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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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SHELTER COMPONENTS CORPORATION
(NAME OF SUBJECT COMPANY)
SHELTER COMPONENTS CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
82283500
(CUSIP Number of Class of Securities)
LARRY D. RENBARGER
CHIEF EXECUTIVE OFFICER
SHELTER COMPONENTS CORPORATION
2831 DEXTER DRIVE
ELKHART, INDIANA 46514
(219) 262-1514
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH COPIES TO:
HERBERT S. WANDER, ESQ. STEVEN A. SALZER, ESQ.
KATTEN MUCHIN & ZAVIS VICE PRESIDENT AND GENERAL COUNSEL
525 W. MONROE, SUITE 1600 SHELTER COMPONENTS CORPORATION
CHICAGO, ILLINOIS 60661 2831 DEXTER DRIVE
(312) 902-5200 ELKHART, INDIANA 46514
(219) 262-1514
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Shelter Components Corporation, an Indiana
corporation ("Shelter" or the "Company"), and the address of the principal
executive offices of the Company is 2831 Dexter Drive, Elkhart, Indiana 46514.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
relates is the Company's common stock, par value $.01 per share (the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
The Offer. This statement relates to the tender offer (the "Offer")
disclosed in a Tender Offer Statement on Schedule 14D-1, dated October 28,
(the "Schedule 14D-1"). The Offer is being made by SCC Acquisition Corp., an
Indiana corporation ("Offeror") and a wholly-owned subsidiary of Kevco, Inc.,
a Texas corporation ("Kevco" or "Parent") pursuant to the terms of an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of October 21,
1997, by and among Kevco, Offeror and the Company. Pursuant to the terms of
the Offer, Offeror has agreed to purchase each of the outstanding Shares for
$17.50 in cash, without any interest thereon (the "Offer Consideration" or the
"Offer Price"). The Merger Agreement provides, among other things, that after
the completion of the Offer, subject to the terms and conditions of the Merger
Agreement, including that there has been no material adverse change in the
Company, the Company's business, results of operations or financial condition
of the Company's business or any material portion thereof since September 30,
1997, Offeror and the Company will be merged (the "Merger") and each
outstanding Share (other than those held by Kevco, Offeror, or any other
direct or indirect subsidiary of Kevco) will be converted at the effective
time of the Merger into the right to receive $17.50 in cash, without interest
or such higher price as paid pursuant to the offer.
The Offer is conditioned upon, among other things, a minimum number of the
outstanding Shares being tendered pursuant to the Offer such that, when added
to all Shares owned by Kevco, Offeror or any of their affiliates prior to
consummation of the Offer, Offeror will own, on a fully-diluted basis, at
least a majority of the Shares outstanding at the time Offeror shall acquire
Shares pursuant to the Offer (the "Closing Time"). Kevco and Offeror have
reported that, as of the date hereof, neither Kevco nor Offeror beneficially
owns any Shares. The Offer is also subject to certain other conditions, any or
all of which may be waived in the sole discretion of Kevco or Offeror.
The Company's directors and executive officers have entered into a
Shareholders Agreement pursuant to which they have agreed to tender 1,091,113
Shares in accordance with the Offer unless the Merger Agreement is terminated
or the Company's Board of Directors withdraws its recommendation of the Offer.
As of the date hereof, the Shares agreed to be tendered pursuant to the
Shareholders Agreement represent approximately 14% of all outstanding Shares.
The Offer is being made on the terms and subject to the conditions set forth
in the related Letter of Transmittal, a copy of which is included with this
mailing.
The Schedule 14D-1 states that the principal executive offices of Kevco are
located at 1300 South University Drive, Suite 200, Fort Worth, Texas 76107.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, is set forth in Item 1 above. All information contained in this
Statement or incorporated herein by reference concerning Kevco, Offeror or
their affiliates, or actions or events with respect to any of them, was
provided by Kevco, and the Company takes no responsibility for such
information.
(b) Each material contract agreement, arrangement or understanding and any
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company, its executive officers, directors or affiliates or (ii)
Kevco, its executive officers, directors or affiliates, is set forth below.
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THE MERGER AGREEMENT
The following summarizes certain portions of the Merger Agreement, which
relate to arrangements among the Company, Kevco, Offeror and the Company's
executive officers and directors. The summary of the Merger Agreement provided
below is qualified in its entirety by reference to the Merger Agreement. A
copy of the Merger Agreement has been filed as Exhibit 1 hereto and is
incorporated herein by reference and should be read in its entirety for a more
complete description of the terms and provisions of the Merger Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in 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 below in "Conditions of the
Offeror" of this Schedule 14D-9 (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 Indiana
Business Corporation Law (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.
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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.
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
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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;
(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
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(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 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
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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 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
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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 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. 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.
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.
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
7
<PAGE>
(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 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.
8
<PAGE>
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.
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.
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.
9
<PAGE>
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 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);
10
<PAGE>
(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 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.
CONFIDENTIALITY AGREEMENT
The Company and Kevco have entered into a Confidentiality Agreement dated
August 25, 1997 (the "Confidentiality Agreement"). The Confidentiality
Agreement provides that Kevco will keep confidential any confidential
information furnished to it by the Company. The Confidentiality Agreement also
contains "standstill" provisions prohibiting Kevco, for a period of eighteen
months from (i) employing any officer or other senior or key employees of the
Company; (ii) soliciting proxies or consents to vote any voting securities of
the Company; (iii) seeking to advise or influence any person or entity with
respect to the voting of any securities of the Company; or (iv) otherwise
acting, directly or indirectly, to seek to control or influence the
management, Board of Directors, policies or affairs of the Company. In
addition to the foregoing, the Confidentiality Agreement also contains a "non-
solicitation" provision prohibiting the Company, for a period of 60 days from
the date of the Confidentiality Agreement, from taking 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 of or
substantially all of the capital stock of the Company.
The foregoing summary is qualified in its entirety by reference to the
Confidentiality Agreement, a copy of which is filed hereto as Exhibit 2
hereto, and is incorporated herein by reference.
11
<PAGE>
POTENTIAL OR ACTUAL CONFLICTS OF INTEREST
Shareholders Agreement. On October 21, 1997 and in connection with the
approval of the Merger Agreement, executive officers and directors of the
Company entered into a Shareholders Agreement with Kevco, Offeror and the
Company pursuant to which they have agreed to tender 1,091,113 Shares in
accordance with the Offer unless the Merger Agreement is terminated or the
Company's Board of Directors withdraws its recommendation of the Offer or
Merger. The Shares agreed to be tendered pursuant to this agreement represent
14% of all outstanding Shares.
The foregoing summary is qualified in its entirety by reference to the
Shareholders Agreement, a copy of which is filed hereto as Exhibit 11 hereto,
and is incorporated herein by reference.
Treatment of Stock Options. Pursuant to the Merger Agreement, the Company
has agreed to use commercially reasonable efforts such that, as of the
consummation of the Offer, the Company shall pay to each Company employee,
consultant or director who holds any option to acquire Shares ("Option"), an
amount of cash equal to the number of Shares subject to such Option as of the
consummation of the Offer (whether or not then vested) times the remainder
derived by subtracting the exercise price per share from $17.50. The Company
has agreed to use commercially reasonable efforts to obtain any consents as
are necessary from each holder of each Option to accept such payment in
exchange for a surrender of all rights of such holder under or by reason of
such Option, including but not limited to, the termination of the holder's
rights to purchase any Shares under such Options.
The following schedule sets forth the number of Shares of the Company
subject to issuance under each outstanding Option granted to the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
OUTSTANDING
DIRECTORS AND/OR EXECUTIVE OFFICERS OPTIONS
----------------------------------- -----------
<S> <C>
Larry D. Renbarger................................................ 40,625
Gerald R. Stults.................................................. 40,625
Mark C. Neilson................................................... 35,000
William J. Barrett................................................ 5,000
Arthur M. Borden.................................................. 5,000
Herbert M. Gardner................................................ 5,000
William N. Harper................................................. 5,000
Ronald D. Minzey.................................................. 5,000
William B. Riblet................................................. 5,000
Dale A. Ledbetter................................................. 50,000
Richard J. Ostroski............................................... 22,500
Richard E. Clark.................................................. 33,593
Steven A. Salzer.................................................. 10,000
-------
Total......................................................... 266,250
=======
</TABLE>
Employment Agreements. As of October 21, 1997, the Company entered into
employment agreements (the "Employment Agreements") with the Company's
executive officers (the "Officers") for the position and base salary as
identified below.
<TABLE>
<CAPTION>
BASE
NAME POSITION SALARY
---- -------- -------
<S> <C> <C>
Larry D. Renbarger........ Chief Executive Officer 300,000
Gerald R. Stults.......... President and Chief Operating Officer 210,000
Dale A. Ledbetter......... Executive Vice President--Distribution 135,000
Richard E. Clark.......... Executive Vice President--Marketing 125,000
Richard J. Ostroski....... Executive Vice President--Manufacturing 110,000
Mark C. Neilson........... Chief Financial Office and Treasurer 110,000
Steven A. Salzer.......... Vice President and General Counsel and
Secretary 100,000
</TABLE>
12
<PAGE>
Each Officer is also entitled to participate in the bonus programs generally
available to Company executives as specified under the terms of such programs.
Generally, the bonus available under such programs is 75% of base salary if
certain performance targets are achieved. If the performance targets are
surpassed the bonus may exceed 75% of base salary.
Each Employment Agreement provides that the respective Officer shall not
compete in the business of the Company nor solicit business or employees on
behalf of any competitor of the Company for a period ranging from 12 to 36
months after the termination of such Employment Agreement.
Each Employment Agreement also provides for various levels of severance
payments upon a termination of the Employment Agreement. Other than for
permanent disability, the maximum severance amount payable to any executive
under the Employment Agreements is 18 months of compensation (which includes
both his base compensation and his bonus compensation) if he is fired without
cause or quits for good reason after a Change in Control.
