proposal or
(ii) the withdrawal or modification by the board of directors of the Company of
its approval or recommendation of the Offer, this Agreement or the Merger.
(b) If Company Shareholder Approval is required by Law, the Company
shall as soon as practicable following the consummation of the Offer in
accordance with the terms of Section 1.1, and to the extent permitted by Law,
prepare and file a preliminary Proxy Statement with the SEC and shall use its
reasonable best efforts to respond to any comments of the SEC or its staff, and,
to the extent permitted by Law, to cause the Proxy Statement to be mailed to the
Company's Shareholders as promptly as practicable after responding to all such
comments to the satisfaction of the staff. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand,
<PAGE>
and the SEC or its staff, on the other hand, with respect to the Proxy Statement
or the Merger. If at any time prior to the Shareholders Meeting there shall
occur any event that should be set forth in an amendment or supplement to the
Proxy Statement, the Company shall promptly prepare and mail to its Shareholders
such an amendment or supplement. The Company shall not mail any Proxy
Statement, or any amendment or supplement thereto, to which Parent reasonably
objects. Parent shall cooperate with the Company in the preparation of the Proxy
Statement or any amendment or supplement thereto.
(c) Parent agrees to cause all Shares purchased pursuant to the
Offer and all other Shares of the Company entitled to vote on the Merger owned
by Parent or any Subsidiary of Parent to be voted in favor of the Merger.
7.2 Access to Information; Confidentiality.
--------------------------------------
(a) (i) Between the date hereof and until such time as Parent's
designees shall constitute a majority of the Board of Directors of the Company,
the Company (i) shall give Parent and its authorized representatives reasonable
access to all employees, all offices, warehouses, and other facilities, and all
books and records relating to the Business, (ii) shall permit Parent and its
authorized representatives to make such inspections as they may reasonably
require, and (iii) shall cause its officers to furnish Parent and its authorized
representatives with such financial and operating data and other information
with respect to its Business as Parent may from time to time reasonably request;
provided, however, that no investigation pursuant to this Section shall affect
any representation or warranty of any party contained in this Agreement or in
any agreement, instrument, or document delivered pursuant hereto or in
connection herewith; and provided further that the Company shall have the right
to have a representative present at all times. Each party shall hold in
confidence all such information on the terms and subject to the conditions
contained in any Confidentiality Agreements or similar agreements heretofore
entered into between the parties (collectively the "Confidentiality
Agreements"), including the Confidentiality Agreement (the "August
Confidentiality Agreement") dated August 25, 1997 between the Company and
Parent.
(ii) Between the date hereof and until such time as Parent's
designees shall constitute a majority of the Board of Directors of the Company,
the Parent (i) shall give the Company and its authorized representatives
reasonable access to all employees, all offices, warehouses, and other
facilities, and all books and records relating to the business of the Parent to
the same extent requested by Parent of the Company, (ii) shall permit the
Company and its authorized representatives to make such inspections as they may
reasonably require but consistent with those conducted by Parent, and (iii)
shall cause its officers to furnish the Company and its authorized
representatives with such financial and operating data and other information
with respect to its business as the Company may from time to time reasonably
request to the extent that similar information has been provided by the Company
to Parent; provided, however, that no investigation pursuant to this Section
shall affect any representation or warranty of any party
<PAGE>
contained in this Agreement or in any agreement, instrument, or document
delivered pursuant hereto or in connection herewith; and provided further that
the Parent shall have the right to have a representative present at all times.
Each party shall hold in confidence all such information on the terms and
subject to the conditions contained in any Confidentiality Agreements or similar
agreements heretofore entered into between the parties (collectively the
"Confidentiality Agreements").
(b) Each party acknowledges and agrees that irreparable damage
would occur in the event any confidential information regarding the Intellectual
Property, the Company, the Business, the Parent or the Parent's business (the
"Confidential Information") were disclosed to or utilized on behalf of any
Person which is in competition with Company or Parent. Accordingly, each party
covenants and agrees with the other that it will not, directly or indirectly,
without the prior written consent of the other, disclose any of such
Confidential Information from and after the date hereof to any Person, except to
its authorized representatives; provided, however, that Confidential Information
shall not be deemed to include information which (i) was or becomes generally
available to the public other than as a result of an unauthorized disclosure, or
(ii) was or becomes available on a non-confidential basis from a source other
than the recipient of such information, provided that such source is not known
to the provider of such information to be bound by a confidentiality agreement
with respect to such Confidential Information. Notwithstanding the foregoing
provisions of this Section 7.2(b), each party and its Affiliates may disclose
any Confidential Information to the extent that, in the written opinion of its
counsel, such person is legally compelled to do so, provided that, prior to
making such disclosure, such person advises and consults with the other party
regarding such disclosure and provided further that such person discloses only
that portion of such Confidential Information as is legally required. To the
extent that the provisions of this Section 7.2(b) conflict with the provisions
of the August Confidentiality Agreement, the provision of the August
Confidentiality Agreement shall be controlling.
(c) If Parent requests, the Company will cooperate, and will cause
its accountants to cooperate, in all material respects with any financing
efforts of Parent or its Affiliates (including providing assistance in the
preparation of one or more registration statements or other offering documents
relating to debt and/or equity financing) and any other filings that may be made
by Parent or its Affiliates with the SEC, all at the sole expense of Parent. The
Company (a) shall furnish to its independent accountants (or, if requested by
Parent to Parent's independent accountants), such customary management
representation letters as its accountants may reasonably require of the Company
as a condition to its execution of any required accountants' consents necessary
in connection with the delivery of any customary "comfort" letters reasonably
requested by financing sources of Parent or its Affiliates, and (b) shall
furnish to Parent all financial statements (audited and unaudited) and other
information in the possession of the Company of its representatives or agents as
Parent shall reasonably determine as necessary or appropriate in connection with
such financing. Without limiting the generality of the foregoing, the Company
agrees to cooperate with Parent's and Newco's efforts to secure any
<PAGE>
financing, such cooperation to include providing such information to Parent's
and Newco's financing sources as Parent or Newco may reasonably request and
making available to such financing sources, senior officers and such other
employees of the Company as Parent and Newco may reasonably request to assist in
the preparation of one or more offering documents and other appropriate
marketing materials and otherwise participate in such marketing and sales
efforts relating to obtaining any financing as Parent and Newco may reasonably
request upon reasonable notice and consistent with such officers' and employees'
other business responsibilities to the Company.
7.3 Acquisition Proposals.
---------------------
(a) The Company shall, and shall direct and use its commercially
reasonable efforts to cause its officers, directors, employees, agents and other
representatives to, immediately cease any discussions or negotiations with any
Persons that may be ongoing with respect to an Acquisition Proposal (as
hereinafter defined). Further, the Company shall not, nor shall it permit any
of its Company Subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any Company
Subsidiary to, directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing information) any inquiries or the
making of any proposal which constitutes or may reasonably be expected to lead
to any Acquisition Proposal, or (ii) engage in discussions or negotiations with
any Person regarding any Acquisition Proposal; provided, however, that if, at
any time prior to the acceptance for payment of Shares pursuant to the Offer,
the board of directors of the Company determines in good faith, after
consultation with and advice from outside counsel, that it would be consistent
with the fiduciary responsibilities of the board of directors to the Company's
shareholders under Applicable Law, the Company may, in response to an
Acquisition Proposal, and subject to compliance with Section 7.3(c), (A) furnish
information with respect to the Company or any Company Subsidiary to any Person
pursuant to a confidentiality agreement in substantially the same form as the
August Confidentiality Agreement with respect to protecting the Confidential
Information of the Company, and (B) participate in discussions, investigations
and/or negotiations regarding such Acquisition Proposal; provided, however, that
prior to furnishing information to, or entering into discussions or negotiations
with, such Person, (x) the Company shall provide written notice to Parent to the
effect that the Company is furnishing information to, or entering into
discussions or negotiations with, such Person, and (y) the Company keeps Parent
informed, on a current basis, as to the status and, subject to the fiduciary
responsibilities of the board of directors, the substance of such discussions or
negotiations. With respect to any Person or Persons with whom the Company has
been discussing any Acquisition Proposal prior to the date hereof, the Company
shall promptly following the execution of this Agreement, request each such
Person who has heretofore entered into a confidentiality agreement with the
Company regarding an Acquisition Proposal to return to the Company all
Confidential Information heretofore furnished to such Person or Persons by or on
behalf of the Company. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in this Section 7.3(a) by any
officer,
<PAGE>
director, employee or other representative heretofore described in this Section
7.3(a), whether or not such Person is purporting to act on behalf of the Company
or any Company Subsidiary or otherwise, shall be deemed to be a breach of this
Section 7.3(a) by the Company. For purposes of this Agreement, an "Acquisition
Proposal" means any offer or proposal, inquiry or indication of interest, from
any Person relating to any direct or indirect acquisition or purchase of 5% or
more of the aggregate assets of the Company and the Company Subsidiaries, taken
as a whole, or 5% or more of the voting power of the Shares or securities of any
Company Subsidiary then outstanding or any tender offer or exchange offer that
if consummated would result in any Person beneficially owning 5% or more of the
voting power of the Shares or securities of any Company Subsidiary then
outstanding or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any Company Subsidiary, other than the transactions contemplated by
this Agreement.
(b) Except as set forth in this Section 7.3, neither the board of
directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such board of directors or such committee of the
Offer, the Merger or this Agreement; provided, however, that the board of
directors may (A) in respect to any takeover or Acquisition Proposal, suspend
such recommendation for a period of up to three days pending its analysis of
such Acquisition Proposal, or (B) at any time prior to consummation of the
Offer, modify or withdraw such recommendation if the board of directors of the
Company determines in good faith, after consultation with and the advice of
outside counsel, that it would be consistent with its fiduciary responsibilities
to so modify or withdraw such recommendation; provided, further that, unless
this Agreement shall have been terminated, any such suspension, modification or
withdrawal shall not prevent Parent and Newco, in its or their discretion, from
consummating the Offer and shall not affect any of the actions taken by the
Company pursuant to this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or (iii) cause the
Company to enter into any letter of intent, agreement in principle, acquisition
or other similar agreement (each, an "Acquisition Agreement") related to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that prior to
the acceptance for payment of Shares pursuant to the Offer, the board of
directors of the Company determines in good faith, after consultation with and
the advice of outside counsel, that it would be consistent with its fiduciary
responsibilities to the Company's shareholders under Applicable Law, the board
of directors of the Company may (subject to this and the following provisions of
this Section 7.3) (i) withdraw or modify its approval or recommendation of the
Offer, the Merger and this Agreement, (ii) approve or recommend a Superior
Proposal (as defined below) (iii) cause the Company to enter into any letter of
intent, agreement in principle, acquisition or other similar agreement related
to any Superior Proposal or (iv) terminate this Agreement, but in each case,
only at a time that is after the second Business Day following Parent's receipt
of written notice (or such earlier time as is necessary for the board of
directors of the Company to comply with its fiduciary duties) (a "Notice of
Superior Proposal"), which obligation shall be satisfied by delivery by
facsimile transmission and by overnight delivery by Federal Express or other
nationally recognized
<PAGE>
overnight carrier as well as by delivery of the notice required by Section
7.3(c) advising Parent that the board of directors of the Company has received
an Acquisition Proposal that may constitute a Superior Proposal, subject to the
fiduciary duties of the board of directors of the Company, specifying the
material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal. For purposes of this Agreement, a
"Superior Proposal" means any Acquisition Proposal determined by the board of
directors of the Company in good faith, after consultation with and advice from
outside counsel, to be a bona fide proposal and made by a third party for
consideration consisting of cash, property and/or securities, for more than a
majority of the combined voting power of the shares of Company Common Stock then
outstanding or all or substantially all of the assets of the Company or a
Company Subsidiary and otherwise on terms which the board of directors of the
Company determines in its good faith judgment, after consultation with outside
counsel and with a financial advisor of nationally recognized reputation (such
as SBC Warburg Dillon Read Inc.), to be more favorable to the Company's
shareholders than the Offer and the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 7.3, the Company shall promptly advise
Parent orally and in writing of any request for information or of any
Acquisition Proposal, subject to the fiduciary duties of the board of directors
of the Company, the material terms and conditions of such request or Acquisition
Proposal, and, the identity of the person making such request or Acquisition
Proposal. The Company will endeavor to keep Parent reasonably informed of the
overall status and, subject to the fiduciary duties of the board of directors of
the Company, substance of any such request or Acquisition Proposal.
(d) Nothing contained in this Section 7.3 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rules
14D-9 and 14E-2 promulgated under the 1934 Act or from making any disclosure to
the Company's shareholders if, in the good faith judgment of the board of
directors of the Company, in reliance upon advice from its outside counsel, such
disclosure is necessary in order to comply with its fiduciary duties to the
Company's shareholders under Applicable Law or is otherwise required under
Applicable Law.
(e) During the period from the date of this Agreement until such time
as Parent's designees shall constitute a majority of the Board of Directors, the
Company shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which the Company or any Company
Subsidiary is a party (other than any involving Parent) unless the Company's
board of directors shall have determined in good faith, in reliance upon advice
from its outside counsel, that failing to release any third party or to amend,
modify or waive such provisions would not be consistent with the Company's board
of directors' fiduciary responsibilities under Applicable Law.
<PAGE>
7.4 Stock Options. Prior to the consummation of the Offer, the Company
-------------
shall use its commercially reasonable efforts to obtain any consents from
holders of Options as are necessary to give effect to the provisions of
paragraphs (a) and (b) of this Section 7.4.
(a) Each option granted to a Company employee, consultant or director
to acquire Shares ("Option") that is outstanding immediately prior to the
consummation of the Offer, and whether or not then vested or exercisable, with
respect to which, as of the consummation of the Offer, the exercise price per
share is less than the Offer Price shall, effective as of immediately prior to
the consummation of the Offer, be canceled in exchange for a single lump sum
cash payment equal to the product of (1) the number of Shares subject to such
Option and (2) the excess of the Offer Price over the exercise price per share
of such Option.
(b) Each Option that is outstanding immediately prior to the
consummation of the Offer, and whether or not then vested or exercisable, with
respect to which, as of the exercise price per Share is equal to or greater than
the Offer Price shall, effective as of the consummation of the Offer, be
canceled and no payments shall be made with respect thereto.
7.5 Shareholder Agreements. Each of the Persons identified on Schedule
----------------------
7.5 shall enter into a Shareholders Agreement (the "Shareholders Agreement")
with Parent and the Company substantially in the form of Exhibit "E" attached
-----------
hereto within two (2) Business Days of the date hereof.
7.6 Public Announcements. Parent and Company will consult with each other
--------------------
before issuing any press releases or otherwise making any public statements with
respect to this Agreement, the Offer and the Merger, and shall not issue any
such press release or make any such public statement without the prior written
consent of the other party (which consent shall not be unreasonably withheld or
delayed) except as may be required by law or by obligations pursuant to any
listing agreement with any national securities exchange or as may be advised by
counsel, in writing, to be necessary. Parent and Company anticipate issuing a
joint press release within two (2) Business Days of the date hereof.