All of the foregoing amounts will be reduced to the extent necessary to
avoid federal excise taxes under Section 280G of the Internal Revenue Code.
For purposes of these Employment Agreements, a "Change in Control" shall be
deemed to have occurred if during, or following the consummation of, a stock
purchase program, tender offer, exchange offer, merger, consolidation, sale of
assets, contested election, or any combination of the foregoing transactions,
any person, entity or group of persons acting in concert, directly or
indirectly (1) acquires ownership of or the power to vote in excess of twenty
percent (20%), of the voting securities of the Company, or (2) otherwise
acquires effective control of the business affairs of the Company. If the
Offer is consummated a Change of Control will have occurred for purposes of
the Employment Agreements.
The following description is qualified in its entirety by reference to
certain forms of the Employment Agreements, copies of which are filed as
Exhibits 3 and 4 hereto, and are incorporated herein by reference.
Company Separation Allowance Plan. The Company has in place a Separation
Allowance Plan for Salaried Employees (the "Separation Plan"). The Separation
Plan provides that each salaried employee of the Company, upon termination of
his or her employment and under certain circumstances, including the sale or
transfer of the Company business to another employer, shall receive one week
of base salary for each of the employee's years of service to the Company. The
minimum amount of separation pay is two weeks base salary and the maximum
amount of separation pay is thirteen weeks base salary.
The foregoing description is qualified in its entirety by reference to the
Separation Plan, a copy of which is filed as Exhibit 10 hereto, and is
incorporated herein by reference.
Limited Liability of Directors and Indemnification of Officers and
Directors. Article VII of the Company's Restated Articles of Incorporation
provides for the indemnification of officers and directors under certain
circumstances. In addition, it provides that the Company's Board of Directors
may at any time approve indemnification to the full extent permitted by the
provisions of applicable law at the time.
The foregoing description is qualified in its entirety by reference to the
Company's Restated Articles of Incorporation, a copy of which is filed as
Exhibit 5 hereto, and is incorporated herein by reference.
Indemnification Agreements. Each director and executive officer of the
Company has entered into an Indemnification Agreement with the Company
(collectively, the "Indemnification Agreements") pursuant to which the Company
has agreed to indemnify such director and officer, except to the extent
prohibited by applicable law as then in effect, who is involved in any manner
by reason of the fact that such director or officer is or was a director or
officer of the Company.
13
<PAGE>
The forgoing description is qualified in its entirety by reference to the
Form of Indemnification Agreement, a copy of which is filed as Exhibit 8
hereto, and is incorporated herein by reference.
See Item 3. "Identity and Background--The Merger Agreement--Indemnification
and Insurance", located at page 7 of this Schedule 14D-9, which discusses the
obligations of Kevco under the Merger Agreement to provide the directors and
officers of the Company with Directors' and Officers' Insurance and to
irrevocably guarantee the performance of the indemnification provisions under
the Company's Restated Articles of Incorporation, Bylaws and Indemnification
Agreements.
ITEM 4. THE SOLICITATION AND OR RECOMMENDATION.
(a) History of the Negotiations. 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 American Stock Exchange 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 American Stock
Exchange 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 held a regularly scheduled meeting at
which the potential transaction with Kevco was discussed. The Company's Board
approved continued discussions with Kevco about a potential transaction and
approved entering into a confidentiality agreement with Kevco.
On August 25, 1997, Mr. William Harper, Chairman of the Board 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 into 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 the Company and Kevco on August 25, 1997. The Confidentiality
Agreement 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-
14
<PAGE>
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 was
held to discuss the Kevco offer of $17.50 per share. The Company's Board
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 requested that Mr. Renbarger obtain from Kevco a
more detailed explanation of the acquisition proposal or a draft of the 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 the Company and Kevco 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 held a special telephonic 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 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 American Stock Exchange was
$14.9375 per share.
15
<PAGE>
Recommendation of the Company's Board. In the opinion of the Board of
Directors of the Company, the Offer Price and the Merger Consideration are
fair to the Company's shareholders and the Offer and the Merger are in the
best interests of the Company and its shareholders and are fair to the
shareholders of the Company. The Board of Directors of the Company recommends
that the Company's shareholders accept the Offer, tender their Shares pursuant
to the Offer and, if required by applicable law, approve and adopt the Merger
Agreement.
(b) Reasons for the Transaction. In reaching its decision to approve and
adopt the Merger Agreement and the transactions contemplated thereby, the
Company's Board consulted with the Company's senior management and its
financial and legal advisers and considered many factors, including, but not
limited to, the following:
. (i) the results of operations of the Company and, (ii) the businesses
and prospects of the Company;
. the Company's future growth and success as a stand-alone entity depends,
to a significant extent, on its ability to access capital and identify
and make strategic acquisitions of companies to increase its growth and
enhance its long-term value, and in the opinion of the Board of
Directors of the Company, only limited opportunities for such
significant acquisitions are foreseen in the near future;
. the Company's Board's belief that the market price of the Shares would
not reach $17.50 in the reasonably foreseeable future;
. $17.50 per Share represents a 17.15% premium over the $14.9375 per Share
closing price on the American Stock Exchange on October 21, 1997, the
last full trading day prior to the public announcement of the execution
of the Merger Agreement, and a 42.86% premium over the $12.25 per Share
closing price on the American Stock Exchange on August 25, 1997, the
date on which Kevco first made its offer of $17.50 per share;
. the Shares had not traded at a price higher than $15.625 during the
preceding twelve months;
. the presentations by SBC Warburg Dillon Read Inc. at the October 8, 1997
and October 21, 1997 Board meetings and the opinion of SBC Warburg
Dillon Read Inc. that, as of the date of such opinion, the $17.50 per
Share to be offered to the shareholders of the Company in connection
with the Offer and the Merger is fair, from a financial point of view,
to such shareholders;
. the Merger Agreement is structured to accommodate certain unsolicited
third-party proposals to acquire the Company and specifically permits
the Company to provide information to and negotiate or discuss such
proposals if the Company's Board determines, after consultation with and
the advice of the Company's financial advisor and legal counsel, that to
provide such information or to engage in such negotiations or
discussions are consistent with the fiduciary duties of the Board of
Directors under applicable law; and if a proposal is determined to be
superior to the Offer, the Company's Board would be permitted to
recommend its approval to the shareholders of Company, (although the
Company's ability to accept competing proposals is subject in certain
cases to the obligation to pay Kevco a termination fee of $6,000,000);
and
. the belief of the Board of Directors of the Company, based upon, among
other things, discussions with SBC Warburg Dillon Read Inc., that (i)
other potential acquirers of the Company would not be likely to pay in
excess of 17.50 per Share and (ii) the likelihood that a strategic buyer
such as Kevco is in a position to pay a higher price than a financial
buyer due to the anticipated synergies, such as cost savings, resulting
from consolidating the business of the Company with the business of
Kevco.
The foregoing discussion of the information and factors considered by the
Company's Board of Directors is not intended to be exhaustive but is intended
to include the material factors considered by the directors. In the view of
the wide variety of factors considered by the Company's Board of Directors,
the directors did not find it practical to, and did not, quantify or otherwise
assign relative weight to the specific factors considered and individual
directors may have ascribed differing weights to different factors.
16
<PAGE>
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Compensation. Pursuant to an engagement letter agreement dated September 22,
1997, by and between the Company and SBC Warburg Dillon Read Inc., the Company
paid to SBC Warburg Dillon Read Inc. a retainer fee of $100,000. Upon SBC
Warburg Dillon Read Inc.'s rendering of its fairness opinion at the October
21, 1997 meeting of the Company's Board of Directors, the Company paid to SBC
Warburg Dillon Read Inc. an additional $400,000. Such payment was required to
be made regardless of the conclusions reached by SBC Warburg Dillon Read Inc.
in such opinion. During the term and for a period of twelve months following
any termination of this engagement, the Company is obligated to pay SBC
Warburg Dillon Read Inc. an additional fee if the Company completes a
transaction (i) with Kevco at a price other than $17.50 per share; or (ii)
with an entity other than Kevco, so long as the Company or SBC Warburg Dillon
Read Inc. had contact with such entity during the term of the engagement. Such
fee would amount to one percent of the aggregate amount of the consideration
paid to the Company or its shareholders, plus the aggregate amount of
indebtedness assumed, in connection with such a transaction; provided,
however, that the amounts previously paid to SBC Warburg Dillon Read Inc. by
the Company as described above would be deducted from such fee.
SBC Warburg Dillon Read Inc. also is entitled to twenty percent of any walk-
away, break-up, topping, or termination fee and/or similar compensation paid
to the Company, less any amounts previously paid by the Company to SBC Warburg
Dillon Read Inc. as described above. The Company is required to reimburse SBC
Warburg Dillon Read Inc. for its reasonable out-of-pocket expenses, including
fees and disbursements of counsel. In addition, the Company agreed to
indemnify SBC Warburg Dillon Read Inc., its affiliates and their respective
directors, officers, employees, and agents and controlling persons against
certain liabilities relating to or arising out of its engagement, including
liabilities under the federal securities laws.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any other person to make solicitations or
recommendations to shareholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, the only transactions in Shares
that have been effected during the past 60 days by the Company or by any
executive officer, director, affiliate or subsidiary of the Company relate to
donations to charities by Mr. Renbarger of 2,300 Shares in September 1997 and
by and Mr. Murphy of 12,400 Shares in October 1997.
(b) See Item 3. "Identity and Background--Potential or Actual Conflicts of
Interests--Shareholders Agreement," located at page 12 of this Schedule 14D-9,
which discusses the obligations of directors and officers of the Company to
tender their Shares, pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as indicated above in Items 3 and 4 with respect to the Offer and
the Merger, no discussions or negotiations are being undertaken or are under
way by the Company in response to the Offer or the Merger which relate to, or
would result in, (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company, (iii) a tender offer for or other acquisition
of securities by, or of, the Company, or (iv) any material change in the
present capitalization or dividend policy of the Company, other than, pursuant
to the Merger Agreement, the Company has agreed not to declare or pay any
dividends on its capital stock while the Offer is pending.
(b) Except as indicated above in Items 3 and 4 hereto in connection with the
Offer and the Merger, there are no transactions, board resolutions, agreements
in principle or signed contracts in response to the Offer which would relate
to or would result in one or more of the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
17
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1 Agreement and Plan of Merger, dated October 21, 1997, among
Kevco, the Company and Offeror**
2 Confidentiality Agreement, dated August 25, 1997, between the
Company and Kevco**
3 Form of Employment Agreement, dated October 21, 1997, as in
place between the Company and Larry D. Renbarger and Gerald R.
Stults**
4 Form of Employment Agreement, dated October 21, as in place
between the Company and Dale A. Ledbetter, Richard E. Clark,
Richard J. Ostroski, Mark C. Neilson and Steven A. Salzer**
5 Restated Articles of Incorporation of the Company**
6 Letter dated October 28, 1997, to the shareholders of the
Company from the Chief Executive Officer of the Company*
7 Opinion of SBC Warburg Dillon Read Inc. dated October 21, 1997*
8 Form of Indemnification Agreement as entered into by and between
the Company and its executive officers and directors**
9 Joint Press Release by the Company and Kevco, dated October 22,
1997**
10 Company Separation Allowance Plan for Salaried Employees**
11 Shareholders Agreement, dated October 21, 1997, by and between
Kevco and directors and executive officers of the Company**
</TABLE>
- --------
*These documents are included in the materials mailed to shareholders pursuant
to the Offer.
**These documents were filed with the Securities and Exchange Commission as
exhibits to this Schedule 14D-9, but were not included in the mailing to
shareholders. Such documents and other information may be inspected at the
public reference facilities maintained by the Securities and Exchange
Commission (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 the
American Stock Exchange, 8 Trinity Place, New York, New York 10006.
18
<PAGE>
SIGNATURE
AFTER REASONABLE 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.
Shelter Components Corporation
STEVEN A. SALZER
-------------------------------------
Steven A. Salzer
Vice President and General Counsel
Date: October 28, 1997
19
<PAGE>
ANNEX A
OPINION OF
SBC WARBURG DILLON READ INC. DATED OCTOBER 21, 1997
<PAGE>
[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 Common 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.
<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.
2
<PAGE>
ANNEX B
SHELTER COMPONENTS CORPORATION
2831 DEXTER DRIVE
ELKHART, INDIANA 46514
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
ON THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement ("Information Statement") is being mailed on or
about October 28, 1997, as part of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
the Shares at the close of business on or about October 24, 1997. You are
receiving this Information Statement in connection with the possible
appointment of persons designated by Offeror to fill all of the seats on the
Board of Directors of the Company (the "Board"). The Merger Agreement provides
that, at the time Offeror shall consummate the Offer and acquire all Shares
properly tendered and not withdrawn (the "Closing"), the Company will cause
such of the directors of the Company as Offeror may request, to resign their
positions as such and/or shall arrange for the election or appointment as
directors of the Company as provided by Merger Agreement. This Information
Statement is required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. See "Change in Board of Directors Upon Consummation of the Offer--
Right to Designate Directors; the Kevco Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the accompanying Schedule
14D-9.
Pursuant to the Merger Agreement, Offeror commenced the Offer on October 28,
1997. The Offer is scheduled to expire at 12:00 midnight on December 1, 1997,
unless Offeror extends the Offer. The Offer is conditioned on a minimum number
of the outstanding Shares being tendered for cash pursuant to the Offer such
that, when added to all Shares owned by Kevco, Offeror, or any of their
affiliates prior to consummation of the Offer, Offeror will own at least a
majority of the Shares which shall be outstanding at the Closing. The Offer is
also subject to certain other conditions. Upon the expiration of the Offer, if
all conditions of the Offer have been satisfied or waived, Offeror has agreed
to purchase all Shares validly tendered pursuant to the Offer and not
withdrawn.
The information contained in this Information Statement concerning Kevco and
Offeror has been furnished to the Company by Kevco and Offeror, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
CHANGE IN BOARD OF DIRECTORS
UPON CONSUMMATION OF THE OFFER
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of October 24, 1997, the Company had
7,770,783 Shares outstanding. The Board currently consists of ten members.
Each director holds office until such director's successor is elected and
qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE KEVCO DESIGNEES
Board Representation. The Merger Agreement provides that upon the purchase
of and payment for Shares by Offeror which represents at least a majority of
the outstanding Shares, Offeror shall be entitled to designate such number of
directors, rounded up to the next whole number, as will make the percentage of
the Company's
B-1
<PAGE>
directors designated by Offeror equal to the aggregate voting power of the
Shares held by Offeror and Kevco. In furtherance thereof, the Company has
agreed, upon request of Kevco, either to increase the size of the Board or
secure the resignations of such number of incumbent directors, or both, as is
necessary to enable the Kevco's designees to be so elected to the Company's
Board. The Company's obligation to appoint such designees is subject to
Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company is required to take all action necessary to
effect any such election and to include in this Information Statement the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Notwithstanding the foregoing, Kevco may request to
have at least two members of the Board as of the date of the Merger Agreement
who are neither officers nor affiliates of Kevco or the Company or any of
their respective subsidiaries.
Information concerning the Kevco Designees is set forth in Exhibit A hereto.
Such information was provided by the Offeror and the Company does not assume
any responsibility for the accuracy or completeness thereof. To the best
knowledge of the Company, none of the Kevco Designees beneficially owns any
equity securities in the Company.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS
The names of the Company's current directors, their ages as of October 21,
1997 and certain other information about them are set forth below. As
indicated above, it is anticipated that all of the current directors of the
Company will be requested to resign effective as of the consummation of the
Offer.
CLASS "A" DIRECTORS--TERM EXPIRING IN 2000
ARTHUR M. BORDEN, age 76, has been a director since 1985. He is of counsel
to the law firm of Rosenman & Colin and also a director of Scientific
Industries, Inc., a manufacturer of laboratory testing instruments and
equipment.
WILLIAM B. RIBLET, age 58, is Vice President of Sales and Director of
Lippert Components, Inc., a private company supplying steel components to the
manufactured housing, office unit, and recreational vehicle industries. He was
an Executive Vice President and Vice Chairman of the Board of Directors of
Thunander Corporation, a predecessor corporation, from March 1986 until May
1990.
LARRY D. RENBARGER, age 58, has been a director since 1979. He became Chief
Executive Officer of Shelter Components, Inc. in 1979. Mr. Renbarger had
served as the President of Shelter Components of Indiana, Inc., a major
subsidiary of the Company from August 1987 through May 1992. Mr. Renbarger was
President of the Company from May 1992 until December 1996 and has been Chief
Executive Officer since May 1992.
CLASS "B" DIRECTORS--TERM EXPIRING IN 1998
WILLIAM N. HARPER, age 52, is retired. Prior to June 30, 1996, Mr. Harper
was Senior Vice President and Chief Financial Officer of National Steel
Corporation, an integrated steel company, since October 1995. Previously, Mr.
Harper was employed as Vice President and Controller of Clark Equipment
Company, a manufacturer, for 10 years. Mr. Harper has been Chairman of the
Board since May 1995 and a Director since May 1990.
RONALD D. MINZEY, age 66, has served as a director from 1983 until 1986 and
since May 1990. For over ten years, he has been a private investor investing
in companies primarily in the Northern Indiana area. Prior to that Mr. Minzey
was president of Kinder Manufacturing, a furniture supplier to the
Manufactured Housing and Recreational Vehicle industries. He is also a
director of Barger Packaging Corporation and Director Emeritus of KeyBank
National Association, a national bank.
MARK C. NEILSON, age 39, has served as a director since May 1992. He has
served as Chief Financial Officer of the Corporation since 1986 and as
Secretary of the Corporation since 1990. Prior to 1986, Mr. Neilson was
employed as a CPA with McGladrey & Pullen since 1980.
B-2
<PAGE>
CLASS "C" DIRECTORS--TERM EXPIRING IN 1999
WILLIAM J. BARRETT, age 57, has been a director since 1981. He has been a
Senior Vice President of Janney Montgomery Scott Inc., investment bankers,
since January 1978. Mr. Barrett had been Chairman of the Board from August
1987 to May 1995. Mr. Barrett is also a director of Supreme Industries, Inc.,
a specialized truck body and shuttle bus manufacturer, Fredericks of
Hollywood, Inc., an apparel marketing company, TGC Industries, Inc., a
geophysical services company, The Western Systems Corp., a company seeking to
redeploy its assets through investments and business combinations, and Chase
Packaging Corp., a specialty packaging supplier primarily to the agricultural
market.
HERBERT M. GARDNER, age 57, has been a director since 1981. He has been a
Senior Vice President of Janney Montgomery Scott Inc., investment bankers,
since January 1978. Mr. Gardner is also Chairman of the Board of Supreme
Industries, Inc., a specialized truck body and shuttle bus manufacturer, and a
director of The Western System Corp., a company seeking to redeploy its assets
through investments and business combinations, Nu Horizons Electronics Corp.,
an electronic components distributor, TGC Industries, Inc. a geophysical
services company, Hirsch Internal Corp., a distributor of computerized
embroidery machines and application software, and Chase Packaging Corp., a
specialty packaging supplier primarily to the agricultural market.