7.7 Notification of Certain Matters. Company shall give prompt notice to
-------------------------------
Parent of (i) the occurrence or nonoccurrence of any event, the occurrence or
nonoccurrence of which would be likely to cause (a) any representation or
warranty of the Company that is not qualified by materiality contained in
Article V of this Agreement to be untrue or inaccurate in any material respect
at or prior to the consummation of the Offer or (b) any representation or
warranty of the Company that is qualified by materiality contained in Article V
of this Agreement to be untrue or inaccurate in any respect at or prior to the
consummation of the Offer, and (ii) any failure of the Company to comply with or
satisfy in any material respect any covenant, condition, or agreement to be
complied with or satisfied by the Company hereunder. Company shall give prompt
notice to Parent if there occurs any event which has resulted in or is
reasonably likely to result in a Material Adverse Effect on the Company or,
subject to the fiduciary duties of the board
<PAGE>
of directors of the Company, will prevent or result in a third party materially
delaying the consummation of the Offer or the Merger. The Company shall provide
to Parent copies of all filings made by the Company with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby.
Parent shall give prompt notice to Company of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause (a) any representation or warranty of Parent or Newco that is
not qualified by materiality contained in Article IV of this Agreement to be
untrue or inaccurate in any material respect at or prior to the consummation of
the Offer or (b) any representation or warranty of the Parent or Newco that is
qualified by materiality contained in Article IV of this Agreement to be untrue
or inaccurate in any respect at or prior to the consummation of the Offer and
(ii) any failure of Parent to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by Parent hereunder. Parent shall
give prompt notice to the Company if there occurs any event which has resulted
in or is reasonably likely to result in a Material Adverse Effect on Parent or
will prevent or result in a third party materially delaying the consummation of
the Offer or the Merger. The Company shall provide to Parent copies of all
filings made by the Company with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby. Parent shall provide to the
Company copies of all filings made by Parent with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby. The
delivery of any notice pursuant to this Section shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, (ii) modify the conditions set forth in Articles VIII and IX, or (iii)
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
7.8 Fees and Expenses.
-----------------
(a) Except as otherwise provided in this Agreement, Parent, Newco and
Company shall each be responsible for their own fees and expenses incurred in
connection with the transactions contemplated by this Agreement, whether the
Offer or Merger is consummated.
(b) The Company shall pay, or cause to be paid to Parent, in
immediately available funds, $6,000,000.00 (the "Company Termination Fee") under
the circumstances and at the times set forth as follows:
(i) Upon demand, if Parent or Newco terminates this Agreement
under Section 10.1(f); or
(ii) Upon demand, if the Company terminates this Agreement under
Section 10.1(g); or
(iii) If (A) Parent or the Company terminates this Agreement under
Section 10.1(d)(ii) or (B) Parent terminates this Agreement under Section
10.1(e) as a result of a breach of a representation, warranty or covenant, and
in each case, prior to such termination,
<PAGE>
an Acquisition Proposal shall have been made and publicly disclosed and
concurrently therewith or within 12 months thereafter, the Company enters into a
merger agreement, acquisition agreement or similar agreement (including without
limitation a letter of intent) with respect to a Superior Proposal or a Superior
Proposal is consummated, then the Company shall pay the Termination Fee upon the
earlier of the execution of such agreement or upon consummation of such Superior
Proposal; provided, however, for purposes of this Section 7.8, if a dispute
exists between the Company and Parent concerning whether such transaction
constitutes a Superior Proposal, The Principal Financial Group (or its
successor) shall determine whether the proposal is more favorable to the
Company's shareholders than the Offer and the Merger.
(c) If through no fault of Parent or Newco, Parent cannot consummate
the Offer because any of the conditions set forth in paragraphs (d), (e) or (g)
(insofar as it relates to the Company) of the Offer Conditions exists, then and
in any of such events, the Company shall pay, or cause to be paid, to Parent, on
demand, in immediately available funds, an amount equal to the actual out-of-
pocket expenses actually incurred by Parent and Newco in an amount not to exceed
$1,000,000; provided, if Parent incurs a commitment or similar fee with respect
to financing the Offer, the Company shall pay Parent, upon demand, an amount
equal to such commitment or similar fee not to exceed an additional $2,000,000
(the "Parent Expense Reimbursement"). Upon receipt of the Parent Expense
Reimbursement, Parent and Newco shall terminate the Agreement. Notwithstanding
the foregoing, Parent and Newco shall not be required to terminate the Agreement
or accept the Parent Expense Reimbursement if any of the foregoing conditions
exist as a result of the following with respect to the Company: (i) an
intentional or willful breach of a representation or warranty, (ii) intentional
or willful failure to perform a covenant or (iii) fraud.
7.9 Hart-Scott-Rodino. As promptly as practicable, and in any event
-----------------
within five (5) Business Days following the execution and delivery of this
Agreement by the parties, to the extent required by the HSR Act, Company and the
Parent shall each prepare and file, or shall cause its "ultimate parent" (as
defined in the HSR Act) to prepare and file, any required notification and
report form under the HSR Act, in connection with the transactions contemplated
hereby, the filing fees for which shall be borne by the Parent; Company and
Parent shall, or shall cause their ultimate parents to, request early
termination of the waiting period thereunder; and Company and Parent shall, or
shall cause their ultimate parents to, respond with reasonable diligence to any
request for additional information made in response to such filings. As promptly
as practicable, and in any event within five (5) Business Days, following the
execution and delivery of this Agreement by the parties, Company and Parent
shall prepare and file any other application, report, or other filing required
to be submitted to any other governmental authority in connection with the
transactions contemplated hereby.
7.10 Indemnification and Insurance. On and after the consummation of the
-----------------------------
Offer, the Company shall at all times fully perform all of its obligations to
the present and past officers and directors of the Company (the "Indemnified
Parties") under the provisions existing on the date hereof of the Restated
Articles of Incorporation, Bylaws and any indemnification agreements
<PAGE>
(collectively the "Company Indemnification Obligations") for a period of at
least six years from the consummation of the Offer; provided, if pursuant to any
indemnification agreement the Company Indemnification Obligations extend for a
period longer than six years, the Company shall perform its obligations under
such agreement for the time period set forth therein. Parent hereby confirms
that neither amendment of the Company's Restated Articles of Incorporation or
Bylaws nor any merger, liquidation or dissolution of the Company shall impair or
eliminate the Company Indemnification Obligations. The Parent hereby irrevocably
guarantees the performance of the Company Indemnification Obligations if, at the
time any claim, action, suit, proceeding or investigation is brought against the
Indemnified Parties the tangible net book value of the Surviving Corporation is
less than $54,000,000; provided, however, the obligations of the Surviving
Corporation and Parent shall not, in the aggregate, exceed $54,000,000; and,
provided further that none of Parent's obligations under this sentence shall be
binding upon Parent until and unless the Offer shall be consummated. For the
period beginning at the consummation of the Offer and ending December 31, 2003,
the Company shall obtain and maintain directors' and officers' liability
insurance coverage as currently maintained by the Company in an amount equal to
$10,000,000; provided that the Surviving Corporation may substitute therefor
policies containing coverage, terms and conditions which are no less
advantageous to the beneficiaries of such insurance coverage.
7.11 Board of Directors. Promptly after such time as Newco purchases
------------------
Shares pursuant to the Offer (but subject to the satisfaction of the Minimum
Condition), Newco shall be entitled, to the fullest extent permitted by Law, to
designate at its option up to that number of directors, rounded to the nearest
whole number, of the Company's board of directors, subject to compliance with
Section 14(f) of the 1934 Act, as will make the percentage of the Company's
directors designated by Newco equal to the aggregate voting power of the Shares
held by Parent; provided, however, that in the event that Newco's designees are
elected to the board of directors of the Company, until the Effective Time, such
board of directors shall, if requested by Parent have two directors who are
directors on the date of this Agreement and who are not officers or Affiliates
of the Company or any Company Subsidiaries or officers or Affiliates of Parent
or any of its Subsidiaries (the "Independent Directors"); and provided, further
that, in such event, if the number of Independent Directors shall be reduced
below two for any reason whatsoever, the remaining Independent Directors shall,
to the fullest extent permitted by Law, designate a person to fill such vacancy
who shall be deemed to be an Independent Director for purposes of this Agreement
or, if no Independent Directors then remain, the other directors shall designate
two persons to fill such vacancies who shall not be officers or Affiliates of
the Company or any Company Subsidiaries, or officers or Affiliates of Parent or
any of its Subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Following the election or appointment
of Newco's designees pursuant to this Section 7.11 and prior to the Effective
Time, any amendment, or waiver of any term or condition, of this Agreement or
the Restated Articles of Incorporation or Bylaws of the Company, any termination
of this Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Newco or waiver or
assertion of any of the Company's rights hereunder, and any
<PAGE>
other consent or action by the board of directors with respect to this
Agreement, will require the concurrence of a majority of the Independent
Directors and no other action by the Company, including any action by any other
director of the Company, shall be required for purposes of this Agreement. To
the fullest extent permitted by Applicable Law, the Company shall take all
actions requested by Parent which are reasonably necessary to effect the
election or appointment of any such designee, including mailing to its
shareholders the Information Statement containing the information required by
Section 14(f) of the 1934 Exchange Act and Rule 14f-1 promulgated thereunder,
and the Company agrees to make such mailing with the mailing of the Schedule
14D-9 (provided that Newco shall have provided to the Company on a timely basis
all information required to be included in the Information Statement with
respect to Newco's designees). Parent and Newco will be solely responsible for
any information with respect to either of them and their nominees, officers,
directors and Affiliates required by Section 14(f) of the 1934 Act and Rule 14f-
1 promulgated thereunder. In connection with the foregoing, the Company will
promptly, at the option of Parent, to the fullest extent permitted by Law,
either increase the size of the Company's board of directors and/or request the
resignation of such number of its current directors as is necessary to enable
Newco's designees to be elected or appointed to the Company's board of directors
as provided above.
7.12 Commercially Reasonable Efforts. Upon the terms and conditions set
-------------------------------
forth herein, subject to fiduciary responsibilities, each of the Company, Parent
and Newco agrees to use its commercially reasonable efforts to cause the
purchase of Shares pursuant to the Offer and the consummation of the Merger to
occur as soon as reasonably possible. Without limiting the foregoing, (i) each
of the Company, Parent and Newco agree to use its commercially reasonable
efforts to take, or cause to be taken, all actions necessary to comply promptly
with all legal requirements that may be imposed on itself with respect to the
Offer and the Merger (which actions shall include furnishing all information
required under the HSR Act and in connection with approvals of or filings with
any other Governmental Entity) and shall promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
any of them or any of their Subsidiaries in connection with the Offer and the
Merger, and (ii) each of the Company, Parent and Newco shall, and shall cause
its Subsidiaries to, use its commercially reasonable efforts to obtain (and
shall reasonably cooperate with each other in obtaining) (a) any material
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, Newco, the Company or any of their Subsidiaries in
connection with the Offer and the Merger or the taking of any action
contemplated by this Agreement and (b) the financing necessary to consummate the
Offer and the Merger on terms and conditions satisfactorily to Parent.
Notwithstanding anything to the contrary contained in this Agreement, in
connection with any filing or submission required or action to be taken by
Parent, the Company or any of Company Subsidiaries to consummate the Offer, the
Merger or the other transactions contemplated in this Agreement, the Company
shall not, without Parent's prior written consent, commit to any divestiture of
assets or businesses of the Company and Company Subsidiaries if such divested
assets and/or businesses are Material to the assets or profitability of the
Company and Company
<PAGE>
Subsidiaries taken as a whole; and neither Parent nor any of its Subsidiaries
shall be required to divest or hold separate or otherwise take or commit to take
any action that limits ability to retain, the Company or any of the businesses,
product lines or assets of Parent or any of its Subsidiaries or that would have
a Material Adverse Effect on Parent.
7.13 Litigation Settlement. The Company agrees that it shall not settle
---------------------
any litigation commenced after the date hereof against the Company or any of its
directors by any shareholder of the Company relating to the Offer, the Merger or
this Agreement without the prior written consent of Parent, which consent shall
not be unreasonably withheld or delayed.
7.14 Parent Guarantee. The Parent hereby unconditionally and irrevocably
----------------
guarantees performance of all obligations of Newco arising under or by reason of
this Agreement.
7.15 Compliance with Indiana Corporation Law and other State Takeover
----------------------------------------------------------------
Statutes. Parent, Newco and the Company shall take such actions as are necessary
- - --------
to comply with the provisions of IC 23-2-3.1-0.5 et. seq. (the "Indiana Takeover
Offers Statute") and the Company shall take such actions as are necessary,
including amending its Bylaws, to render inapplicable the provisions of IC 23-1-
42-1 et. seq. (the "Indiana Control Share Acquisitions Statute") to the
transactions contemplated by this Agreement, so that the Offer, the Merger and
the transaction contemplated by this Agreement may be consummated as promptly as
reasonably practical by the terms contemplated hereby. If any other "fair price"
or "control share acquisition" statute or similar statute or regulation, shall
be or become applicable to the Offer, the Merger or the transactions
contemplated by the Agreement, the Company, through the board of directors, will
approve the Agreement, the Offer and the Merger, will amend the Bylaws of the
Company, and will take such other actions as are necessary so that the Offer,
the Merger and the transactions contemplated by this Agreement may be
consummated as promptly as reasonably practical on the terms contemplated hereby
and otherwise act to minimize the effects of any such statute or regulation on
the transactions contemplated hereby.
7.16 Compensation Arrangements.
-------------------------
(a) The Parent and Newco hereby acknowledge that they are aware of
the agreements (the "Severance Agreements") and the Separation Plan listed on
Exhibit "F" attached hereto which were approved by the Company's Compensation
- - -----------
Committee on October 21, 1997 and by the Company's board of directors on October
21, 1997.
(b) The Parent and Newco agree to use commercially reasonable
efforts, consistent with the provisions of Applicable Law, to cause the Company
to perform its obligations under the Severance Agreements and the Severance
Plan, and neither Parent nor Newco shall challenge or contest the enforceability
of, cause the Company to challenge or contest the enforceability of the
Severance Agreements or the Severance Plan.
<PAGE>
ARTICLE VIII
Conditions to Obligations of the Company to Close the Merger
------------------------------------------------------------
The obligations of the Company to consummate the Merger shall be subject to
the fulfillment on or prior to the Closing Date of each of the following
conditions:
8.1 Shareholder Approval; Purchase of Shares.
----------------------------------------
(a) If required by Applicable Law, Company Shareholder Approval shall
have been obtained; provided, however, that Parent and Newco shall vote all of
their shares of Company Common Stock entitled to vote thereon in favor of the
Merger.
(b) Newco shall have previously accepted for payment and paid for
Shares pursuant to the Offer.
8.2 Legal Proceedings. There shall not be any statute, rule or regulation
-----------------
that makes consummation of the transactions contemplated hereby illegal or
otherwise prohibited and no Governmental Entity shall have issued an order,
decree, or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the consummation of the transactions contemplated
hereby, and such order, decree, ruling, or other action shall have become final
and nonappealable.
8.3 Hart-Scott-Rodino. All applicable waiting periods (and any extensions
-----------------
thereof) under the HSR Act shall have expired or otherwise been terminated
without objection from any of the relevant federal authorities.
ARTICLE IX
Conditions to Obligation of Parent and Newco to Close
-----------------------------------------------------
The obligations of Parent and Newco to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
9.1 Shareholder Approval; Purchase of Shares.
----------------------------------------
(a) If required by Applicable Law, Company Shareholder Approval shall
have been obtained; provided, however, that Parent and Newco shall vote all of
their shares of Company Common Stock entitled to vote thereon in favor of the
Merger.
<PAGE>
(b) Newco shall have previously accepted for payment and paid for
Shares pursuant to the Offer.
9.2 Legal Proceedings. There shall not be any statute, rule or regulation
-----------------
that makes consummation of the transactions contemplated hereby illegal or
otherwise prohibited and no Governmental Entity shall have issued an order,
decree, or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the consummation of the transactions contemplated
hereby, and such order, decree, ruling, or other action shall have become final
and nonappealable.
9.3 Hart-Scott-Rodino. All applicable waiting periods (and any extensions
-----------------
thereof) under the HSR Act shall have expired or otherwise been terminated
without objection of any of the relevant federal authorities.
9.4 No Material Adverse Change. Except as disclosed in this Agreement or
--------------------------
the Schedules hereto, since the latest of the Financial Statements or, if
applicable, the Supplementary Unaudited Financial Statements, there shall not
have been any material adverse change in the Company or the Business, assets,
results of operations or financial condition of the Company's Business or any
material portion thereof.
ARTICLE X
Termination, Amendment and Waiver
---------------------------------
10.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby abandoned at any time prior to the consummation of the Offer
in the following manner:
(a) by mutual written consent of the Company, Parent and Newco; or
(b) either by the Company or Parent, if the Offer shall not have been
consummated on or before December 31, 1997 (the "Cut-Off Date") unless such
failure to consummate the Offer shall (i) be due to a breach of this Agreement
by the party or parties seeking to terminate this Agreement pursuant to this
clause (b), or (ii) through no fault of the parties hereto, be due to the
failure to obtain the governmental approvals contemplated by Section 7.9 of this
Agreement on or before April 30, 1998; or
(c) either by the Company or by Parent, if there shall be any
statute, rule, or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or a Governmental Entity
shall have issued an order, decree, or ruling or taken any
<PAGE>
other action permanently restraining, enjoining, or otherwise prohibiting the
consummation of the transactions contemplated hereby, and such order, decree,
ruling, or other action shall have become final and nonappealable; or
(d) by either Parent or the Company if (i) as a result of the failure
of any of the Offer Conditions set forth in Exhibit "B" (other than the Minimum
-----------
Condition), the Offer shall have been terminated or expired in accordance with
its terms without Newco having accepted for payment of any Shares pursuant to
the Offer consistent with Newco's obligations under Section 1.1 of this
Agreement, or (ii) as a result of the failure of the Minimum Condition, the
Offer shall have terminated or expired in accordance with its terms without
Newco having accepted for payment any Shares pursuant to the Offer consistent
with Newco's obligations under Section 1.1 of this Agreement, or (iii) Newco
shall have, consistent with its obligations hereunder, failed to pay for the
Shares prior to the Cut-Off Date; provided, however, that the right to terminate
this Agreement pursuant to this Section 10.1(d) shall not be available to any
party whose failure to perform any of its obligations under this Agreement
results in the failure of any such Offer Condition; provided, however, neither
Parent or the Company may terminate for failure to obtain the governmental
approvals contemplated by Section 7.9 of this Agreement on or before April 30,
1998;
(e) by Parent or Newco prior to the purchase of Shares pursuant to
the Offer in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in this Agreement which (i)
would give rise to the failure of the condition set forth in paragraph (d) or
(e) of Exhibit "B" and (ii) cannot be or has not been cured within ten (10)
-----------
Business Days after the giving of written notice to the Company; or
(f) by Parent or Newco if either Parent or Newco is entitled to
terminate the Offer as a result of the occurrence of any event set forth in
paragraph (c) of Exhibit "B" to this Agreement; provided that the temporary
-----------
suspension of the recommendation of the Company's board of directors referred to
herein in accordance with Section 7.3(b) shall not give rise to a right of
termination pursuant to this Section 10.1(f); or
(g) by the Company in accordance with Section 7.3(b); provided,
however, that it has complied with all provisions thereof, including the notice
provisions therein, and that it complies with the requirements of Section 7.8
relating to the payment (including the timing of any payment) of the Company
Termination Fee; or
(h) by the Company, if (i) any of the representations or warranties
of Parent or Newco set forth in this Agreement that are qualified as to
materiality shall not be true and correct in any respect or any such
representations or warranties that are not so qualified shall not be true and
correct in any material respect, or (ii) Parent or Newco shall have failed to
perform in any material respect any material obligation or to comply in any
material respect with any material agreement or covenant of Parent or Newco to
be performed or complied with by it under this Agreement and, in the case of
(i), such untruth or incorrectness cannot be or has not been
<PAGE>
cured within ten (10) Business Days after the giving of written notice to Parent
or Newco, and, in the case of (ii), such failure cannot be or has not been cured
within ten (10) Business Days after the giving of written notice to Parent or
Newco; or
(i) by the Company, prior to the commencement of the Offer if Newco
for any reason shall have failed to commence the Offer in accordance with
Section 1.1 within five (5) Business Days after the date of this Agreement.
10.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 10.1 by the Company or by Parent, written notice
thereof shall forthwith be given to the other party specifying the provision
hereof pursuant to which such termination is made, and this Agreement shall
become null and void and have no effect except that (i) the agreements contained
in this Section 10.2, Article XII, Article XIII and the last sentences each of
Section 1.1(a) and 1.2(a) shall survive the termination hereof and remain in
full force and effect and (ii) subject to the provisions of Sections 7.8 and
10.5, nothing herein shall relieve any party for liability for any breach
hereof.
10.3 Amendment. This Agreement may not be amended except by an instrument
---------
in writing approved by the parties to this Agreement and signed by or on behalf
of each of the parties hereto; provided, however, that:
(a) After the consummation of the Offer, no change shall be made to
the provisions in Article II, Article VIII, Article IX or Section 7.1 without
the consent of the holders of a majority of the Shares not owned by Parent,
Newco or any of their respective Affiliates. The holders of the Shares not
acquired in the Offer shall be third party beneficiaries of the provisions in
Article II, Article VIII, Article IX, and Section 7.1 and shall be entitled to
enforce the obligations of the Parent, Newco and Company under Article II,
Article VIII, Article IX, and Section 7.1 and this clause (a) to the same extent
as if such Persons were a party to this Agreement.
(b) After the consummation of the Offer, no change shall be made in
the provisions in Sections 7.4, 7.10, 7.12, 7.14, 7.16 or 10.3 which would
diminish the rights or benefits a person would have if the requirements of those
Sections as constituted as of the consummation of the Offer were honored without
the consent of that person. Each individual who has rights under the
arrangements cited in Sections 7.4, 7.10, 7.12, 7.14, 7.16 or 10.3 shall be a
third party beneficiary of those Sections and shall be entitled to enforce the
obligations of the Parent, Newco and Company under those Sections and this
clause (b) to the same extent as if such individual were a party to this
Agreement.
The prohibitions against change in preceding subparagraphs (a) and (b) include
prohibitions against accomplishing the prohibited changes indirectly by
extending time for performance, termination of this Agreement, waiver or other
indirect means.
<PAGE>
10.4 Waiver. The Company, on the one hand, and Parent, on the other hand,
------
may (i) waive any inaccuracies in the representations and warranties of the
other party or parties contained herein or in any document, certificate, or
writing delivered pursuant hereto or (ii) waive compliance by the other party or
parties with any of the other party's or parties' agreements or fulfillment of
any conditions to its or their own obligations contained herein. Any agreement
on the part of a party hereto to any such waiver shall be valid only if set
forth in an instrument in writing signed by or on behalf of such party. No
failure or delay by a party hereto 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.
10.5 Remedies Not Exclusive. The rights and remedies herein provided shall
----------------------
be cumulative and not exclusive of any rights or remedies provided by Law except
that if this Agreement is terminated pursuant to any of the provisions of
Sections 7.3(b) or 7.8(b) hereof, the payment of the Company Termination Fee
provided for in Section 7.8(b) or the payment of the Parent Expense
Reimbursement provided in Section 7.8(c) hereof shall be the sole and exclusive
right, remedy and obligation of the parties hereto.
ARTICLE XI
Non-Survival of Representations and Warranties
----------------------------------------------
None of the representations and warranties contained in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
consummation of the Offer.
ARTICLE XII
Financing Condition
-------------------
12.1 Financing Condition. The Company acknowledges and agrees that the
-------------------
obligation of Parent and Newco to consummate the Offer is subject to, among
other conditions set forth in Exhibit "B," Parent obtaining, prior to the
------------
expiration of the Offer, sufficient financing, on terms and conditions
satisfactory to Parent to enable consummation of the Offer and the Merger (the
"Financing Condition").
12.2 Failure to Obtain Financing. In the event that the Offer is not
---------------------------
consummated by the Cut-Off Date only because Parent was unable to satisfy the
Financing Condition the Parent shall pay, or cause to be paid, to the Company,
upon demand, an amount equal to $6,000,000 (the "Parent Termination Fee");
provided that if any of the Offer Conditions exist, (excluding the Financing
Condition and condition (g) as it applies to the Parent), Parent shall have no
obligation to pay the Parent Termination Fee.
<PAGE>
ARTICLE XIII
Miscellaneous
-------------
13.1 Notices. All notices, requests, demands, and other communications
-------
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if delivered
personally, or three (3) Business Days after deposit in the United States Mail
and transmitted by first class registered or certified mail, postage prepaid,
return receipt requested, or when sent by prepaid overnight delivery service, to
the parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
If to Parent: Kevco, Inc.
ATTN: Jerry E. Kimmel
1300 S. University Drive
Suite 200
Fort Worth, Texas 76107
Or if to Newco: SSC Acquisition Corp.
ATTN: Jerry E. Kimmel
1300 S. University Drive
Suite 200
Fort Worth, Texas 76107
With a copy to: Richard S. Tucker
Jackson Walker L.L.P.
777 Main Street, Suite 1800
Fort Worth, Texas 76102
If to Company: Shelter Components Corporation
ATTN: Larry D. Renbarger
2831 Dexter Drive
Elkhart, Indiana 46514
With a copy to: Herbert Wander
Katten Muchin & Zavis
525 West Monroe Street
16/th/ Floor
Chicago, Illinois 60661-3693
13.2 Governing Law. This Agreement shall be construed in accordance with
-------------
and governed by the internal substantive Laws, not the Law of conflicts, of the
State of Indiana.
<PAGE>
13.3 Captions. The captions used herein are for administrative and
--------
convenience purposes only and shall not be construed in interpreting this
Agreement.
13.4 Gender. Whenever the context so requires, the masculine shall include
------
the feminine and neuter, and the singular shall include the plural, and
conversely.
13.5 Invalidity. If any portion of this Agreement shall be held invalid or
----------
inoperative, then so far as reasonable and possible:
(1) The remainder of this Agreement shall be considered valid and
operative; and
(2) Effect shall be given to the intent manifested by the portion
held invalid or inoperative.
13.6 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original but all of which shall constitute one
instrument.
13.7 Specific Performance. Each party hereto acknowledges that a remedy at
--------------------
law for any breach or attempted breach of this Agreement may be inadequate,
agrees that such other party hereto shall be entitled to specific performance
and injunctive and other equitable relief in case of any such breach of
attempted breach and further agrees to waive any requirement for securing or
posting of any bond in connection with the obtaining of such injunctive or other
equitable relief. Such remedies shall be cumulative and not exclusive and shall
be in addition to any other rights or remedies any party may have against the
other.
13.8 Attorneys' Fees. If any action at law or in equity, including any
---------------
action for injunctive or declaratory relief, is brought to enforce or interpret
any of the provisions of this Agreement, the prevailing party shall be entitled
to recover reasonable attorneys' fees and expenses from the other party, which
fees and expenses may be set by the court in the trial of such action or may be
enforced in a separate action brought for that purpose and which fees and
expenses shall be in addition to any other relief which may be awarded.
13.9 Binding Effect. This Agreement and schedules attached hereto, the
--------------
Shareholder's Agreement as well as all covenants, agreements, representatives,
warranties or obligations contained in any of same shall be binding upon and
inure to the benefit of the parties hereto, their respective successors, assigns
(if permitted), receivers, trustees or other legal representatives. Neither
Parent nor Newco shall have the right to assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of the other
parties thereto.
<PAGE>
13.10 Entire Agreement. The August Confidentiality Agreement and this
----------------
Agreement (and the exhibits, schedules and Disclosure Letters attached hereto)
contains the entire agreement between the parties hereto with respect to the
within subject matter and supersedes any and all prior agreements, whether
written or oral, with respect thereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
PARENT:
KEVCO, INC.
By: /s/ Jerry E. Kimmel
-------------------------------------
Its: President and Chairman
------------------------------------
NEWCO:
SCC ACQUISITION CORP.
By: /s/ Jerry E. Kimmel
-------------------------------------
Its: President
------------------------------------
COMPANY:
SHELTER COMPONENTS CORPORATION
By: /s/ Larry D. Renbarger
-------------------------------------
Its: Chief Executive Officer
------------------------------------
<PAGE>
EXHIBIT "A"
DEFINITIONS
-----------
CERTAIN DEFINED TERMS. As used in the Agreement, each of the following
initially capitalized terms still have the respective meaning set forth below:
"AFFILIATE" means, with respect to any Person, any other person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. "Control" or
"controls" for purposes hereof means that a Person has the power, direct or
indirect, to conduct or govern the policies of another Person.
"APPLICABLE LAW" means any Law of any Governmental Entity to which a
specified Person or property is subject.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that primarily forms or is likely to be the
primary cause for any specified consequence.
"BUSINESS" means the Business conducted by the Company as of the date of
the Agreement and including, without limitation, the manufacture, distribution
and sale of products to the manufactured housing, modular housing and
recreational vehicle industries, the distribution and sale of products to other
industries within its geographic territories and the supply and rendering of
other services ancillary and incidental thereto.
"BUSINESS DAY" refers to a day other than a Saturday, Sunday or a holiday
on which commercial banks are required or authorized to close in Elkhart,
Indiana.
"CODE" means Internal Revenue Code of 1986, as amended.
"COMPANY SUBSIDIARY" means each Subsidiary of the Company.
"COMPANY STOCK" means Company Common Stock and Company Special Stock.
"CONTRACTS" refers to, collectively, all oral or written contracts,
agreements, leases, subleases, licenses, sublicenses, commitments, instruments,
guaranties, bids and proposals to which Parent, Newco or Company is a party as
of the date specified, all unfilled orders
<PAGE>
outstanding as of the Closing Date for the purchase of raw materials, goods or
services, and all unfilled orders outstanding as of the Closing Date for the
sale of raw materials, goods or services.