CORNELIUS J. MURPHY, age 59, is retired. He has been a director since
January 1979. Mr. Murphy is the former President of Danube Carpet Mills, Inc.,
a major subsidiary of the Corporation and former Vice Chairman of the Board of
the Corporation.
GERALD R. STULTS, age 48, has been a director since May 1996. He has served
as the Chief Operating Officer of the Corporation since August 1995. He also
served as Executive Vice President since August 1995 until December 1996, at
which time he became President of the Corporation. Mr. Stults was the
President and owner of BABSCO, Inc. from January 1981 until January 1995 when
the Corporation acquired BABSCO, Inc. from him. Mr. Stults is also the
President and owner of Galleries, Ltd., a retail lighting company; a director
of Zorn Industries, Inc., a manufacturer of storage tanks; and a director and
part owner of CopperCon Wire and Cable, LLP, a manufacturer of wire products.
EXECUTIVE OFFICERS
The names of the Company's executive officers, their ages and certain other
information about them are set forth below:
<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY AGE
---- --------------------- ---
<S> <C> <C>
Larry D. Renbarger.......... Chief Executive Officer 58
Gerald R. Stults............ President 48
Dale A. Ledbetter........... Executive Vice President--Distribution 49
Richard E. Clark............ Executive Vice President--Marketing 50
Richard J. Ostroski......... Executive Vice President--Manufacturing 59
Mark C. Neilson............. Chief Financial Officer and Treasurer 39
Steven A. Salzer............ Vice President and General Counsel 36
</TABLE>
ADDITIONAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Each director of the Company holds office until the next annual meeting of
shareholders or until a successor has been elected and qualified. The
Company's executive officers are elected by the Board and serve at the
discretion of the Board.
There are no family relationships between any director or executive officer
and any other director or executive officer of the Company.
B-3
<PAGE>
Except as described in this Information Statement or the Schedule 14D-9,
there are no arrangements or understandings between any of the executive
officers of the Company and other persons relating to their selection as
officers.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held 6 meetings during 1996. All
directors attended at least 75% of the total number of meetings of the Board
and the committees on which they served.
The Board of Directors presently has two committees.
The Audit Committee, which presently consists of Herbert M. Gardner
(Chairman), William N. Harper and Ronald D. Minzey, was established to review
the professional services and independence of the Company's independent
accountants and to review the Company's financial statements, procedures and
internal controls. The Audit Committee held four meetings during 1996.
The Compensation Committee, which presently consists of William J. Barrett
(Chairman), William N. Harper and Cornelius J. Murphy, has the responsibility
of fixing annual salaries and bonuses for the officers of the Company and
administering the Company's Key Employee Incentive Plan. The Compensation
Committee met 3 times during 1996.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company or its subsidiaries receive
no compensation in their capacities as directors. Nonemployee directors
receive an annual retainer of $6,000 plus a fee of $1,500 for each Board
meeting attended, $500 for each telephonic Board meeting in which the director
participates, $250 for each committee meeting attended and $100 for each
telephonic committee meeting in which the director participates. The Chairmen
of the Board and of the Board's Committees receive $1,800 and $300,
respectively, for each meeting attended and $600 and $125, respectively, for
each telephonic meeting in which the Chairman participates. All directors are
reimbursed for expenses connected with attendance at Board or committee
meetings. Commencing in 1996, each nonemployee director received annual
automatic grants of stock options to purchase 2,500 shares of Common Stock
based on market prices at or around the date of grant.
B-4
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S SHARES
The following table sets forth, as of June 30, 1997 (except as otherwise
indicated), certain information with respect to those persons known to the
Company to be the beneficial owners of more than 5% of the outstanding Shares
of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
- ------------------- ----------------------- -------------------
<S> <C> <C>
Wellington Management... 744,374 9.1%
75 State Street
Boston, MA 02109
Franklin Management 621,000 7.6%
Group ..................
74850 Highway 111
Indian Wells, CA 92210-
7116
Heartland Funds......... 571,375 7.0%
790 North Milwaukee
Street
Milwaukee, WI 53202
Fidelity Management & 539,600 6.6%
Research Co.............
82 Devonshire Street
Boston, MA 02109-3614
Larry D. Renbarger...... 456,700(3) 5.8%
2831 Dexter Drive
Elkhart, IN 46514
Brinson Partners, Inc. . 467,349 5.7%
209 South LaSalle Street
10th Floor
Chicago, IL 60604
Gerald R. Stults........ 424,047(4) 5.4%
2831 Dexter Drive
Elkhart, IN 46514
</TABLE>
- --------
(1) Unless otherwise noted, the beneficial owner has sole voting and
investment power with respect to all of the Shares reflected in the table.
(2) The percent of class is based upon 7,770,783 Shares outstanding on October
24, 1997 and the number of Shares, if any, as to which the named person
has the right to acquire beneficial ownership upon the exercise of such
person's Options.
(3) Includes options to purchase 40,625 shares, not yet exercised and 62,500
shares owned by Mrs. Renbarger, to which Mr. Renbarger disclaims any
beneficial ownership.
(4) Includes options to purchase 40,625 shares, not yet exercised.
B-5
<PAGE>
The following table sets forth, as of October 15, 1997, certain information
with respect to the Company's Shares beneficially owned by (i) each of the
directors, (ii) each of the executive officers of the Company named in the
Summary Compensation Table below and (iii) executive officers and directors of
the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
- ---- ----------------------- -------------------
<S> <C> <C>
Larry D. Renbarger................. 456,700(3) 5.8%
Gerald R. Stults................... 424,047(4) 5.4%
Cornelius J. Murphy................ 155,095(5)(9) 2.0%
William J. Barrett................. 131,783(6)(9) 1.7%
Herbert M. Gardner................. 106,210(7)(9) 1.4%
Mark C. Neilson.................... 59,906(8) *
Arthur M. Borden................... 20,086(9) *
William N. Harper.................. 8,983(9) *
William B. Riblet.................. 7,312(9) *
Ronald D. Minzey................... 6,593(9) *
Dale A. Ledbetter.................. 58,352 *
Richard E. Clark................... 33,672 *
All officers and directors as a
group (14 persons)................ 1,501,239 18.4%
</TABLE>
- --------
(* Less than 1% of class of stock owned.)
(1) See Note (1) to preceding table.
(2) See Note (2) to preceding table.
(3) Includes options to purchase 40,625 shares, not yet exercised and 62,500
shares owned by Mrs. Renbarger, to which Mr. Renbarger disclaims any
beneficial ownership.
(4) Includes options to purchase 40,625 shares, net yet exercised.
(5) Includes 58,925 shares owned by Mrs. Murphy, to which Mr. Murphy disclaims
any beneficial ownership.
(6) Includes 1,406 shares owned by Mrs. Barrett, to which Mr. Barrett
disclaims any beneficial ownership.
(7) Includes 7,616 shares owned by Mrs. Gardner, to which Mr. Gardner
disclaims any beneficial ownership.
(8) Includes option to purchase 35,000 shares, not yet exercised.
(9) Includes option to purchase 5,000 shares, not yet exercised.
SECTION 16. REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
requires the Company's officers, directors and persons who are beneficial
owners of more than ten percent of the Company's Common Stock ("reporting
persons") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Reporting persons are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms filed by them.
Based on its review of the copies of Section 16(a) forms received by it, the
Company believes that, during 1996, all reporting persons fully complied with
the filing requirements applicable to such persons.
B-6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table shows compensation paid by the
Corporation for services rendered during fiscal years 1996, 1995 and 1994 for
the person who was Chief Executive Officer at the end of the last fiscal year
and the other four most highly compensated executive officers of the
Corporation whose salary and bonus exceeded $100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -------------
ALL OTHER
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR (1) (2) (3) OPTION SHARES
- --------------------------- ---- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Larry D. Renbarger(4) 1996 $220,000 $ 99,000 $8,232 0
CEO 1995 161,000 165,000 8,239 15,625
1994 161,000 165,000 8,210 0
Gerald R. Stults(4) 1996 $150,000 $ 67,500 $1,032 0
President and COO 1995 120,000 41,000 743 15,625
Mark C. Neilson 1996 $110,000 $ 49,500 $7,032 0
CFO and 1995 77,000 77,000 7,039 25,000
Treasurer 1994 77,000 77,000 6,950 0
Dale A. Ledbetter(5) 1996 $130,000 $160,000 $8,240 0
Executive Vice President--
Distribution 1995 130,000 151,000 8,214 15,000
1994 113,333 110,000 8,214 0
Richard E. Clark(6) 1996 $120,000 $163,000 $7,730 0
Executive Vice President--
Marketing 1995 120,000 92,500 7,671 9,375
1994 106,666 70,500 7,530 0
</TABLE>
- --------
(1) Compensation deferred at the election of the Executive, pursuant to the
Corporation's 401(k) plan, is included in the year earned.
(2) Cash bonuses for services rendered in fiscal year 1996, 1995 and 1994 have
been listed in the year earned, but in some cases were paid in the
subsequent year. Bonuses were calculated based on the results of
operations of the Company and its subsidiaries.
(3) Comprised of automobile allowance and the Company's contribution to the
Executive's 401(k) account.
(4) Mr. Stults succeeded Mr. Renbarger as President in December 1996.
(5) Mr. Ledbetter was appointed to Executive Vice President--Distribution in
May 1997.
(6) Mr. Clark was appointed to Executive Vice President--Marketing in May
1997.