"COSTS OF REMEDIATION" refers to all Damages arising out of or related to
(i) those items listed or referred to on Schedule 5.21 to the Company Disclosure
Letter or the Financial Statements; (ii) the presence of any Hazardous Materials
existing at any Owned Real Property or Leased Property at or to which the
Company disposed, transported, stored, treated or arranged to dispose Hazardous
Materials (including, without limitation, off-site liability under any
Environmental Law arising from or in connection with transportation, treatment,
storage disposal, or arranging for disposal of Hazardous Materials; and (iii)
the Release of any Hazardous Materials) from any of such property, including,
without limitation, fees for services of attorneys, consultants, contractors,
experts and laboratories, and all other out-of-pocket costs, incurred in
connection with investigation, characterization, remediation or mitigation
thereof.
"DAMAGES" refers to, in respect of any obligation to indemnify any Person,
pursuant to the terms of the Agreement, any losses, amounts paid in settlement,
Taxes, claims, damages, liabilities, obligations, judgments, settlements and
costs and expenses (including costs of investigation or enforcement and
attorneys' fees and expenses), including all special or punitive damages which
are assessed or incurred.
"EMPLOYEE BENEFIT PLANS" refers to an Employee Pension Benefit Plan or an
Employee Welfare Benefit Plan where no distinction is required by the context in
which the term is used.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section 3(2)
of ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section 3(1)
of ERISA.
"ENVIRONMENTAL LAWS" refers to any existing federal, state, or local
statute, regulation or ordinance, or any existing judicial or administrative
decree or decision with respect to any Hazardous Materials, drinking water,
ground water, landfills, open dumps, storage tanks, underground storage tanks,
solid waste, waste water, storm water run-off, waste emissions or wells.
Without limiting the generality of the foregoing, the term will encompass each
of the following statutes, and the regulations promulgated thereunder, in each
case as in effect as of Closing: (a) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (b) Occupational Safety and
Health Act of 1970, as amended, (c) the Resource Conservation and Recovery Act
of 1976, as amended, (d) the Hazardous Material Transportation Act, as amended,
(e) the Toxic Substances Control Act, as amended, (f) the Clean Water Act, as
amended, (g) comparable state and local Laws, and (h) other health, safety and
environmental protection Laws in effect on the date of the Agreement.
"ERISA" refers to the Employee Retirement Income Security Act of 1974 as
amended.
<PAGE>
"GAAP" refers to generally accepted accounting principles in the United
States of America as in effect as of the date hereof.
"GOVERNMENTAL ENTITY" means any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality
(domestic or foreign).
"HAZARDOUS MATERIALS" means any substance, material or waste which is
regulated by any applicable local, state or federal Governmental Entity,
including without limitation, any material, substance or waste which is defined
as "hazardous", "hazardous waste", "hazardous material", "hazardous substance",
"extremely hazardous waste", "restricted hazardous waste", "pollutant",
"contaminant", "toxic substance" or "toxic waste" under any provision of any
applicable Environmental Law, and includes, but is not limited to, petroleum,
petroleum products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"HSR ACT" refers to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEBTEDNESS" means any liability, whether or not contingent, (i) in
respect of borrowed money or evidenced by bonds, notes, debentures, or similar
instruments, (ii) representing the balance deferred and unpaid of the purchase
price of any property (including pursuant to capital leases) but excluding trade
payables, if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet prepared on a consolidated basis in accordance
with GAAP, (iii) guaranties, direct or indirect, in any manner, of all or any
part of any Indebtedness of any Person.
"INDIANA LAW" means the Indiana Business Corporation Law.
"INTELLECTUAL PROPERTY" means patents, trademarks, service marks, trade
names, copyrights, trade secrets, know-how, inventions, brand names, labels,
customer lists, logos, rights in computer software, rights granted or retained
in licenses under any of the foregoing, and similar rights utilized by Company
or Parent, as the case may be, in its business and all registrations,
applications, licenses and rights with respect to any of the foregoing.
"KNOWLEDGE" as applied to either the Company, a Company Subsidiary, Parent
or Newco, refers to the actual knowledge, of its respective executive officers,
its risk management officer, its human resources officer or directors.
"LAW" means all applicable federal, state, local, foreign or other laws
(including common law), statutes, ordinances, regulations, rules, codes, writs,
judgments, orders or decrees.
<PAGE>
"LIEN" refers to any mortgage, pledge, security agreement, charge,
restriction, easement or other encumbrance of any type or character.
"MATERIAL ADVERSE EFFECT" refers to a material adverse effect with respect
to the, business, results of operations, properties, operations, or financial
condition of any specified Person and its Subsidiaries, taken as a whole.
"MULTI-EMPLOYER PLAN" has the meaning set forth in Section 3(37) of ERISA.
"PERMITS" refers to any licenses, permits, franchises, consents, approvals,
variances and other authorizations of, from or required by any Governmental
Entity under any applicable law.
"PERMITTED LIEN" means Liens imposed by law, such as carriers'
warehousemen's and mechanic's Liens or other Liens arising out of judgments or
awards against such person with respect to which such person shall be then
prosecuting appeal or other proceedings for review, and which do not in the
aggregate materially adversely affect the value of said properties or materially
impair their use in the operation of the Business of the Company; Liens for ad
valorem taxes not yet due and payable or not yet subject to penalties for
nonpayment or which are being contested in good faith and by appropriate
proceedings; Liens in favor of issuers of surety bonds issued pursuant to the
request of and for the account of the Company in the ordinary course of its
business, and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
Business of the Company; survey exceptions, easements or reservations of, or
rights of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of Owned Real Property, and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of the Company; Liens or other interests in favor
of others incidental to the conduct of the Company's Business or to the
ownership of its properties which were not incurred in connection with
Indebtedness or other extensions of credit, including, without limitation,
properties in the Company's possession under conditional sales, consignment or
purchase money lease agreements and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the Business of the Company; and other Liens in existence as of
the date of the Agreement which will not have a Material Adverse Effect on the
Company or on the ability of Parent to consummate the Offer or the financing of
the Offer.
"PERSON" refers to any individual, partnership, corporation, trust,
association, limited liability company, Government Entity or any department or
agency thereof, or any other entity.
"PROCEEDING" means any proceeding, action, claim, suit, audit,
investigation or inquiry by or before any Governmental Entity.
<PAGE>
"RELEASE" refers to any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, storing, escaping, leaching, dumping, burying,
abandoning or disposing into the environment.
"SEC" means the Securities and Exchange Commission.
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association, trust, or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association, trust, or other business entity a
majority of the partnership or other similar ownership or beneficial interest
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association,
trust or other business entity if such Person or Persons shall be allocated a
majority of limited liability company, partnership, association, trust or other
business entity gains or losses, distributions or other economic interests or
shall be or control any managing director, manager, general partner or trustee
of such limited liability company, partnership, association trust or other
business entity.
"TAX" refers to all federal, state, local and foreign taxes, charges, fees,
levies, penalties, duties or other assessments, including, without limitation,
income, gross receipts, excise, employment, sales, use, transfer, license,
payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, withholding, social security, disability, real property, personal
property, ad valorem or other tax or governmental fee of any kind whatsoever
imposed or required to be withheld by any Governmental Entity, whether disputed
or not.
"TAX RETURN" means any tax return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"1933 ACT" means the Securities Act of 1933, as amended.
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT "B"
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer, but subject, in all cases to
Parent's and Newco's obligations set forth under the Agreement, including,
without limitation, under Sections 1.1, 7.12 and 12.2 Newco shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the 1934 Act (relating to
Newco's obligation to promptly pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of Shares that would when
combined with any Shares held by the Parent, Newco or any of their Affiliates,
would constitute a majority of the aggregate outstanding Shares (assuming the
exercise of all options to purchase, and the conversion or exchange of all
securities convertible or exchangeable into, Shares outstanding as of the
consummation Offer) (the "Minimum Condition"), (ii) any waiting period under the
HSR Act applicable to the Offer shall have expired or been terminated prior to
the expiration of the Offer, and (iii) the Financing Condition shall have been
satisfied. Furthermore, notwithstanding any other term of the Offer, but
subject, in all cases, to Parent's and Newco's obligations set forth in the
Agreement, including, without limitation, under Sections 1.1, 7.12 and 12.2
Newco shall not be required to accept for payment or, to pay for any Shares not
theretofore accepted for payment or paid for, and may terminate the Offer at any
time if, at any time on or after the date of the Agreement and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions exists (other than as a result of any action or inaction of
Parent or any of its Subsidiaries that constitutes a breach of this Agreement):
(a) there shall be instituted or pending by any governmental agency or
similar authority in any United States federal or state court or administrative
agency any suit, action, Proceeding, application or counterclaim which would
reasonably be expected to (i) restrain or prohibit the acquisition by Parent or
Newco of the Shares pursuant to the Offer, the consummation of the Offer or the
Merger, or require the Company, Parent or Newco to pay any damages that are
material in relation to the Company and Company Subsidiaries, or Parent and its
Subsidiaries, taken as a whole, (ii) prohibit or limit in any material respect
the ownership or operation of any business or assets of the Company or Company
Subsidiaries or Parent or its Subsidiaries, as they are presently being
operated, or to compel the Company or Parent to dispose of or hold separate any
material business or assets of the Company and Company Subsidiaries or Parent
and its Subsidiaries, as a result of the Offer, or the Merger, (iii) impose
material limitations on the ability of Parent or Newco to acquire or hold, to
exercise full rights of ownership of, any Shares to be accepted for payment
pursuant to the Offer, including, without limitation, the right to vote such
Shares on all matters properly presented to the shareholders of the Company,
(iv) prohibit Parent
<PAGE>
or any of its Subsidiaries from effectively controlling any material business or
operations of the Company or Company Subsidiaries, or (v) which otherwise is
reasonably likely to have a Material Adverse Effect on the Business, properties,
assets, financial condition or results of operations of the Company and Company
Subsidiaries taken as a whole;
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any United States federal or state
governmental agency, court or similar authority, any statute, rule, regulation,
judgment, order of injunction, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that would reasonably be
expected to result in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above (other than any state law, statue, rule or regulation
whose applicability can be avoided by not extending the Offer to residents of
such state provided that in the aggregate not more than 5% of the outstanding
Shares as of the consummation of the Offer shall be owned of record by residents
of all such states);
(c) the board of directors of the Company or any committee thereof
shall have and be continuing to have suspended (in excess of three days),
withdrawn or modified in a manner adverse to Parent or Newco its approval or
recommendation of the Offer, the Merger or this Agreement, or approved or
recommended any Acquisition Proposal, or shall have resolved to take any of the
foregoing actions;
(d) any of the representations and warranties of the Company set forth
in the Agreement that are qualified as to materiality shall not be true and
correct in any respect or any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case, at the date of this Agreement and as if such representations and
warranties were made as of such time of determination (except that
representations and warranties that speak as of a specified date shall only be
true and correct to such extent as of such date);
(e) the Company shall have and be continuing to have failed to perform
in any material respect any material obligation or to comply in any material
respect with any material agreement or material covenant of the Company to be
performed or complied with by it under the Agreement prior to the consummation
of the Offer;
(f) there shall have occurred and be continuing (i) any general
suspension of trading in, or limitation on prices for, securities on a national
securities exchange in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified increase or decrease in a market
index or similar "circuit breaker" process), (ii) a declaration of a banking
moratorium or any general suspension of payments in respect of banks in the
United States, (iii) any material limitation (whether or not mandatory) by any
Governmental Entity on, or other similar event that materially adversely
affects, the extension of credit in the United States by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the United
States which materially
<PAGE>
adversely affects the extension of credit in the United States by banks or other
leading institutions, or (v) from the date of this Agreement through the date of
termination or expiration, a decline of at least 25% in either the Dow Jones
Industrial Average or the Standard & Poor's 500 Index; or
(g) there shall have occurred and be continuing any material adverse
change with respect to the Company or Parent (other than changes in general
economic conditions or in economic conditions generally affecting the industry
in which the Company and Parent operates).
which, in the judgment of Newco with respect to each and every matter referred
to above and regardless of the circumstances (including any action or inaction
by Newco or any of its Affiliates not inconsistent with the terms hereof) giving
rise to any such condition, makes it inadvisable to proceed with the Offer or
with such acceptance for payment of or payment for Shares.
If the Agreement is terminated by Parent or Newco or by the Company in
accordance with its terms, Newco shall, and Parent shall cause Newco to,
terminate promptly the Offer.
The foregoing conditions are for the benefit of Parent and Newco and may,
subject to the terms and conditions of the Agreement, be waived by Parent and
Newco in whole or in part at any time and from time to time in their sole
discretion; provided, however, that the Minimum Condition must be satisfied
prior to acceptance of any Shares for purchase pursuant to the Offer. The
failure by Parent or Newco at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
Notwithstanding the fact that Newco reserves the right to assert the occurrence
of a condition following acceptance for payment but prior to payment in order to
delay or cancel its obligation to pay for properly tendered Shares, Newco shall
either promptly pay for such Shares or promptly return such Shares.
Each term which is defined in the Agreement has the same meaning wherever
it is used in this Exhibit "B" as the meaning given in the Agreement.
<PAGE>
EXHIBIT "C"
RESOLUTIONS OF THE BOARD OF DIRECTORS OF
SHELTER COMPONENTS CORPORATION
(Approved and Adopted at Meeting of the Directors on October 21, 1997)
WHEREAS, there has been presented to the Board of Directors of the
Corporation a proposed Agreement and Plan of Merger (the "Merger Agreement"), by
and among the Corporation, Kevco, Inc., a Texas corporation ("Kevco"), and a
wholly owned subsidiary of Kevco, a true and correct copy thereof is attached as
Exhibit A hereto;
NOW THEREFORE BE IT RESOLVED, that the acquisition of the Corporation by
Kevco pursuant to the Offer (as defined in the Merger Agreement) and the Merger
(as defined in the Merger Agreement), be, and hereby is, in all respects,
approved substantially according to the terms, provisions, and conditions of the
Merger Agreement.
FURTHER RESOLVED, that the Merger Agreement, together with any exhibits,
schedules and annexes thereto, substantially in the form presented to and
reviewed by the Board of Directors, and the Corporation's performance of its
obligations under the Merger Agreement and related documents and agreements
contemplated by the Merger Agreement and necessary or appropriate to effect the
transactions contemplated by the Merger Agreement, be, and hereby are, in all
respects, approved.
FURTHER RESOLVED, that the Board of Directors of the Corporation hereby
determines and declares, upon the terms and subject to the conditions set forth
in the Merger Agreement, that, in the opinion of the Board of Directors, the
Offer and the Merger are in the best interests of the Corporation and the
shareholders of the Corporation and are fair to the shareholders of the
Corporation; and that the Board of Directors does hereby recommend that the
shareholders of the Corporation accept the Offer and tender their shares of
common stock of the Corporation pursuant to the Offer and, if required by
applicable law, approve, adopt and accept the Merger Agreement and the Merger.
FURTHER RESOLVED, that, any of the Chairman of the Board, the Chief
Executive Officer or the President of the Corporation be, and hereby is
authorized, empowered and directed for and on behalf of and in the name of the
Corporation to execute, acknowledge, deliver and otherwise approve and authorize
the Merger Agreement in substantially the form presented to the Board of
Directors, with such changes and modifications or amendments thereto as a such
officer of the Corporation shall deem necessary or appropriate, the approval of
which shall be conclusively evidenced by his or their execution and delivery
thereof.
FURTHER RESOLVED, that, the Board of Directors acting pursuant to Indiana
Code (S) 23-1-43-19, and intending to render inapplicable the provisions of
Indiana Code (S) 23-1-43, et seq, The Business Combinations Chapter, to the
Offer, the Merger, the Merger Agreement and the Shareholders Agreements (as
defined in the Merger Agreement) approves the Offer, the Merger, the Merger
Agreement and the Shareholders Agreements, approves the purchase of shares of
the common stock of the Corporation to be made by Kevco pursuant to the Offer
and the transactions contemplated by Shareholders Agreements; and approves such
share purchase before the share acquisition date (as defined in Indiana Code (S)
23-1-43-15 of such purchaser.
FURTHER RESOLVED, that, subsequent to the execution and delivery of the
Merger Agreement, any one or more of the officers of the Corporation be, and
hereby are, authorized, empowered and directed to take all further actions and
to execute and deliver all instruments, certificates, documents, deeds,
assignment, and withdrawal documents including, without limitation, to make any
and all filings with the Secretary of State of Indiana, foreign jurisdictions
where the Corporation is qualified to transact business, and other local, state
and federal authorities, in the name and on behalf of the Corporation, which
shall in his or her judgment be necessary, proper or advisable in order to
perform the Corporation's obligations under or in connection with the Offer, the
Merger, the Merger Agreement and the other transactions contemplated thereby.
FURTHER RESOLVED, that the Secretary or any Assistant Secretary be, and
hereby are, authorized and empowered for and on behalf of and in the name of the
Corporation to execute, acknowledge and deliver any and all attestations and
certifications that may be required from time to time in connection with the
Offer, the Merger, the Merger Agreement and the other transactions contemplated
thereby.
FURTHER RESOLVED, that the foregoing resolutions are adopted subject to and
in acknowledgment of the right of the parties to the Merger Agreement to
terminate and abandon the transactions in accordance with the terms of the
Merger Agreement.
<PAGE>
EXHIBIT "D"
FAIRNESS OPINION
[LETTERHEAD OF SBC WARBURG APPEARS HERE] SBC Warburg Dillon Read Inc.
535 Madison Avenue
New York, NY 10022
Tel. 212-906-7000
October 21, 1997
The Board of Directors
Shelter Components Corporation
2831 Dexter Drive
Elkhart, IN 46514
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, of the per share consideration to be offered to the holders (the
"Shareholders") of shares of common stock, $.01 par value per share (the
"Common Stock"), of Shelter Components Corporation (the "Company"), in
connection with the proposed acquisition (the "Acquisition") of the Company by
Kevco, Inc., ("Acquiror").
We have assumed that the terms of the Acquisition are as set forth in the
Agreement and Plan of Merger dated as of October 21, 1997 (the "Agreement")
among Acquiror, the Acquiror's acquisition subsidiary (the "Acquisition
Subsidiary") and the Company. We understand that the Acquisition is to be
effected in a two-step transaction, the first step of which will be a cash
tender offer (the "Tender Offer") by the Acquisition Subsidiary for all
outstanding shares of Common Stock at a per share price of $17.50 net to the
seller in cash upon the terms and conditions set forth in the Agreement. We
further understand that each share of Common Stock not acquired in the Tender
Offer will be converted in a subsequent merger of the Acquisition Subsidiary
with and into the Company into the right to receive $17.50 in cash.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and financial information relating to the
Company; (ii) reviewed the historical price and trading activity for the
shares of Commons Stock; (iii) reviewed certain internal financial information
and other data provided to us by the Company relating to the business and
prospects of the Company, including financial projections prepared by the
management of the Company; (iv) conducted discussions with members of the
senior management of the Company; (v) reviewed the financial terms, to the
extent publicly available, of certain acquisition transactions which we
considered relevant; (vi) reviewed publicly available financial and securities
market data pertaining to certain publicly held companies in lines of business
which we believed to be generally comparable to those of the Company; and
(vii) conducted such other financial studies, analyses and investigations, and
considered such other information as we deemed necessary or appropriate. We
were not requested to, and did not, solicit third party indications of
interest in acquiring the Company.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the foregoing
information and have relied upon its being complete and accurate in all
material respects. We have not been requested to and have not made an
independent evaluation or appraisal of any assets or liabilities (contingent
or otherwise) of the Company or any of its subsidiaries, nor have we been
furnished with any such evaluation or appraisal. Further, we have assumed,
with your consent, that all of the information, including the projections
provided to us by the Company's management, was prepared in good faith and was
reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the Company's management as to the future financial
performance of the Company, and was based upon the historical performance and
certain estimates and assumptions which were reasonable at the time made. In
addition, our opinion is based on economic, monetary and market conditions
existing on the date hereof.
SBC Warburg Dillon Read Inc. is a subsidiary of Swiss Bank Corporation and a
member of the New York Stock Exchange.
<PAGE>
[LETTERHEAD OF SBC WARBURG APPEARS HERE]
We are acting as financial advisor to the Company and its Board of Directors
in connection with the Acquisition and will receive a fee from the Company for
our services. In the ordinary course of its business, SBC Warburg Dillon Read
Inc. ("SBCWDR") may trade the securities of the Company and Acquiror for its
own account or for the accounts of customers, and it may at any time hold a
long or short position in such securities.
It is understood that our advisory services and the opinion expressed herein
are provided for the information of the Board of Directors in their evaluation
of the Acquisition, and our opinion is not intended to be and does not
constitute a recommendation as to whether or not any Shareholder should tender
shares of Common Stock pursuant to the Tender Offer.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the per share consideration to be offered to the Shareholders
in connection with the Acquisition is fair, from a financial point of view, to
such Shareholders.
Very truly yours,
SBC WARBURG DILLON READ INC.
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EXHIBIT "E"
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (the "Agreement"), dated as of October 21,
1997, among Kevco, Inc., a Texas corporation (the "Parent"), SCC Acquisition
Corp., an Indiana corporation and a direct wholly owned subsidiary of Parent
("Newco"), and the other parties signatory hereto (each a "Shareholder," and
collectively, the "Shareholders").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, concurrently herewith, Parent, Newco and Shelter Components
Corporation, an Indiana corporation (the "Company"), are entering into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to which, among other things, Newco will be merged with and into the
Company (the "Merger"); and
WHEREAS, in furtherance of the Merger, Parent and the Company have agreed
that as soon as practicable (and not later than five Business Days) after the
first public announcement of the execution and delivery of the Merger Agreement,
Newco will commence a cash tender offer to purchase all outstanding shares of
Company Common Stock (as defined in Section 1), including all of the Shares (as
defined in Section 2) Beneficially Owned (as defined in Section 1) by the
Shareholders; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Shareholders agree, and the Shareholders
have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Owned" or "Ownership" with respect to any securities shall mean
having the sole power to dispose of such securities and the sole power to vote
such securities.
(b) "Company Common Stock" shall mean at any time the common stock,
$.01 par value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
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2. TENDER OF SHARES.
(a) TENDER. Subject to Section 6, each Shareholder hereby agrees to
validly tender (and not to withdraw except in the case of termination of the
Merger Agreement as a result of a Superior Proposal) pursuant to and in
accordance with the terms of the Offer, not later than the fifth Business Day
prior to the expiration of the Offer (as such expiration date may be delayed
from time to time), the number of shares of Company Common Stock set forth
opposite such Shareholder's name on Schedule I hereto (the "Existing Shares"
and, together with any shares of Company Common Stock acquired by such
Shareholder after the date hereof and prior to the termination of this
Agreement, whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution or otherwise, the "Shares"). Each Shareholder
hereby acknowledges and agrees that Newco's obligation to accept for payment and
pay for Shares in the Offer is subject to the terms and conditions of the Offer.
(b) DISCLOSURE. Subject to Section 6, each Shareholder hereby agrees
to permit Parent and Newco to publish and disclose in the Offer Documents and,
if approval of the Merger by the Company's shareholders (other than Parent or
any of its wholly-owned subsidiaries) is required under Applicable Law, in the
Proxy Statement (including all documents and schedules filed with the SEC) his
or its identity and ownership of Company Common Stock and the nature of his or
its commitments under this Agreement.
3. PROVISIONS CONCERNING COMPANY COMMON STOCK.
(a) VOTING AGREEMENT. Each Shareholder hereby agrees that during the
period commencing on the date hereof and continuing until the termination of
this Agreement, at any meeting of the holders of Company Common Stock, however
called, or in connection with any written consent of the holders of Company
Common Stock, such Shareholder shall vote (or cause to be voted) the Shares held
of record or Beneficially Owned by such Shareholder, whether issued, heretofore
owned or hereafter acquired, (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
this Agreement and any actions required in furtherance thereof and hereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or this Agreement (after giving effect to
any materiality or similar qualifications contained therein); and (iii) except
as otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or Company
Subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or Company Subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or Company Subsidiaries; (C) (1) any
change in a majority of the persons who constitute the Board of Directors of the
Company; (2) any change in the present capitalization of the Company or any
amendment of the Company's Articles of
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Incorporation or Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the Company
or Company Subsidiaries which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by this Agreement and the Merger
Agreement. Such Shareholder shall not enter into any agreement or understanding
with any Person or entity the effect of which would be inconsistent with or
violative of the provisions and agreements contained in this Section 3.
(b) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(i) Subject to Section 6, each Shareholder hereby irrevocably grants
to and appoints Parent and Jerry D. Kimmel (as President and Chief Executive
Officer) and Ellis McKinley (as Chief Financial Officer) or either of them, in
their respective capacities of officers of Parent, and any individual who shall
hereafter succeed to any of such office of Parent, and each of them
individually, such Shareholder's Proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Shareholder, to vote
such Shareholder's Shares, or grant a consent or approval in respect of the
Shares in favor of the various transactions contemplated by the Merger Agreement
and against any Acquisition Proposal.
(ii) Subject to Section 6, each Shareholder represents that any
proxies heretofore given in respect of such Shareholder's Shares are not
irrevocable, and that any such proxies are hereby revoked.
(iii) Each Shareholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance that such Shareholder's execution
and delivery of this Agreement. Each Shareholder hereby affirms that the
irrevocable proxy set forth in this Section 3(c) is given in connection with the
execution of the Merger Agreement and that such irrevocable proxy is given to
secure the performance of the duties of such Shareholder under this Agreement.
Each Shareholder hereby further affirms that the irrevocable proxy is coupled
with an interest and, except as provided under Section 6, may under no
circumstances be revoked. Each Shareholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do and caused to be done in accordance
with the terms of this Agreement prior to termination of this Agreement.
(c) OPTIONS. Each of the Shareholders that holds Options to acquire
shares of Company Common Stock, as identified on the signature pages hereof,
shall, if requested by the Company, consent to the cancellation of such
Shareholder's Options in exchange for a lump sum cash payment in accordance with
the terms of the Merger Agreement and shall execute all appropriate
documentation in connection with such cancellation. The foregoing shall not
apply if as a result thereof such Shareholder shall be required to disgorge any
profits on such Options pursuant to Section 16(b) of the 1934 Act or the rules
promulgated thereunder.
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4. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Each Shareholder
hereby individually as to itself represents, warrants, covenants and agrees to
and with Parent as follows:
(a) OWNERSHIP OF SHARES. Such Shareholder is the record Owner of the
number of Existing Shares, other shares, and derivative securities set forth
opposite such Shareholder's name on Schedule I hereto. On the date hereof, the
Existing Shares set forth opposite such Shareholder's name on Schedule I hereto
constitute all of the shares or securities issued by the Company Owned of record
by such Shareholder. Such Shareholder has sole voting power and sole power to
issue instructions with respect to the matters set forth in Sections 2 and 3
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Existing Shares set
forth opposite such Shareholder's name on Schedule I hereto, with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Such Shareholder has the legal
capacity, power and authority, as applicable, to enter into and perform all of
such Shareholder's obligations under this Agreement. The execution, delivery
and performance of this Agreement by such Shareholder will not violate any other
agreement to which such Shareholder is a party including, without limitation,
any voting agreement, shareholders agreement or voting trust. This Agreement
has been duly and validly executed and delivered by such Shareholder and
constitutes a valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws affecting creditors'
rights generally. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which such Shareholder is trustee
whose consent is required for the execution and delivery of this Agreement or
the consummation by such Shareholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act, if
applicable, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority or any other Person
is necessary for the execution of this Agreement by such Shareholder and the
consummation by such Shareholder of the transactions contemplated hereby and (B)
none of the execution and delivery of this Agreement by such Shareholder, the
consummation by such Shareholder of the transactions contemplated hereby or
compliance by such Shareholder with any of the provisions hereof shall (1)
conflict with or result in any breach of any applicable organizational documents
applicable to such Shareholder, (2) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which such Shareholder is a party or by which such Shareholder or any of
such Shareholder's properties or assets may be
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<PAGE>
bound, or (3) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Shareholder or any of such
Shareholder's properties or assets.
(d) NO ENCUMBRANCES. Except as applicable in connection with the
transactions contemplated by Section 2 hereof and except as noted on Schedule I
hereto, the certificates representing such Shareholder's Existing Shares will
be, when tendered pursuant to Section 2(a) of this Agreement, held by such
Shareholder, or by a nominee or custodian for the benefit of such Shareholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, or any other encumbrances whatsoever, except for any such
encumbrances arising hereunder. The transfer by each Shareholder of his or its
Shares to Newco in the Offer shall pass to Newco good and valid title to the
number of Shares set forth opposite such Shareholder's name on Schedule I
hereto, free and clear of all claims, liens, restrictions, security interests,
pledges, limitations and encumbrances whatsoever.
(e) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Except as
applicable in connection with the transactions contemplated by Section 2 hereof,
subject to Section 6, no Shareholder shall (i) directly or indirectly, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Shareholder's Shares or Options or any interest therein; (ii) except as
contemplated by this Agreement, grant any proxies or powers of attorney, deposit
any Shares or Options into a voting trust or enter into a voting agreement with
respect to any Shares or Options; or (iii) take any action that would make any
representation or warranty of such Shareholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Shareholder from
performing such Shareholder's obligations under this Agreement.
(f) WAIVER OF APPRAISAL RIGHTS. Each Shareholder hereby waives any
rights of appraisal or rights to dissent from the Merger that such Shareholder
may have.
(g) RELIANCE BY PARENT. Such Shareholder understands and acknowledges
that Parent is entering into, and causing Newco to enter into, the Merger
Agreement in reliance upon such Shareholder's execution and delivery of this
Agreement.
(h) FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, the transactions
contemplated by this Agreement.