B-7
<PAGE>
STOCK OPTION EXERCISES AND VALUES TABLE
The following table shows information with respect to options for the
Company's Common Stock either exercised during 1996 or having value
outstanding at December 31, 1996 under the Company's Key Employees Stock
Incentive Plan.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND YEAR END OPTION VALUES
--------------------------------------------------------------------------------
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
OPTIONS UNDERLYING UNEXERCISED AT DECEMBER 31,
EXERCISED IN 1996 OPTIONS AT DECEMBER 31, 1996 1996(1)(2)
----------------- --------------------------------- -------------------------
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry D. Renbarger...... -- -- 3,906 11,719 $11,913 $34,743
Gerald R. Stults........ -- -- 3,906 11,719 11,913 34,743
Mark C. Neilson......... -- -- 6,250 18,750 19,063 57,188
Dale A. Ledbetter....... -- -- 21,718 18,282 106,848 71,652
Richard E. Clark........ -- -- 9,531 14,062 45,312 58,779
</TABLE>
- --------
(1) All values are shown pre-tax.
(2) The values are based on a closing price of $12.25 for the Shares on
December 31, 1996, less the option exercise price.
EMPLOYMENT AGREEMENTS
See Item 3. "Identity and Background--The Merger Agreement--Employment
Agreements", located on page 12 of the Schedule 14D-9, for a description of
the Employment Agreements.
SEPARATION PLAN
See Item 3. "Identity and Background--The Merger Agreement--Separation
Plan", located on page 13 of the Schedule 14D-9, for a description of the
Separation Plan.
B-8
<PAGE>
TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
The Company leases office and warehouse facilities from ELJO Investments, a
partnership of which Directors Minzey, Murphy and Renbarger are partners. The
Company also leases office and warehouse facilities from Stults Realty, Inc.
of which Director Stults is the sole owner and CopperCon Wire and Cable, LLP
of which Mr. Stults is a 16% owner. Such leases are described in the Notes to
Consolidated Financial Statements which are a part of the 1996 Annual Report
to Shareholders which is incorporated herein by reference. None of such leases
provided for annual payments during 1996 in excess of $60,000. During 1996,
the Company exercised its option to purchase certain real estate totalling
$3.6 million from ELJO Investments. The Company also purchased a facility from
Stults Realty, Inc. pursuant to a provision in the January 1995 agreement to
purchase the assets of BABSCO, Inc. The purchase price was approximately
$600,000.
The Company believes that the terms of the foregoing leases and purchases
are at least as favorable to the Company as those which could have been
obtained from unrelated parties.
The Company also made purchases of electrical products for resale totalling
approximately $3 million for 1996 and $2.2 million thus far for 1997 from
CopperCon Wire and Cable, LLP, a manufacturer of electrical wire products of
which Mr. Stults is a 16% owner. These purchases are believed to have been at
a price and terms equal to or better than general market prices and terms for
similar products.
B-9
<PAGE>
EXHIBIT A
KEVCO DESIGNEES
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 Kevco Designee. 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.
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.
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,
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
---- ----------------------------------------------
<C> <S>
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>
A-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT NAME
------- ------------
<C> <S> <C>
1 Agreement and Plan of Merger, dated October 21, 1997, among
Kevco, the Company and Offeror**
2 Confidentiality Agreement, dated August 25, 1997, between
the Company and Kevco**
3 Form of Employment Agreement, dated October 21, 1997, as in
place between the Company and Larry D. Renbarger and Gerald
R. Stults**
4 Form of Employment Agreement, dated October 21, as in place
between the Company and Dale A. Ledbetter, Richard E. Clark,
Richard J. Ostroski, Mark C. Neilson and Steven A. Salzer**
5 Restated Articles of Incorporation of the Company**
6 Letter dated October 28, 1997, to the shareholders of the
Company from the Chief Executive Officer of the Company*
7 Opinion of SBC Warburg Dillon Read Inc. dated October 21,
1997*
8 Form of Indemnification Agreement as entered into by and
between the Company and its executive officers and
directors**
9 Joint Press Release by the Company and Kevco, dated October
22, 1997**
10 Company Separation Allowance Plan for Salaried Employees**
11 Shareholders Agreement, dated October 21, 1997, by and
between Kevco and directors and executive officers of the
Company**
</TABLE>
- --------
*These documents are included in the materials mailed to shareholders
pursuant to the Offer.
**These documents were filed with the Securities and Exchange Commission as
exhibits to this Schedule 14D-9, but were not included in the mailing to
shareholders.
<PAGE>
EXHIBIT 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:_____________________________________
Its: ___________________________________
NEWCO:
SCC ACQUISITION CORP.
By:_____________________________________
Its: ___________________________________
COMPANY:
SHELTER COMPONENTS CORPORATION
By:_____________________________________
Its: __________________________________
<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
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 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.
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<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.
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<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.
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<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
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<PAGE>
EXHIBIT 3
FORM OF
EMPLOYMENT AGREEMENT
--------------------
This Agreement, effective as of this ____ day of October, 1997 (the
"Effective Date"), by and between Shelter Components Corporation, an Indiana
corporation ("Employer"), and ___________________ a resident of ________ County,
Indiana ("Executive").
WITNESSETH
----------
WHEREAS, Executive is employed by Employer as its, ___________________
and Executive has made valuable contributions to the strategic planning,
business operations, and financial strength of Employer; and
WHEREAS, Employer desires to encourage Executive to continue to make
such contributions to Employer's overall profitability and strength; and
WHEREAS, Executive desires to be assured of a secure minimum
compensation from Employer for his services; and
WHEREAS, Employer desires to assure the continued employment services
of Executive on an objective and impartial basis and without distraction; and
WHEREAS, Employer recognizes that when faced with a proposal for a
change of control of Employer, Executive will have a significant role in helping
the Board of Directors of Employer assess the options and advising the Board of
Directors on what is in the best interests of Employer's shareholders; and
WHEREAS, Employer desires to provide fair and reasonable benefits to
Executive on the terms and conditions set forth in this Agreement; and
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Executive will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of the
Executive, Employer and Executive, each intending to be legally bound, covenant
and agree as follows:
1. Upon the terms and conditions set forth in this Agreement, Employer
employs Executive and Executive accepts such employment.
<PAGE>
2. Executive agrees to serve as Employer's _______________________
or an executive position with Employer of equal or greater stature ("Job
Responsibilities"); provided, however that such duties shall be performed in or
from the offices of Employer and shall be of the same character as those
previously performed by Executive and generally associated with the office held
by Executive. Employer shall not, without the written consent of Executive,
relocate or transfer Executive to a location more than fifty (50) miles from
Employer's current offices. Executive shall serve the Employer and its
subsidiaries in substantially the same manner and to substantially the same
extent as Executive rendered his services to Employer before the date hereof.
Executive shall devote his full business time and best efforts to Employer's
business and shall not engage in any other related business without the written
consent of Employer. Employer shall cause Executive to be nominated to
successive terms as a member of Employer's Board of Directors and shall use its
best efforts to cause Executive to continue to be elected as a member of
Employer's Board; provided, however, the failure to elect Executive shall not
constitute "Good Reason", as defined below.
3. The term of this Agreement shall begin on the "Effective Date"
and shall end on the date which is three (3) years following such date;
provided, however, that such term shall be extended for an additional one (1)
year term on each anniversary of the Effective Date (the "Anniversary Date") so
that the term is three (3) years on each Anniversary Date, unless either party
hereto gives written notice to the other party not to so extend within ninety
(90) days prior to each such Anniversary Date, in which case no further
extension shall occur and the term of this Agreement shall end on the last day
of the term as it existed on the date that the notice of termination was given.
A notice not to so extend given by Employer shall be a termination of employment
prior to the expiration of the Term of this Agreement, for all purposes,
including Section 7 and Section 8 of this Agreement.
4. Executive shall receive an annual salary determined by the
Employer's Board of Directors, but not less than the salary rate at the
Effective Date, payable at regular intervals in accordance with Employer's
normal payroll practices now or hereafter in effect ("Base Compensation").
Employer may consider and declare from time to time adjustments in the
compensation it pays Executive and thereby adjustments in his Base Compensation.
A reduction in Executive Base Compensation can only be made prior to a Change in
Control as part of an Employer cost reduction program for substantially all
executives of the Employer. Executive shall also be entitled to participate in,
and receive compensation ("Bonus Program Compensation") under, the bonus
programs generally available to Company executives as specified under the terms
of such programs, including the EVA bonus bank (the "EVA Bonus Program"), which
Bonus Program Compensation can be reduced only if part of an Employer cost
reduction program applicable to substantially all executives of the Employer. A
reduction in actual amount of bonus payout during employment under any Bonus
Program in effect as of the Effective Date shall not be a reduction in Bonus
Program Compensation if it is pursuant to the pre-existing bonus formula in
effect on the Effective Date unless otherwise agreed to by the Executive. The
sum of Base Compensation and the total EVA Bonus Program targeted bonus amount
covering the Executive shall be "Annual Compensation."
For purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if during, or following the consummation of, a stock purchase
program, tender offer, exchange offer, merger, consolidation, sale of assets,
contested election, or any combination of
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<PAGE>
the foregoing transactions, any person, entity or group of persons acting in
concert (other than the Executive), directly or indirectly (1) acquires
ownership of or the power to vote in excess of twenty percent (20%) of the
voting securities of Employer, or (2) otherwise acquires effective control of
the business and affairs of Employer; provided, however, that a Change of
Control shall not be deemed to occur as a result of any acquisition of shares of
Employer capital stock by Executive, any affiliate of Executive, or any voting
trust(s) to which Executive's capital stock is transferred or a sale of stock or
stock buy-back by Employer.
5. So long as Executive is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all present and future
employee benefit, retirement, and compensation plans generally available to
executive employees of Employer, consistent with his Annual Compensation and his
Job Responsibilities including, without limitation, Employer's 401(k) plan,
stock incentive plan, health and medical insurance plans, executive deferred
compensation plan, and group life insurance plans (collectively, the "Benefit
Plans"), each of which Employer agrees to continue in effect on terms no less
favorable than those in effect as of the Effective Date (as permitted by law)
and throughout the Term of this Agreement.