5. STOP TRANSFER; CHANGES IN SHARES. Each Shareholder agrees with, and
covenants to, Parent that such Shareholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Shareholder's Shares, unless
such transfer is made in compliance with this Agreement (including the
provisions of Section 2 hereof). In the event of a stock dividend or
distribution, or any change in the
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Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
6. TERMINATION. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares including but not limited
to the grant of the irrevocable proxy set forth in Section 3(b)(i) hereof, shall
terminate upon the earliest of (w) the acquisition of the Shares by Parent or
Newco pursuant to the Offer, (x) the Effective Time, (y) the termination of the
Merger Agreement or the withdrawal or modification by the Company Board of its
recommendation of the Offer or the Merger as permitted by Section 7.3(b) of the
Merger Agreement and (z) the six month anniversary of the date hereof.
7. SHAREHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director of the Company makes any agreement or
understanding herein in his or her capacity as such director.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Each Shareholder agrees that this Agreement and
the obligations hereunder shall attach to such Shareholder's Shares and shall be
binding upon any Person to which legal or beneficial ownership of such Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, such Shareholder's heirs, guardians, administrators or successors.
Notwithstanding any transfer of Shares, the transferor shall remain liable for
the performance of all obligations under this Agreement of the transferor.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, with respect
to any one or more Shareholders, except upon the execution and delivery of a
written agreement executed by the relevant parties hereto; provided that
Schedule I hereto may be supplemented by Parent by adding the name and other
relevant information concerning any shareholder of the Company who agrees to be
bound
6
<PAGE>
by the terms of this Agreement without the agreement of any other party hereto,
and thereafter such added shareholder shall be treated as a "Shareholder" for
all purposes of this Agreement.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Shareholders: At the addresses set forth on Schedule I hereto
If to Parent: Kevco, Inc.
1300 S. University Drive, Suite 200
Ft. Worth, Texas 76107
Attention: Jerry E. Kimmel
Telecopy: 817/332-2765
copy to: Richard S. Tucker
Jackson Walker L.L.P.
777 Main Street, Suite 1800
Ft. Worth, Texas 76102
Telecopy: 817/334-7290
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement may cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
7
<PAGE>
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) 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, and 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.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Indiana, without giving effect to the
principles of conflicts of law thereof.
(l) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, Parent, Newco and each Shareholder have caused this
Agreement to be duly executed as of the day and year first above written.
PARENT:
KEVCO, INC.
By:
------------------------------------------
Name: Jerry Kimmel
Title: Chairman of the Board and President
NEWCO:
SCC ACQUISITION CORP.
By:
------------------------------------------
Name: Jerry E. Kimmel
Title: President
8
<PAGE>
SHAREHOLDERS:
9
<PAGE>
AGREED TO AND ACKNOWLEDGED
(with respect to Section 5):
COMPANY:
SHELTER COMPONENTS CORPORATION
By:
------------------------------------------
Name: Larry D. Renbarger
Title: President
10
<PAGE>
Schedule I to Shareholders Agreement
<TABLE>
<CAPTION>
Number of Shares of
Name and Address Number of Shares Common Stock Issuable
of Shareholders of Common Stock Owned Upon Exercise of Options
- - ---------------- --------------------- ------------------------
<S> <C> <C>
William N. Harper 3,983 5,000
15797 Branch Water Way
Mishawaka, Indiana 46545-1605
Larry D. Renbarger 353,575 40,625
14609 Brick Road
Granger, Indiana 46530
Gerald R. Stults 383,422 40,625
17460 Valentine Ct.
Bristol, Indiana 46507
Herbert M. Gardner 93,594 5,000
4 Darley Road
Great Neck, New York 11021
Arthur M. Borden 15,091 5,000
860 United Nations Plaza
New York, New York 10017
Cornelius J. Murphy 91,170 5,000
1051 Hillsboro Mile-PH5E
Hillsboro Beach, Florida 33062
William J. Barrett 125,377 5,000
c/o Janney Montgomery Scott, Inc.
26 Broadway
New York, New York 10004
Mark C. Neilson 24,906 35,000
51195 Streamwood Drive
Granger, Indiana 46530
Steven A. Salzer --- 10,000
15490 Stony Run Trail
Granger, Indiana 46530
</TABLE>
11
<PAGE>
EXHIBIT "F"
SEVERANCE AGREEMENTS
AND SEVERANCE PLAN
Shelter Components
Separation Allowance Plan
for Salaried Employees
10/14/97
<PAGE>
Separation Allowance Plan for Salaried Employees
------------------------------------------------
INTRODUCTION
- - ------------
This document serves as both the master plan document and the Summary Plan
Description (SPD) for the Shelter Components Separation Plan for Salaried
Employees ("Plan"). All decisions about eligibility and benefits will be
determined by the provisions of the Plan.
POLICY STATEMENT
- - ----------------
It is the policy of the Company to provide a formal means of compensating
salaried employees who are terminated from employment.
Accordingly, a schedule of separation allowance, together with the conditions
governing their payment, are set forth below.
It is understood that the payment of separation allowance under this Plan does
not constitute a contractual agreement with the employee for the period covered
by the separation allowance nor for the employee to be retained in the employ of
the Company.
Part-time and temporary employees are not eligible for any separation allowance.
SCOPE
- - -----
This policy and related procedures apply to all facilities and subsidiaries of
the Company employing salaried personnel unless specifically excluded.
ADMINISTRATION
- - --------------
It is the responsibility of all management personnel to administer the Plan
within its objectives and the provisions set forth. The President shall make
final determination regarding eligibility for benefits and interpretation of
all terms of the Plan.
10/14/97 1
<PAGE>
DEFINITIONS
- - -----------
For purposes of this Plan, the following definitions apply:
1. The Company- Shelter Components Corporation and all subsidiaries.
2. Salaried Employee- those employees whose compensation is based on a fixed
rate per pay period or annual amount.
3. Temporary Employees- those employees hired for full-time work (40 hours per
week) but for a limited period of time not to exceed twelve (12) months.
4. Part-time Employees- those employees hired for an indefinite period who are
normally scheduled to work less than forty (40) hours per week.
5. Years of Service- means total number of full and fractional years of
service with the Company unless otherwise excluded under a provision of
this Plan or by virtue of employment practices or policies of the Company.
For purposes of this Plan, such service will be from the last date of hire.
Service prior to a break in service, which was re-established for purposes
of calculating vacation time, shall be counted as service under this Plan.
Only full months of service will be counted towards Years of Service.
6. Base Salary- means the basic rate of pay for a forty (40) hour work week.
Base Salary excludes overtime, bonus, commissions, profit sharing, shift
premiums, or any other compensation not normally included in a salaried
employee's base compensation.
ELIGIBILITY
- - -----------
A salaried employee terminated for the following reasons, and only under the
conditions stated, shall be eligible to receive separation allowance.
Individuals involuntarily separated for work-related misconduct or for poor
performance will not be eligible for the separation allowance. Otherwise,
salaried employees are eligible under the following conditions:
A. SEPARATION FROM ACTIVE EMPLOYMENT- termination by the Company due to a
reduction in the work force for business reasons such as declining volume,
inefficient or discontinued operations, etc., provided:
1. The separation is for an indefinite period of time.
2. The employee has not declined an offer to be retained in a position at
a base salary at least 80% of base salary in effect at the time of
layoff.
3. The employee has not been retained on the Company's payroll.
10/14/97 2
<PAGE>
B. SALARIED EMPLOYEE OFFERED ANOTHER POSITION- a salaried employee whose
performance has been considered satisfactory but cannot continue in his/her
present position because of a reduction in force or due to circumstances
deemed acceptable by the Company may be offered, if available, other
employment opportunities within the Company. In such cases, such employee
will be eligible for separation pay if such employee:
1. Is offered and declines any position in another Company facility which
requires relocation to a facility at least 50 miles from his or her
current place of employment and which the pay offered is less than
120% of the affected employee's current pay; or
2. Is offered and declines a salaried position which does not require
relocation to a facility at least 50 miles from his or her current
place of employment and for which the pay offered is less than 80% of
his/her current pay; or
3. Is offered and declines an hourly-rated position in a Company
facility; or
4. Accepts an hourly-rated position in a Company facility and during the
succeeding six (6) months quits or is separated for reasons other than
discharge or death. Such separation allowance shall be the amount to
which the employee was entitled at the time of the separation from the
last salaried position to which assigned.
C. SALE OR TRANSFER OF ALL OR A PORTION OF A COMPANY BUSINESS TO ANOTHER
EMPLOYER- a salaried employee employed in a Company business or portion
thereof which is sold or transferred to another employer shall be eligible
for separation pay only if:
1. He/she is not offered employment with the new employer or maintains
existing employment; or
2. He/she is offered and declines a position with the new employer which
requires relocation to a facility at least 50 miles from his or her
current place of employment and which the pay offered is less than
120% of the affected employee's current pay; or
3. He/she is offered and declines a salaried position which does not
require a relocation to a facility at least 50 miles from his or her
current place of employment and for which the pay offered is less than
80% of their current pay, or
4. He/she is offered and declines an hourly-rated position, or
5. Special arrangements are made at or prior to the time of sale or
transfer to pay separation pay.
10/14/97 3
<PAGE>
If in the sole discretion of the Company, there appears to be a sound basis for
an employee to believe his/her position with the new employer is not comparable
to the one held with the Company, such employee will be given the alternative of
being released under Mutually Satisfactory Conditions, as defined in this Plan.
Such employee shall be eligible for separation allowance.
D. RELEASE UNDER MUTUALLY SATISFACTORY CONDITIONS-An employee released due to
inability to satisfactorily perform assigned duties is normally not eligible
for separation allowance. However, there may be situations involving an
employee where special circumstances, such as medical reasons (except for
those whom workers' compensation payments are currently being paid, or where
such a claim is pending), warrant a release which is mutual satisfactory to
both the Company and the employee. Separation allowance up to and including
the amount described in the Plan may be granted in such cases only if
approved in advance by the President.
AMOUNT OF SEPARATION ALLOWANCE
- - ------------------------------
Separation allowance shall be based upon an eligible employee's length of
service and the employee's Base Salary as in effect at the time of termination
unless otherwise provided under the Plan.
The amount of separation pay will equal one (1) week base salary times the
employee's years of service. The minimum amount of separation pay will be two
(2) weeks base salary. The maximum amount of separation allowance will not
exceed thirteen (13) weeks base salary.
For example, an employee entitled to separation pay whose base salary per week
is $500.00 and whose years of service is five (5) years will have a separation
pay amount calculated as:
$500.00 x 5 years = $2,500.00 Separation Pay
PAYMENT OF SEPARATION ALLOWANCE
- - --------------------------------
Any separation allowance due an employee will be made as soon as practicable
after termination. In no case will payment be delayed more than sixty (60) days
after termination. Any separation allowance due will be paid in a single lump
sum payment processed through the Company's Payroll Department.
Any applicable deductions and/or required taxes will be deducted from any
separation allowance payment.
Amounts owed to the Company by an employee entitled to separation allowance will
be deducted (up to the full amount of the separation allowance) from the
separation allowance payment.
10/14/97 4
<PAGE>
OTHER
- - -----
A. Separation allowance shall be in addition to any payments for unused
vacation time to which the employee may be entitled under the Company's
vacation policy.
B. Separation may be paid to the estate of a deceased employee if the
employee's death occurs after the act giving rise to such claim and before
actual payment is made.
C. The Company reserves the right to modify or amend the Plan from time to
time and to terminate the Plan at any time without notice. Any modification
or amendment to the Plan, including terminating the Plan, must be approved
by the President of the Company.
D. This document shall be the only legally governing document for the Plan,
subject to all applicable laws and regulations. All statements, whether
verbal or written, made by the Company, the Plan Administrator, or any
employee of the Company shall not be deemed representations and warranties.
No such statements shall void, reduce or increase any benefits under this
Plan.
E. The sole and exclusive remedy for any person who has been denied benefits
under this Plan and who believes that he/she is entitled to benefits under
this Plan shall present such claim in writing to the Designated Agent for
Service of Legal Process within sixty (60) days following the act giving
rise to such claim. Failure to provide written notice within sixty (60)
days following the act giving rise to such claim will result in waiver of
any claim under this Plan. The Designated Agent for Service of Legal
Process shall within a reasonable time provide adequate notice in writing
to any claimant as to the decision of such claim. If such claim has been
denied in whole or in part, such notice shall set forth; (1) the specific
reason for the denial; (2) specific reference to any pertinent provisions
of the Plan; (3) a description of any additional material or information
necessary for the claimant to perfect such claim; and (4) an explanation of
the Plan's review procedure.
Within sixty (60) days after receipt by the claimant of notification of
denial from the Designated Agent for Service of Legal Process, the claimant
shall have the right to present written appeal to the Plan Administrator.
If no such written appeal is received within said sixty (60) days, the
Designated Agent for Service of Legal Process' decision shall be final and
binding. The Plan Administrator will review such appeal and within a
reasonable time uphold, modify, or reverse such decision and notify the
claimant of the same. The decision of the Plan Administrator will be final.
F. Release. In order to obtain separation benefits, the employee must sign a
release, such as that attached as Appendix A hereto, that releases the
Company, its agents, and employees from any liability arising from
employment.
10/14/97 5
<PAGE>
GENERAL INFORMATION
- - -------------------
Name and address of the Plan Sponsor
- - ------------------------------------
Shelter Components Corporation
PO Box 4026
Elkhart, IN 46514
(219) 262-4541
Name and address of the Plan Administrator
- - ------------------------------------------
President
Shelter Components Corporation
PO Box 4026
Elkhart, IN 46514
(219) 262-4541
Name and address of Designated Agent for Service of Legal Process
- - -----------------------------------------------------------------
Corporate Attorney
Shelter Components Corporation
PO Box 4062
Elkhart, IN 46514
(219) 262-4541
Internal Revenue Service and Plan Identification Number
- - --------------------------------------------------------
The corporate tax identification number assigned by the Internal
Revenue Service is 35-1844944. The Plan number is 503.
Plan Type
- - ---------
The Plan is a Welfare Benefits Plan as defined by Employee Retirement Income
Security Act of 1974 (ERISA).
Type of Administration
- - ----------------------
The administation of this Plan is performed by Shelter Components Corporation.
Plan Year
- - ---------
The Plan year is from November 1st to October 31st.
Funding
- - -------
The Plan is funding from the general assets of the Company.
Plan Effective Date
- - -------------------
The Plan is effective November 1, 1997.
6
<PAGE>
RIGHTS OF PARTICIPANTS
- - ----------------------
As a participant in the Plan, you are entitled to certain rights under federal
law.
According to the law, you have the right to examine, without charge at the Plan
Administrator's office or other specified locations, all documents and contracts
of the Plan that are filed with the U.S. Department of Labor, such as detailed
annual reports and plan descriptions. You may obtain copies of all documents
upon written request to the Plan Administrator. The Plan Administrator may make
a reasonable charge for copies. You are also entitled to receive a summary of
the Plan's annual financial report.
Federal law imposes duties on the individuals responsible for the operation of
the Plan to do so carefully and in the interest of all participants. No one,
including your employer, a union, or any other person, may fire you or
discriminate against you to prevent you from obtaining any benefit under the
Plan or exercising your rights under federal law.
Under federal law, there are steps you may take to enforce your rights. For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file a suit in federal court. The court may require the Plan
Administrator to provide you the materials and pay up to $100 a day until you
receive the materials unless the delay is beyond the control of the Plan
Administrator. If the people who operate the Plan misuse the Plan's money, or if
you are discriminated against for enforcing your rights, you may seek assistance
from the U.S. Department of Labor or file suit in federal court. If you do file
suit, the court will decide who should pay court fees and legal fees. If your
case is upheld by the court, the court may order the person or organization you
have sued to pay related expenses. If you lose or the court finds your case
frivolous, you may be ordered to pay the court costs and legal fees.
If you have any questions about the Plan, contact the Plan Administrator. If you
have any questions about your rights, contact the office of the U.S. Department
of Labor-Management Services Administration, Department of Labor.
7
<PAGE>
Appendix A
----------
SEPARATION AND RELEASE AGREEMENT
--------------------------------
The purpose of this document is to set forth the agreement between SHELTER
COMPONENTS, INC., ("COMPANY") and EMPLOYEE ("EMPLOYEE") regarding his/her
employment by COMPANY and the termination of that employment.
1. COMPANY agrees as to pay EMPLOYEE the total sum of ________________________
__________________________________________ and 00/100 Dollars
($___________) as a severance payment. Payment shall be made by check
payable to EMPLOYEE eight (8) days after execution of this Agreement.
2. EMPLOYEE agrees as follows:
(a) To resign his/her employment with COMPANY effective ___________.
(b) To RELEASE and DISCHARGE COMPANY, its officer, directors, and
employees from any and all claims, actions or causes of action, known
and unknown, relating to, arising out of EMPLOYEE's employment with
COMPANY and the termination of that employment. By way of
specification and not by way of limitation, EMPLOYEE specifically
waives, releases, and agrees to forgo any rights or claims that he/she
may now have, may have heretofore had, or may at any time hereafter
have against COMPANY on matters arising prior to and up to the date of
this Agreement, under tort, contract, or other law of the State of
Indiana, including, but not limited to claims arising out of
allegation of wrongful or retaliatory discharge, breach of contract,
breach of implied covenant of good faith and fair dealing,
misrepresentation, slander, libel, defamation, emotional pain and
suffering, and intentional affliction of emotional distress and those
claims alleging discrimination on the basis of race, age, color, sex,
religion, national origin, and disability under the Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act of 1990, the Age Discrimination in Employment
Act, Older Worker Benefit Protection Act, or under any other laws,
ordinances, executive orders, rules, regulations, or administrative or
judicial case law arising under the statutory or common laws of the
United States, State of Indiana, or any political subdivision of the
State of Indiana.
(c) NOT TO SUE COMPANY, its officers, directors, and employees alleging
any claim, action or cause of action for breach of contract or
wrongful discharge under any statute or common law of the State of
Indiana, or alleging any claim, action, or cause of action for
discrimination under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act of 1990, the Age Discrimination in
Employment Act, or any other federal statute, state statute, or local
ordinance.
<PAGE>
(d) Not to reapply for employment with COMPANY within five (5) years of
the date of separation.
3. In executing this Agreement, EMPLOYEE represents that he/she has entered
into this Agreement KNOWINGLY AND VOLUNTARILY and with full knowledge and
understanding of the provisions of this Agreement, including the rights
he/she is waiving under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act of 1990, the Age Discrimination in
Employment Act, any other federal statute, state statute or local
ordinance, and any common law of the State of Indiana. EMPLOYEE further
represents that by entering into this Agreement, he/she is not relying on
any statements or representations made by COMPANY, its officers, directors,
employees, or agents which are not incorporated in this Agreement; rather,
EMPLOYEE is relying upon his/her own judgment and the advice of his/her
counsel.
4. It is understood and agreed to by EMPLOYEE that by entering into this
Agreement, making the payments provided herein and providing the benefits
set out herein, COMPANY does not admit having committed any violation of
Civil Rights Act of 1964, the Americans with Disabilities Act 1990, the Age
Discrimination in Employment Act, or any other rights EMPLOYEE has or may
have under any other federal statute, state statute or local ordinance, or
common law claim of the State of Indiana.
5. EMPLOYEE acknowledges that he/she understands that he/she has the right to
review the terms of this Agreement for a period of twenty-one (21) days
prior to signing this Agreement.
6. EMPLOYEE represents and acknowledges that he/she has been advised by
COMPANY, in writing, that he/she has seven (7) calendar days from the date
of execution of this Agreement within which to revoke this Agreement and
that all waivers, covenants not to sue and releases would not be effective
until after seven (7) calendar days from the date of this Agreement.
7. This Agreement constitutes the entire agreement between COMPANY and
EMPLOYEE and shall not be modified or amended unless in writing and
executed by both COMPANY and EMPLOYEE.
8. This Agreement shall be construed in accordance with the laws of the State
of Indiana. If any portion of this Agreement is deemed to be null, void, or
inoperative for any reason, that portion of the Agreement is severable and
the remaining portions will remain in full force and effect.
9. Each of the covenants contained herein shall be binding upon the parties
hereto, their heirs, executors, administrators, and successors in interest.
<PAGE>
This Agreement is executed as of __________ day of _________________, 1997.
EMPLOYEE __________________________________________________________________
EMPLOYEE
Date: ________________________________________________________
Shelter Components, Inc.
---------------------------------------------------
By:
------------------------------------------------
Its:
-----------------------------------------------
Date:
----------------------------------------------
<PAGE>
EXHIBIT (c)(2)
[LETTERHEAD OF SHELTER COMPONENTS CORPORATION APPEARS HERE]
August 25, 1997
Mr. Jerry E. Kimmel PRIVILEGED & CONFIDENTIAL
Chairman -------------------------
Kevco, Inc.
1300 South University Drive
Suite 200
Fort Worth, Texas 76147-9015
RE: Confidentiality Agreement
-------------------------
Dear Jerry:
In connection with your consideration of a possible negotiated
transaction between Kevco, Inc., acting directly or through an affiliate or a
wholly-owned subsidiary ("You") and Shelter Components Corporation and its
subsidiaries (the "Company"), You have requested information concerning the
Company. As a condition to your being furnished with such information as You may
reasonably request, You agree to treat any information concerning the Company
(whether prepared by the Company, its directors, officers, employees, agents,
advisors or otherwise, and whether oral, written or in any other format
including, without limitation, on any form of computer or other electronic
media) which may be furnished to You or your representatives (which term, for
purposes of this agreement (the "Agreement"), shall include your directors,
officers, employees, agents, advisors, potential financing sources and any
affiliates of such persons) by or on behalf of the Company (herein collectively
referred to as the "Evaluation Material") in accordance with the provisions of
this Agreement, and to take or abstain from taking certain other actions herein
set forth.
The term "Evaluation Material" also shall be deemed to include all
notes, analyses, compilations, studies, interpretations and other documents
prepared by You or your representatives which contain, reflect or are based
upon, in whole or in part, the information furnished to You or your
representatives pursuant hereto. The term "Evaluation Material" does not include
information which (i) is already in your possession, provided that such
information is not known by You after due inquiry to be subject to another
confidentiality agreement with or other obligation of secrecy to the Company or
another person, (ii) is or becomes generally available to the public other than
as a result of a disclosure by You or your representatives, or (iii) becomes
available to You on a non-confidential basis from a source other than the
Company, its directors, officers, employees, agents or advisors, provided that
such source is not
-1-
<PAGE>
Mr. Jerry E. Kimmel
August 25, 1997
bound by a confidentiality agreement with, or have a duty of secrecy or a
fiduciary obligation to, the Company or another party.
You agree that the Evaluation Material will be used solely for the purpose
of evaluating a possible transaction between the Company and You and for no
other purpose and will not be used in any way detrimental to the Company
(including, without limitation, directly or indirectly in the conduct of your
business) and that such information will be kept strictly confidential by You
and your representatives; provided, however, that any of such information may be
disclosed to such of your representatives who need to know such information for
the purpose of assisting You in evaluating any such possible transaction (it
being understood and agreed that such representatives shall be informed by You
of the confidential nature of such information and shall agree to treat such
information confidentially and to be bound by this Agreement. You agree that all
of your representatives to whom any of such information is disclosed will act in
accordance with and be bound by the terms of this Agreement and that You shall
be responsible to the Company for any breach of the provisions of this Agreement
by You or by any of your representatives, and shall indemnify and hold harmless
the Company from any damage, loss, cost or liability (including, without
limitation, attorney's fees and costs with respect to the enforcement of this
Agreement) arising out of or resulting from any unauthorized use or disclosure
by You or your representatives of any of the Evaluation Material or any other
breach of the provisions of this Agreement.
Certain of the Evaluation Material is considered by the Company to be its
most sensitive information, including without limitation, product marketing and
pricing information (collectively referred to as the "Most Sensitive Material").
Notwithstanding anything herein to the contrary, You shall not have access to
the Most Sensitive Material unless and until a Definitive Agreement has been
executed and delivered. Under the Definitive Agreement, the Company and You will
develop a reasonable protocol providing for your access to the Most Sensitive
Material to the maximum extent permitted by law.
You hereby acknowledge that You are aware, and that You will advise such
representatives who become aware of any of the Evaluation Material, that the
United States securities laws prohibit any person who has material, non-public
information relating to a corporation from purchasing or selling securities of
the corporation or from communicating such information to any other person. The
information being provided pursuant hereto may be of such a nature.
In the event that You or your representatives receive a request to disclose
all or any part of the information contained in the Evaluation Material under
the terms of a
-2-
<PAGE>
Mr. Jerry E. Kimmel
August 25, 1997
valid and effective subpoena or order issued by a court of competent
jurisdiction or by a governmental or administrative body, You will immediately
notify the Company of the existence, terms and circumstances surrounding such a
request so that the Company may seek a protective order or other appropriate
remedy (and You will provide such cooperation in connection therewith as the
Company may reasonably request) or waive compliance with the provision of this
Agreement. If such protective order or other remedy is not obtained or the
Company waives compliance with the provisions of this Agreement, You will
furnish only that portion of the Evaluation Material which in the written
opinion of your counsel is legally required to be disclosed and will exercise
reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to the Evaluation Material so furnished.
You hereby acknowledge that the Evaluation Material is being furnished to
You in consideration, among other things, of your agreement that for a period of
eighteen (18) months from the date hereof, You and your affiliates (as defined
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), will not,
directly or indirectly, acting alone or in concert with others, undertake any of
the following actions unless expressly requested in writing in advance by the
Board of Directors of the Company to so act:
(i) employ any of the current officers or other senior or key employees
of the Company identified as such by the Company with whom You have had contact
or who specifically identified to You as such during the period of your
investigation of the Company, so long as they are employed by the Company,
except in connection with and subject to the purchase of assets of the Company;
(ii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" to vote (as such terms are used in the proxy rules
of the Securities and Exchange Commission), or seek to advise or influence any
person or entity with respect to the voting of, any voting securities of the
Company;
(iii) otherwise act, directly or indirectly, alone or in concert with
others, to seek to control or influence in any manner, the management, Board of
Directors, policies or affairs of the Company, or
(iv) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the foregoing.
-3-
<PAGE>
Mr. Jerry E. Kimmel
August 25, 1997
You agree that You and your affiliates will take no action of any form
in any court, or before any governmental or administrative tribunal or agency,
seeking a waiver of any of the prohibitions contained in this Agreement.
Although the Company will endeavor to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of your
investigation, You understand and agree that neither the Company nor any of its
representatives or advisors has made or hereby makes any representation or
warranty as to the accuracy or completeness of the Evaluation Material and that
You are not entitled to rely on the accuracy or completeness of the Evaluation
Material. You agree that neither the Company nor any of its directors, officers,
employees, agents or advisors shall have any liability to You or any of your
representatives resulting from the use of contents of the Evaluation Material or
from any action taken or any inaction occurring in reliance on the Evaluation
Material. Only those representations or warranties which are made in a final
Definitive Agreement regarding the transaction which is contemplated by this
Agreement (a "Definitive Agreement"), when, as and if executed, and subject to
such limitations and restrictions as may be specified therein, may be relied
upon and shall be legally binding upon the Company.
At the request of the Company, You and your representatives shall
promptly redeliver to the Company all Evaluation Material that is in writing or
in any other format (including, without limitation, on any form of computer or
other electronic media) and any other material containing or reflecting any
information in the Evaluation Material, and neither You nor your representatives
shall retain any copies, notes, extracts, compilations, analyses or other
reproductions, in whole or in part, of any Evaluation Material in any form
whatsoever (including, without limitation, on any form of computer or other
electronic media); provided, however, (i) Evaluation Material consisting of
documents, memoranda, notes, and other writings prepared by You and your
representatives, in any form whatsoever (including, without limitation, on any
form of computer or other electronic media), shall be destroyed immediately, and
confirmation of such destruction shall be certified in writing to the Company by
your authorized officer supervising such destruction, and (ii) oral Evaluation
Material shall continue to be subject to the provisions of this Agreement.
Unless and until a Definitive Agreement has been executed and delivered,
You agree that neither the Company nor You will be under any legal obligation of
any kind whatsoever with respect to any such transaction except for such matters
set forth specifically herein. You agree that the Company shall not be
prohibited from seeking to effect any of the transactions contemplated herein
with any third party. The agreements set forth in the Agreement may be expressly
modified or waived only by a separate writing executed between the Company and
You.
-4-
<PAGE>
Mr. Jerry E. Kimmel
August 25, 1997
You agree that You and your representatives shall direct all inquiries
and any request for information to Messrs. Renbarger or Stults at the Company,
or persons designated by such officers, in connection with the possible
transaction contemplated by this Agreement and that no contact shall be made
with other persons in connection therewith.
The term "person" as used in this Agreement shall mean, with limitation,
any corporation, company, group, partnership, individual or other entity.
Until October 25, 1997, the Company shall not take (nor shall the
Company permit its officers, directors, employees, attorneys, or other agents to
take) any action to solicit or initiate the submission by a third party of a
proposal with respect to a merger or other business combination involving the
Company, a sale of all or substantially all of the assets of the Company, or a
sale of all or substantially all of the capital stock of the Company.
It is agreed that money damages would be an inadequate remedy for the
breach of this Agreement because of the difficulty of ascertaining the amount of
damages that would be suffered by the Company in the event of such breach.
Therefore, You agree that, without limiting any other remedies which the Company
may pursue, the Company shall be entitled to equitable relief, including,
without limitation, specific performance of this Agreement and injunctive relief
against any breach hereof, as a remedy for any breach of this Agreement, without
having to post any bond or any other form of security, without having to show
any likelihood or irreparable harm, and without having to prove that money
damages would be an inadequate remedy.
In the event that the Company should institute proceedings to enforce
any provisions of this Agreement, You agree that the Company, if a judgment is
entered in favor of the Company, shall be entitled to recover all expenses
relating to the enforcement of this Agreement, including, without limitation,
reasonable attorneys' fees and costs, in addition to any other remedies. If any
term, provision, covenant or restriction of this Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or in any way
invalidated by such court action.
It is further understood and agreed that no failure or delay by the
Company 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 right, power or
privilege hereunder.
-5-
<PAGE>
Mr. Jerry E. Kimmel
August 25, 1997
You hereby agree to submit to the jurisdiction of any court of the State
of Indiana or any federal court sitting in the State of Indiana for the purpose
of any suit, action or other proceeding arising out of this Agreement, or of the
transactions contemplated hereby, which is brought by or against the Company.