6. Executive shall receive reimbursement from Employer for all
reasonable business expenses incurred in the course of his employment by
Employer, upon submission to Employer of written vouchers and statements for
reimbursement. Executive shall attend those professional meetings, trade shows,
conventions, and/or similar functions that he deems appropriate and useful for
purposes of keeping abreast of current developments in the industry and/or
promoting the interests of Employer. Employer shall continue in effect vacation
policies applicable to Executive no less favorable from his point of view than
those vacation policies in effect on the Effective Date. Executive shall be
entitled to office space and working conditions no less favorable than those in
effect for him on the Effective Date.
7. Subject to the respective continuing obligations of the parties,
including but not limited to those set forth in Section 8 hereof, Executive's
employment by Employer and any of its subsidiaries may be terminated prior to
the expiration of the Term of this Agreement as follows:
(A) Termination For Cause. Employer, by the action of its Board of
---------------------
Directors and upon written notice to Executive, may terminate
Executive's employment with Employer for cause. For purposes of
this Subsection 7(A), "cause" shall be defined as (i) fraud or
willful misconduct, (ii) intentional and continuing material
breach of fiduciary duty involving personal profit, (iii)
continuing intentional material failure to perform stated
duties, (iv) conviction of a felony violation, or (v) any
intentional and continuing material breach of any term,
condition or covenant of this Agreement.
(B) Termination Without Cause. Employer, by action of its Board of
-------------------------
Directors and upon written notice to Executive which notice may
be waived by Executive, may terminate Executive's employment
with Employer without cause at any time.
(C) Quit for Good Reason. Executive, by written notice to Employer,
--------------------
may terminate his employment with Employer for Good Reason. For
purposes of this
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<PAGE>
Subsection 7(C), "Good Reason" shall be defined as (i) any
action by Employer's Board of Directors to remove the Executive
as President and Chief Operating Officer of Employer and its
subsidiaries, except where the Employer's Board of Directors
properly acts to remove Executive from such office for "cause "
as defined in Subsection 7(A) hereof, (ii) any action by
Employer's Board of Directors to materially modify Executive's
Job Responsibilities without Executive's written consent and
Executive's resignation within one (1) year of such change in
responsibilities, (iii) any failure of Employer to obtain (x)
the assumption of the obligation to perform this Agreement by
any successor, assignee, or distributee of all or substantially
all of Employer's stock or assets (on a consolidated basis with
those of its subsidiaries) or (y) the reaffirmation of such
obligation by such successor, assignee, or distributee, as
contemplated in Section 16 hereof, (iv) any material breach by
Employer of a term, condition or covenant of this Agreement
which is not cured within thirty (30) days of such breach and
Executive's resignation within one (1) year of such breach, (v)
any reduction in Base Compensation or Bonus Program Compensation
after a Change in Control, or (vi) any liquidation, dissolution,
or reorganization of Employer by the Employer's Board of
Directors.
(D) Quit Without Good Reason. Executive may terminate his employment
------------------------
with Employer without Good Reason.
(E) Retirement, Death or Disability. Executive's employment with
-------------------------------
Employer shall terminate in the event of Executive's retirement,
death or permanent disability. For purposes hereof, "permanent
disability" shall be defined as Executive's permanent inability
by reason of illness or other physical or mental incapacity to
perform the duties required by his employment for any
consecutive one hundred eighty (180) day period and Executive is
determined to be disabled under Employer's long term disability
plan, if any, provided that notice of any termination by
Employer because of Executive's "permanent disability" shall
have been given to Executive prior to the full resumption by him
of the performance of such duties.
8. In the event of Termination of Executive's employment with the
Employer pursuant to Section 7 hereof, compensation shall continue to be paid by
Employer to Executive as follows:
(A) If an Executive's employment with the Company terminates prior
to a Change in Control within the term of this Agreement, then:
(i) if the Executive's termination is as described in
Section 7(A) or 7(D) (Termination for Cause or Quit
Without Good Reason), Executive shall be entitled to
receive his Annual Compensation through his date of
termination for Termination for Cause and an additional
six (6) months Annual Compensation for Quit Without Good
Reason and shall continue to receive his health and
dental insurance and a payout of his accrued EVA Bonus
Program bank over a period of eighteen (18) months
during
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<PAGE>
which Executive shall refrain from "competition" as
specified in Section 9. Such benefits shall cease and be
forfeited if Executive fails to comply with the
requirements of Section 9 during such eighteen (18)
month period;
(ii) if the Executive's termination is as described in
Section 7(B) or 7(C) (Termination Without Cause or Quit
for Good Reason), Executive shall be entitled to receive
continuation of (i) his Annual Compensation, (ii)
employee benefits (on the same terms and conditions as
available to employees of the Company generally) and
(iii) a payout of his accrued EVA Bonus Program bank
over a period of eighteen (18) months following his
termination, during which time Executive shall refrain
from " competition" as specified in Section 9. All
payments and benefits above shall terminate if Executive
engages in competition during the eighteen (18) months
following termination of employment;
(iii) if Executive's termination is a result of Executive's
"permanent disability" described in Section 7(E), then
Executive shall be entitled to receive (I) a
continuation of his Annual Compensation and employee
benefits (on the same terms and conditions as available
to employees of the Company generally) and a payout of
his accrued EVA Bonus Program bank over one (1) year,
(II) an additional one (1) year of Annual Compensation
paid in installments over four (4) years following
termination (25 % of Annual Compensation each year), and
(III) an extension of his right to exercise any stock
options for a period of four (4) years.
(B) If an Executive's employment with the Company terminates after a
Change in Control within the term of this Agreement, then:
(i) if the Executive's termination is as described in
Section 7(D) (Quit Without Good Reason), Executive shall
be entitled to receive his (I) continuation of his
Annual Compensation and employee benefits (on the same
terms and conditions as available to employees of the
Company generally) for a period of one (1) year
following termination, (II) a payout of his accrued EVA
Bonus Program bank without interest over the eighteen
(18) months following his termination during which time
Executive shall refrain from "competition" as specified
in Section 9. All payments and benefits under (I) and
(II) above shall terminate if Executive engages in
competition during the eighteen (18) months following
termination of employment;
(ii) if the Executive's termination is as described in
Section 7(B) or 7(C) (Termination Without Cause or Quit
for Good Reason), Executive shall be entitled to receive
continuation of his Annual Compensation and employee
benefits (on the same terms and conditions as available
to employees of the Company generally) and a payout of
his accrued EVA Bonus Program Bank over a period of
eighteen (18) months following
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<PAGE>
termination, during which time Executive shall refrain from
"competition" as specified in Section 9. All payments and
benefits above shall terminate if Executive engages in
competition during the eighteen (18) months following
termination of employment;
(iii) if Executive's termination is a result of Executive's
"permanent disability" described in Section 7(E), then
Executive shall be entitled to receive (I) a continuation of
his Annual Compensation and employee benefits (on the same
terms and conditions as available to employees of the Company
generally) and a payout of his accrued EVA Bonus Program bank
one (1) year, (II) an additional one (1) year of Annual
Compensation paid in installments over four (4) years
following termination (25% of Annual Compensation each year),
and (III) an extension of his right to exercise any stock
options for a period of four (4) years;
(iv) if the Executive's termination is as described in Section 7(A)
(Termination for Cause), Executive shall be entitled to
receive his Annual Compensation through his date of
termination and shall continue to receive his health and
dental insurance and a payout of his accrued EVA Bonus Program
bank ratably without interest over a period of eighteen (18)
months during which Executive shall refrain from "competition"
as specified in Section 9. Such benefits and payments shall
cease and be forfeited if Executive fails to comply with the
requirements of Section 9 during such eighteen (18) month
period.
(C) In the event that any payment or benefit provided to Executive under
this Section 8, or under any other plan or arrangement of Employer,
including any such plan or arrangement providing for the grant of stock
options or the transfer or sale of stock to Executive, would be subject
to the imposition of an excise tax under Section 4999 of the Internal
Revenue Code (a "Parachute Payment"), payments or benefits under this
Agreement shall be reduced to an amount which is equal to one thousand
dollars ($1,000) less than the amount at which payments under this
Agreement or any other payments from the Employer to the Executive are
determined to be Parachute Payments as certified by the Company's
auditors or other outside experts retained to make such determination.
Company shall use its best efforts to ensure that all amounts due under
this Agreement shall be paid and not constitute Parachute Payments.
(D) Payments and benefits under this Section 8 shall not be subject to
reduction for any amounts and benefits that Executive receives or could
receive from any other employment following termination.
(E) Executive may, at his option, elect to receive all amounts under this
Section 8 paid in a single lump sum equal to the present value of such
amounts (using the interest rate which would be used as of the first
day of the month in which distribution occurs by the Pension Benefit
Guaranty Corporation for purposes of
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<PAGE>
determining the present value of a lump sum distribution on termination
of a defined benefit plan).
9. In order to induce Employer to enter into this Agreement, Executive
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including the order of a
court or governmental agency, Executive shall not during the term or
thereafter divulge or furnish any trade secrets (as defined in IND.,
CODE (S)24-2-3-2) of Employer or any confidential information acquired
by him while employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person, firm or corporation,
other than Employer or upon its written request, or use any such trade
secret or confidential information directly or indirectly for
Executive's own benefit or for the benefit of any person, firm or
corporation other than Employer, since such trade secrets and
confidential information are confidential and shall at all times remain
the property of Employer.