You agree that this Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of Indiana, without regard to the rules of
the conflict of laws of such State.
This Agreement shall continue for a period of eighteen (18) months,
provided that should any transaction contemplated hereunder be consummated,
then and in that event, the obligations hereunder shall cease.
If You are in agreement with the foregoing, please indicate such
agreement by signing and returning (1) one copy of this Agreement to the
Company, whereupon this Agreement will constitute our agreement with respect to
the subject matter hereof.
Very truly yours,
SHELTER COMPONENTS CORPORATION
/s/ LARRY D. RENBARGER
Larry D. Renbarger
Chief Executive Officer
Confirmed and Agreed, this 25th day of August, 1997:
KEVCO, INC.
By: /s/ JERRY E. KIMMEL
-----------------------------
Jerry E. Kimmel
Chairman
-6-
<PAGE>
EXHIBIT (c)(3)
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (the "Agreement"), dated as of October 21,
1997, among Kevco, Inc., a Texas corporation (the "Parent"), SCC Acquisition
Corp., an Indiana corporation and a direct wholly owned subsidiary of Parent
("Newco"), and the other parties signatory hereto (each a "Shareholder," and
collectively, the "Shareholders").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, concurrently herewith, Parent, Newco and Shelter Components
Corporation, an Indiana corporation (the "Company"), are entering into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to which, among other things, Newco will be merged with and into the
Company (the "Merger"); and
WHEREAS, in furtherance of the Merger, Parent and the Company have agreed
that as soon as practicable (and not later than five Business Days) after the
first public announcement of the execution and delivery of the Merger Agreement,
Newco will commence a cash tender offer to purchase all outstanding shares of
Company Common Stock (as defined in Section 1), including all of the Shares (as
defined in Section 2) Beneficially Owned (as defined in Section 1) by the
Shareholders; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Shareholders agree, and the Shareholders
have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Owned" or "Ownership" with respect to any securities shall mean
having the sole power to dispose of such securities and the sole power to vote
such securities.
(b) "Company Common Stock" shall mean at any time the common stock,
$.01 par value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
1
<PAGE>
2. TENDER OF SHARES.
(a) TENDER. Subject to Section 6, each Shareholder hereby agrees to
validly tender (and not to withdraw except in the case of termination of the
Merger Agreement as a result of a Superior Proposal) pursuant to and in
accordance with the terms of the Offer, not later than the fifth Business Day
prior to the expiration of the Offer (as such expiration date may be delayed
from time to time), the number of shares of Company Common Stock set forth
opposite such Shareholder's name on Schedule I hereto (the "Existing Shares"
and, together with any shares of Company Common Stock acquired by such
Shareholder after the date hereof and prior to the termination of this
Agreement, whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means of
purchase, dividend, distribution or otherwise, the "Shares"). Each Shareholder
hereby acknowledges and agrees that Newco's obligation to accept for payment and
pay for Shares in the Offer is subject to the terms and conditions of the Offer.
(b) DISCLOSURE. Subject to Section 6, each Shareholder hereby agrees
to permit Parent and Newco to publish and disclose in the Offer Documents and,
if approval of the Merger by the Company's shareholders (other than Parent or
any of its wholly-owned subsidiaries) is required under Applicable Law, in the
Proxy Statement (including all documents and schedules filed with the SEC) his
or its identity and ownership of Company Common Stock and the nature of his or
its commitments under this Agreement.
3. PROVISIONS CONCERNING COMPANY COMMON STOCK.
(a) VOTING AGREEMENT. Each Shareholder hereby agrees that during the
period commencing on the date hereof and continuing until the termination of
this Agreement, at any meeting of the holders of Company Common Stock, however
called, or in connection with any written consent of the holders of Company
Common Stock, such Shareholder shall vote (or cause to be voted) the Shares held
of record or Beneficially Owned by such Shareholder, whether issued, heretofore
owned or hereafter acquired, (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other actions contemplated by the Merger Agreement and
this Agreement and any actions required in furtherance thereof and hereof; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or this Agreement (after giving effect to
any materiality or similar qualifications contained therein); and (iii) except
as otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger and the transactions contemplated by the Merger
Agreement): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or Company
Subsidiaries; (B) a sale, lease or transfer of a material amount of assets of
the Company or Company Subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or Company Subsidiaries; (C) (1) any
change in a majority of the persons who constitute the Board of Directors of the
Company; (2) any change in the present capitalization of the Company or any
amendment of the Company's Articles of
2
<PAGE>
Incorporation or Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the Company
or Company Subsidiaries which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially adversely affect the
Merger and the transactions contemplated by this Agreement and the Merger
Agreement. Such Shareholder shall not enter into any agreement or understanding
with any Person or entity the effect of which would be inconsistent with or
violative of the provisions and agreements contained in this Section 3.
(b) GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(i) Subject to Section 6, each Shareholder hereby irrevocably grants
to and appoints Parent and Jerry D. Kimmel (as President and Chief Executive
Officer) and Ellis McKinley (as Chief Financial Officer) or either of them, in
their respective capacities of officers of Parent, and any individual who shall
hereafter succeed to any of such office of Parent, and each of them
individually, such Shareholder's Proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Shareholder, to vote
such Shareholder's Shares, or grant a consent or approval in respect of the
Shares in favor of the various transactions contemplated by the Merger Agreement
and against any Acquisition Proposal.
(ii) Subject to Section 6, each Shareholder represents that any
proxies heretofore given in respect of such Shareholder's Shares are not
irrevocable, and that any such proxies are hereby revoked.
(iii) Each Shareholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance that such Shareholder's execution
and delivery of this Agreement. Each Shareholder hereby affirms that the
irrevocable proxy set forth in this Section 3(c) is given in connection with the
execution of the Merger Agreement and that such irrevocable proxy is given to
secure the performance of the duties of such Shareholder under this Agreement.
Each Shareholder hereby further affirms that the irrevocable proxy is coupled
with an interest and, except as provided under Section 6, may under no
circumstances be revoked. Each Shareholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do and caused to be done in accordance
with the terms of this Agreement prior to termination of this Agreement.
(c) OPTIONS. Each of the Shareholders that holds Options to acquire
shares of Company Common Stock, as identified on the signature pages hereof,
shall, if requested by the Company, consent to the cancellation of such
Shareholder's Options in exchange for a lump sum cash payment in accordance with
the terms of the Merger Agreement and shall execute all appropriate
documentation in connection with such cancellation. The foregoing shall not
apply if as a result thereof such Shareholder shall be required to disgorge any
profits on such Options pursuant to Section 16(b) of the 1934 Act or the rules
promulgated thereunder.
3
<PAGE>
4. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Each Shareholder
hereby individually as to itself represents, warrants, covenants and agrees to
and with Parent as follows:
(a) OWNERSHIP OF SHARES. Such Shareholder is the record Owner of the
number of Existing Shares, other shares, and derivative securities set forth
opposite such Shareholder's name on Schedule I hereto. On the date hereof, the
Existing Shares set forth opposite such Shareholder's name on Schedule I hereto
constitute all of the shares or securities issued by the Company Owned of record
by such Shareholder. Such Shareholder has sole voting power and sole power to
issue instructions with respect to the matters set forth in Sections 2 and 3
hereof, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Existing Shares set
forth opposite such Shareholder's name on Schedule I hereto, with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Such Shareholder has the legal
capacity, power and authority, as applicable, to enter into and perform all of
such Shareholder's obligations under this Agreement. The execution, delivery
and performance of this Agreement by such Shareholder will not violate any other
agreement to which such Shareholder is a party including, without limitation,
any voting agreement, shareholders agreement or voting trust. This Agreement
has been duly and validly executed and delivered by such Shareholder and
constitutes a valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws affecting creditors'
rights generally. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which such Shareholder is trustee
whose consent is required for the execution and delivery of this Agreement or
the consummation by such Shareholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act, if
applicable, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority or any other Person
is necessary for the execution of this Agreement by such Shareholder and the
consummation by such Shareholder of the transactions contemplated hereby and (B)
none of the execution and delivery of this Agreement by such Shareholder, the
consummation by such Shareholder of the transactions contemplated hereby or
compliance by such Shareholder with any of the provisions hereof shall (1)
conflict with or result in any breach of any applicable organizational documents
applicable to such Shareholder, (2) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which such Shareholder is a party or by which such Shareholder or any of
such Shareholder's properties or assets may be
4
<PAGE>
bound, or (3) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to such Shareholder or any of such
Shareholder's properties or assets.
(d) NO ENCUMBRANCES. Except as applicable in connection with the
transactions contemplated by Section 2 hereof and except as noted on Schedule I
hereto, the certificates representing such Shareholder's Existing Shares will
be, when tendered pursuant to Section 2(a) of this Agreement, held by such
Shareholder, or by a nominee or custodian for the benefit of such Shareholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, or any other encumbrances whatsoever, except for any such
encumbrances arising hereunder. The transfer by each Shareholder of his or its
Shares to Newco in the Offer shall pass to Newco good and valid title to the
number of Shares set forth opposite such Shareholder's name on Schedule I
hereto, free and clear of all claims, liens, restrictions, security interests,
pledges, limitations and encumbrances whatsoever.
(e) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Except as
applicable in connection with the transactions contemplated by Section 2 hereof,
subject to Section 6, no Shareholder shall (i) directly or indirectly, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Shareholder's Shares or Options or any interest therein; (ii) except as
contemplated by this Agreement, grant any proxies or powers of attorney, deposit
any Shares or Options into a voting trust or enter into a voting agreement with
respect to any Shares or Options; or (iii) take any action that would make any
representation or warranty of such Shareholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Shareholder from
performing such Shareholder's obligations under this Agreement.
(f) WAIVER OF APPRAISAL RIGHTS. Each Shareholder hereby waives any
rights of appraisal or rights to dissent from the Merger that such Shareholder
may have.
(g) RELIANCE BY PARENT. Such Shareholder understands and acknowledges
that Parent is entering into, and causing Newco to enter into, the Merger
Agreement in reliance upon such Shareholder's execution and delivery of this
Agreement.
(h) FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, the transactions
contemplated by this Agreement.
5. STOP TRANSFER; CHANGES IN SHARES. Each Shareholder agrees with, and
covenants to, Parent that such Shareholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Shareholder's Shares, unless
such transfer is made in compliance with this Agreement (including the
provisions of Section 2 hereof). In the event of a stock dividend or
distribution, or any change in the
5
<PAGE>
Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
6. TERMINATION. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares including but not limited
to the grant of the irrevocable proxy set forth in Section 3(b)(i) hereof, shall
terminate upon the earliest of (w) the acquisition of the Shares by Parent or
Newco pursuant to the Offer, (x) the Effective Time, (y) the termination of the
Merger Agreement or the withdrawal or modification by the Company Board of its
recommendation of the Offer or the Merger as permitted by Section 7.3(b) of the
Merger Agreement and (z) the six month anniversary of the date hereof.
7. SHAREHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director of the Company makes any agreement or
understanding herein in his or her capacity as such director.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Each Shareholder agrees that this Agreement and
the obligations hereunder shall attach to such Shareholder's Shares and shall be
binding upon any Person to which legal or beneficial ownership of such Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, such Shareholder's heirs, guardians, administrators or successors.
Notwithstanding any transfer of Shares, the transferor shall remain liable for
the performance of all obligations under this Agreement of the transferor.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, with respect
to any one or more Shareholders, except upon the execution and delivery of a
written agreement executed by the relevant parties hereto; provided that
Schedule I hereto may be supplemented by Parent by adding the name and other
relevant information concerning any shareholder of the Company who agrees to be
bound
6
<PAGE>
by the terms of this Agreement without the agreement of any other party hereto,
and thereafter such added shareholder shall be treated as a "Shareholder" for
all purposes of this Agreement.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Shareholders: At the addresses set forth on Schedule I hereto
If to Parent: Kevco, Inc.
1300 S. University Drive, Suite 200
Ft. Worth, Texas 76107
Attention: Jerry E. Kimmel
Telecopy: 817/332-2765
copy to: Richard S. Tucker
Jackson Walker L.L.P.
777 Main Street, Suite 1800
Ft. Worth, Texas 76102
Telecopy: 817/334-7290
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement may cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
7
<PAGE>
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) 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, and 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.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Indiana, without giving effect to the
principles of conflicts of law thereof.
(l) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, Parent, Newco and each Shareholder have caused this
Agreement to be duly executed as of the day and year first above written.
PARENT:
KEVCO, INC.
By: /s/ Jerry Kimmel
------------------------------------------
Name: Jerry Kimmel
Title: Chairman of the Board and President
NEWCO:
SCC ACQUISITION CORP.
By: /s/ Jerry Kimmel
------------------------------------------
Name: Jerry E. Kimmel
Title: President
8
<PAGE>
SHAREHOLDERS:
/s/ William N. Harper
--------------------------------
William N. Harper
/s/ Larry D. Renbarger
--------------------------------
Larry D. Renbarger
/s/ Gerald R. Stults
--------------------------------
Gerald R. Stults
/s/ Herbert M. Gardner
--------------------------------
Herbert M. Gardner
/s/ Arthur M. Borden
--------------------------------
Arthur M. Borden
/s/ Cornelius J. Murphy
--------------------------------
Cornelius J. Murphy
/s/ William J. Barrett
--------------------------------
William J. Barrett
/s/ Mark C. Neilson
--------------------------------
Mark C. Neilson
/s/ Steven A. Salzer
--------------------------------
Steven A. Salzer
9
<PAGE>
AGREED TO AND ACKNOWLEDGED
(with respect to Section 5):
COMPANY:
SHELTER COMPONENTS CORPORATION
By: /s/ Larry D. Renbarger
------------------------------------------
Name: Larry D. Renbarger
Title: President
10
<PAGE>
Schedule I to Shareholders Agreement
<TABLE>
<CAPTION>
Number of Shares of
Name and Address Number of Shares Common Stock Issuable
of Shareholders of Common Stock Owned Upon Exercise of Options
- - ---------------- --------------------- ------------------------
<S> <C> <C>
William N. Harper 3,983 5,000
15797 Branch Water Way
Mishawaka, Indiana 46545-1605
Larry D. Renbarger 353,575 40,625
14609 Brick Road
Granger, Indiana 46530
Gerald R. Stults 383,422 40,625
17460 Valentine Ct.
Bristol, Indiana 46507
Herbert M. Gardner 93,594 5,000
4 Darley Road
Great Neck, New York 11021
Arthur M. Borden 15,091 5,000
860 United Nations Plaza
New York, New York 10017
Cornelius J. Murphy 91,170 5,000
1051 Hillsboro Mile-PH5E
Hillsboro Beach, Florida 33062
William J. Barrett 125,377 5,000
c/o Janney Montgomery Scott, Inc.
26 Broadway
New York, New York 10004
Mark C. Neilson 24,906 35,000
51195 Streamwood Drive
Granger, Indiana 46530
Steven A. Salzer --- 10,000
15490 Stony Run Trail
Granger, Indiana 46530
</TABLE>
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