(B) Notwithstanding anything contained herein to the contrary (including
the specific time periods provided in Section 8, above), pursuant to
his obligations contained in the Prior Agreements, in addition to and
running coincident with the obligations specified in Section 8,
Executive shall not for a period totalling three (3) years from
Executive's termination of employment for any reason (i) compete,
directly or indirectly, with the business of Employer (or in any
business involving, directly or indirectly, the manufacture or sale of
manufactured homes or recreational vehicles) as conducted within the
same geographic areas served by Employer during the Term (each such
person, firm or entity which so competes is referred to as
"Competitor"); (ii) solicit or accept business for or on behalf of any
Competitor; (iii) solicit, induce or persuade, any person to work for
or provide services to or provide financial assistance to, any
Competitor; (iv) solicit or accept, on behalf of, or for the benefit
of, any Competitor, any business from any person, firm or entity which
during the Term of this Agreement was a vendor or supplier to or
subcontractor for, or commercial purchaser from, Employer; or (v)
solicit any employee to leave the employment of Employer for any
reason.
(C) If Executive's employment by Employer is terminated for any reason by
either Executive or Employer, Executive will turn over immediately
thereafter to Employer all business correspondence, letters, papers,
reports, customers' lists, financial statements, records, drawings,
credit reports or other confidential information or documents of
Employer or its affiliates in the possession or control of Executive,
all of which writing are and will continue to be the sole and exclusive
property of Employer or its affiliates.
10. Any termination of Executive's employment with Employer as contemplated
by Section 7 hereof, except in the circumstances of Executive's death, shall be
communicated by written "notice of termination" by the terminating party to the
other party hereto. Any "notice of termination" shall indicate the specific
provisions of this Agreement relied upon and shall set
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<PAGE>
forth in reasonable detail the facts and circumstances claimed to provide a
basis for such termination.
11. Anything to the contrary contained herein notwithstanding amounts
payable to or for the benefit of Executive pursuant to Section 8 shall be so
paid whether or not deductible by Employer for federal income tax purposes,
except as provided in Section 8(C).
12. If a dispute arises regarding this Agreement, said dispute shall be
resolved by binding arbitration determined in accordance with the rules of the
American Arbitration Association and if Executive obtains a final award in his
favor or his claim is settled by Employer prior to the rendering of an award by
such arbitration, all reasonable legal fees and expenses incurred by Executive
in contesting or disputing any such termination or otherwise pursuing his claim
shall be paid by Employer, to the extent permitted by law. If a dispute arises
regarding other provisions of this Agreement, including enforcement of the
confidentiality and noncompetition provisions hereof, then such shall be heard
only by the judge and not by a jury, in any court of general jurisdiction in
Elkhart County, Indiana, to which such sole and exclusive jurisdiction each
party irrevocably consents. Each party agrees not to assert and hereby waives
any right of removal, consolidation or joinder with any other action, or any
transfer by reason of preferred venue. The prevailing party shall be entitled to
its costs, expenses and reasonable attorney's fees, not to exceed $20,000. It is
provided, however, that in either of arbitration or judicial proceedings, if it
is determined that Employer breached any of the material terms or conditions of
this Agreement, then as liquidated damages, Executive shall be entitled to
receive not less than the payments and benefits described in Section 8.
Executive understands that Employer would not have an adequate remedy at law for
the material breach or threatened breach by Executive of any one or more of the
covenants set forth in this Agreement and agrees that, in the event of any such
material breach or threatened breach, Employer may, in addition to other
remedies which may be available to Employer, file a suit in equity, without the
necessity of posting bond, to enjoin Executive from the breach or threatened
breach of such covenants.
13. Should Executive die after termination of his employment with Employer
while any amounts are payable to him hereunder, this Agreement shall inure to
the benefit of and be enforceable by Executive's executors, administrators,
heirs, distributees, devisees and legatees and all amounts payable hereunder
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to his
estate.
14. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been given
when delivered or mailed by United States first class mail, courier or hand
delivery, addressed as follows:
If to Executive:
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<PAGE>
If to Employer: Shelter Components Corporation
Attention: General Counsel
2831 Dexter Drive
Elkhart, Indiana 46514-8225
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
15. The validity, interpretation, and performance of this Agreement shall
be governed by the laws of the State of Indiana without regard to conflicts of
laws.
16. Employer shall require any successor, assignee, distributee or other
transferee of all or substantially all of its or its subsidiaries' assets or
business ("Succession") (whether direct or indirect, by purchase, merger,
dissolution, liquidation, consolidation or otherwise) by agreement in form and
substance satisfactory to Executive to expressly assume and agree to perform
this Agreement in the same manner and same extent that Employer would be
required to perform it if no such Succession had taken place. Failure of
Employer to obtain such agreement prior to the effectiveness of any such
Succession shall be a material intentional breach of this Agreement and shall
entitle Executive to terminate his employment with Employer pursuant to
Subsection 7(C) hereof. As used in this Agreement, "Employer" shall mean
Employer and its subsidiaries from time to time and any successor to its or
their business or assets as aforesaid.
17. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Executive and Employer. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
18. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement which shall remain in full force and effect.
19. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
20. This Agreement is personal in nature and neither party hereto shall,
without consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder except as provided in Section 13 and Section 16 above.
Without limiting the foregoing, Executive's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in Section 13 hereof, and in the
event of
-9-
<PAGE>
any attempted assignment or transfer contrary to this paragraph, Employer shall
have no liability to pay any amounts so attempted to be assigned or transferred.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed
and delivered this ______ day of October, 1997.
"Executive" "Employer"
SHELTER COMPONENTS CORPORATION
By:
- ---------------------------- --------------------------------
Name: Its:
---------------------- -------------------------------
CONSENT:
-------
-----------------------------------
On behalf of the Independent
Committee of the Board of Directors
-11-
<PAGE>
EXHIBIT 4
FORM OF
EMPLOYMENT AGREEMENT
--------------------
This Agreement, effective as of this ___ day of October, 1997 (the
"Effective Date"), by and between Shelter Components Corporation, an Indiana
corporation ("Employer"), and ______________ a resident of __________ County,
Indiana ("Executive").
WITNESSETH
----------
WHEREAS, Executive is employed by Employer as its Executive
____________________ and Executive has made valuable contributions to the
manufacturing operations and financial strength of Employer; and
WHEREAS, Employer desires to encourage Executive to continue to make
such contributions to Employer's overall profitability and strength; and
WHEREAS, Executive desires to be assured of a secure minimum
compensation from Employer for his services; and
WHEREAS, Employer desires to assure the continued employment services
of Executive on an objective and impartial basis and without distraction; and
WHEREAS, Employer recognizes that when faced with a proposal for a
change of control of Employer, Executive will have a significant role in helping
the Board of Directors of Employer assess the options and advising the Board of
Directors on what is in the best interests of Employer's shareholders; and
WHEREAS, Employer desires to provide fair and reasonable benefits to
Executive on the terms and conditions set forth in this Agreement; and
WHEREAS, Employer desires reasonable protection of its confidential
business and customer information which it has developed over the years at
substantial expense and assurance that Executive will not compete with Employer
for a reasonable period of time after termination of his employment with
Employer.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and undertakings herein contained and the continued employment of the
Executive, Employer and Executive, each intending to be legally bound, covenant
and agree as follows:
1. Upon the terms and conditions set forth in this Agreement, Employer
employs Executive and Executive accepts such employment.
2. Executive agrees to serve as Employer's Executive _________________
or an executive position with Employer of similar stature ("Job
Responsibilities"); provided, however that such duties shall be performed in or
from the offices of Employer and shall be of a character similar to those
previously performed by Executive and generally associated with the position
held by Executive. Employer shall not, without the written consent of Executive,
<PAGE>
relocate or transfer Executive to a location more than fifty (50) miles from
Employer's current offices. Executive shall serve the Employer and its
subsidiaries in substantially the same manner and to substantially the same
extent as Executive rendered his services to Employer before the date hereof.
Executive shall devote his full business time and best efforts to Employer's
business and shall not engage in any other related business without the written
consent of Employer.
3. The term of this Agreement shall begin on the "Effective Date"
and shall end on the date which is three (3) years following such date;
provided, however, that such term shall be extended for an additional one (1)
year term on each anniversary of the Effective Date (the "Anniversary Date") so
that the term is three (3) years on each Anniversary Date, unless either party
hereto gives written notice to the other party not to so extend within ninety
(90) days prior to each such Anniversary Date, in which case no further
extension shall occur and the term of this Agreement shall end on the last day
of the term as it existed on the date that the notice of termination was given.
A notice not to so extend given by Employer shall be a termination of employment
prior to the expiration of the Term of this Agreement, for all purposes,
including Section 7 and Section 8 of this Agreement.
4. Executive shall receive an annual salary determined by the
Employer's Board of Directors, but not less than the salary rate at the
Effective Date, payable at regular intervals in accordance with Employer's
normal payroll practices now or hereafter in effect ("Base Compensation").
Employer may consider and declare from time to time adjustments in the
compensation it pays Executive and thereby adjustments in his Base Compensation.
A reduction in Executive Base Compensation can only be made prior to a Change in
Control as part of an Employer cost reduction program for substantially all
executives of the Employer. Executive shall also be entitled to participate in,
and receive compensation ("Bonus Program Compensation") under, the bonus
programs generally available to Company executives as specified under the terms
of such programs, including the EVA bonus bank (the "EVA Bonus Program"), which
Bonus Program Compensation can be reduced only if part of an Employer cost
reduction program applicable to substantially all executives of the Employer. A
reduction in actual amount of bonus payout during employment under any Bonus
Program in effect as of the Effective Date shall not be a reduction in Bonus
Program Compensation if it is pursuant to the pre-existing bonus formula in
effect on the Effective Date unless otherwise agreed to by the Executive. The
sum of Base Compensation and the total EVA Bonus Program targeted bonus amount
covering the Executive shall be "Annual Compensation."
For purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if during, or following the consummation of, a stock purchase
program, tender offer, exchange offer, merger, consolidation, sale of assets,
contested election, or any combination of the foregoing transactions, any
person, entity or group of persons acting in concert (other than the Executive),
directly or indirectly (1) acquires ownership of or the power to vote in excess
of twenty percent (20%) of the voting securities of Employer, or (2) otherwise
acquires effective control of the business and affairs of Employer; provided,
however, that a Change of Control shall not be deemed to occur as a result of
any acquisition of shares of Employer capital stock by Executive, any affiliate
of Executive, or any voting trust(s) to which Executive's capital stock is
transferred or a sale of stock or stock buy-back by Employer.
-2-
<PAGE>
5. So long as Executive is employed by Employer pursuant to this
Agreement, he shall be included as a participant in all present and future
employee benefit, retirement, and compensation plans generally available to
executive employees of Employer, consistent with his Annual Compensation and his
Job Responsibilities including, without limitation, Employer's 401(k) plan,
stock incentive plan, health and medical insurance plans, executive deferred
compensation plan, and group life insurance plans (collectively, the "Benefit
Plans"), each of which Employer agrees to continue in effect on terms no less
favorable than those in effect as of the Effective Date (as permitted by law)
and throughout the Term of this Agreement.
6. Executive shall receive reimbursement from Employer for all
reasonable business expenses incurred in the course of his employment by
Employer, upon submission to Employer of written vouchers and statements for
reimbursement. Executive shall attend those professional meetings, trade shows,
conventions, and/or similar functions that he deems appropriate and useful for
purposes of keeping abreast of current developments in the industry and/or
promoting the interests of Employer. Employer shall continue in effect vacation
policies applicable to Executive no less favorable from his point of view than
those vacation policies in effect on the Effective Date. Executive shall be
entitled to office space and working conditions no less favorable than those in
effect for him on the Effective Date.
7. Subject to the respective continuing obligations of the parties,
including but not limited to those set forth in Section 8 hereof, Executive's
employment by Employer and any of its subsidiaries may be terminated prior to
the expiration of the Term of this Agreement as follows:
(A) Termination For Cause. Employer, by the action of its Board of
---------------------
Directors and upon written notice to Executive, may terminate
Executive's employment with Employer for cause. For purposes of
this Subsection 7(A), "cause" shall be defined as (i) fraud or
willful misconduct, (ii) intentional and continuing material
breach of fiduciary duty involving personal profit, (iii)
continuing intentional material failure to perform stated
duties, (iv) conviction of a felony violation, or (v) any
intentional and continuing material breach of any term,
condition or covenant of this Agreement.
(B) Termination Without Cause. Employer, by action of its Board of
-------------------------
Directors and upon written notice to Executive which notice may
be waived by Executive, may terminate Executive's employment
with Employer without cause at any time.
(C) Quit for Good Reason. Executive, by written notice to Employer,
--------------------
may terminate his employment with Employer for Good Reason. For
purposes of this Subsection 7(C), "Good Reason" shall be defined
as (i) any action by Employer's Board of Directors to remove the
Executive as Executive Vice President - Manufacturing of
Employer and its subsidiaries, except where the Employer's Board
of Directors properly acts to remove Executive from such office
for "cause " as defined in Subsection 7(A) hereof, (ii) any
action by Employer's Board of Directors to materially modify
Executive's Job Responsibilities without Executive's written
consent and Executive's resignation within one (1) year of such
change in responsibilities, (iii) any failure of Employer to
obtain (x) the assumption of the
-3-
<PAGE>
obligation to perform this Agreement by any successor, assignee,
or distributee of all or substantially all of Employer's stock
or assets (on a consolidated basis with those of its
subsidiaries) or (y) the reaffirmation of such obligation by
such successor, assignee, or distributee, as contemplated in
Section 16 hereof, (iv) any material breach by Employer of a
term, condition or covenant of this Agreement which is not cured
within thirty (30) days of such breach and Executive's
resignation within one (1) year of such breach, (v) any
reduction in Base Compensation or Bonus Program Compensation
after a Change in Control, or (vi) any liquidation, dissolution,
or reorganization of Employer by the Employer's Board of
Directors.
(D) Quit Without Good Reason. Executive may terminate his employment
------------------------
with Employer without Good Reason.
(E) Retirement, Death or Disability. Executive's employment with
-------------------------------
Employer shall terminate in the event of Executive's retirement,
death or permanent disability. For purposes hereof, "permanent
disability" shall be defined as Executive's permanent inability
by reason of illness or other physical or mental incapacity to
perform the duties required by his employment for any
consecutive one hundred eighty (180) day period and Executive is
determined to be disabled under Employer's long term disability
plan, if any, provided that notice of any termination by
Employer because of Executive's "permanent disability" shall
have been given to Executive prior to the full resumption by him
of the performance of such duties.
8. In the event of Termination of Executive's employment with the
Employer pursuant to Section 7 hereof, compensation shall continue to be paid by
Employer to Executive as follows:
(A) If an Executive's employment with the Company terminates prior
to a Change in Control within the term of this Agreement, then:
(i) if the Executive's termination is as described in
Section 7(A) or 7(D) (Termination for Cause or Quit
Without Good Reason), Executive shall be entitled to
receive his Annual Compensation through his date of
termination for Termination for Cause and an additional
six (6) months Annual Compensation for Quit Without Good
Reason and shall continue to receive (i) his health and
dental insurance and a payout of his accrued EVA Bonus
Program bank over twelve (12) months during which
Executive shall refrain from "competition" as specified
in Section 9. Such benefits and payments shall cease and
be forfeited if Executive fails to comply with the
requirements of Section 9 during such twelve (12) month
period;
(ii) if the Executive's termination is as described in
Section 7 (B) or 7(C) (Termination Without Cause or Quit
for Good Reason), Executive shall be entitled to receive
continuation of (i) his Annual Compensation, (ii)
-4-
<PAGE>
employee benefits (on the same terms and conditions as
available to employees of the Company generally) and
(iii) a payout of his accrued EVA Bonus Program bank
over a period of twelve (12) months following
termination, during which time Executive shall refrain
from " competition" as specified in Section 9. All
payments and benefits above shall terminate if Executive
engages in competition during the twelve (12) months
following termination of employment;
(iii) if Executive's termination is a result of Executive's
"permanent disability" described in Section 7(E), then
Executive shall be entitled to receive (I) a
continuation of his Annual Compensation and employee
benefits (on the same terms and conditions as available
to employees of the Company generally) and a payout of
his accrued EVA Bonus Program bank one (1) year, (II) an
additional one (1) year of Annual Compensation paid in
installments over four (4) years following termination
(25 % of Annual Compensation each year), and (III) an
extension of his right to exercise any stock options for
a period of four (4) years.
(B) If an Executive's employment with the Company terminates after a
Change in Control within the term of this Agreement, then:
(i) if the Executive's termination is as described in
Section 7(D) (Quit Without Good Reason), Executive shall
be entitled to receive his continuation of (i) his
Annual Compensation, (ii) employee benefits (on the same
terms and conditions as available to employees of the
Company generally) and (iii) a payout of his accrued EVA
Bonus Program bank through the date of termination
and for the six (6) months thereafter, and, Executive
shall refrain from "competition" as specified in Section
9 for a period of twelve (12) months. All payments and
benefits above shall terminate if Executive engages in
competition during the twelve (12) months following
termination of employment;
(ii) if the Executive's termination is as described in
Section 7(B) or 7(C) (Termination Without Cause or Quit
for Good Reason), Executive shall be entitled to receive
continuation of (i) his Annual Compensation, (ii)
employee benefits (on the same terms and conditions as
available to employees of the Company generally) and
(iii) a payout of his accrued EVA Bonus Program Bank for
a period of twelve (12) months following termination,
during which time Executive shall refrain from
"competition" as specified in Section 9. All payments
and benefits above shall terminate if Executive engages
in competition during the twelve (12) months following
termination of employment;
(iii) if Executive's termination is a result of Executive's
"permanent disability" described in Section 7(E), then
Executive shall be entitled to receive (I) a
continuation of his Annual Compensation and employee
benefits on the same terms and conditions as available
to employees of the Company
-5-
<PAGE>
generally) a payout of his accrued EVA Bonus Program bank one
(1) year, (II) an additional one (1) year of Annual
Compensation paid in installments over four (4) years
following termination (25 % of Annual Compensation each year),
and (III) an extension of his right to exercise any stock
options for a period of four (4) years;
(iv) if the Executive's termination is as described in Section 7(A)
(Termination for Cause), Executive shall be entitled to
receive his Annual Compensation through his date of
termination and his health and dental insurance and a payout
of his accrued EVA Bonus Program bank over a period of twelve
(12) months during which Executive shall refrain from
"competition" as specified in Section 9. Such benefits and
payments shall cease and be forfeited if Executive fails to
comply with the requirements of Section 9 during such twelve
(12) month period.
(C) In the event that any payment or benefit provided to Executive under
this Section 8, or under any other plan or arrangement of Employer,
including any such plan or arrangement providing for the grant of stock
options or the transfer or sale of stock to Executive, would be subject
to the imposition of an excise tax under Section 4999 of the Internal
Revenue Code (a "Parachute Payment"), payments or benefits under this
Agreement shall be reduced to an amount which is equal to one thousand
dollars ($1,000) less than the amount at which payments under this
Agreement or any other payments from the Employer to the Executive are
determined to be Parachute Payments as certified by the Company's
auditors or other outside experts retained to make such determination.
Company shall use its best efforts to ensure that all amounts due under
this Agreement shall be paid and not constitute Parachute Payments.
(D) Payments and benefits under this Section 8 shall not be subject to
reduction for any amounts and benefits that Executive receives or could
receive from any other employment following termination.
(E) Executive may, at his option, elect to receive all amounts under this
Section 8 paid in a single lump sum equal to the percent value of such
amounts (using the interest rate specified in the Company's pension
Plan).
9. In order to induce Employer to enter into this Agreement, Executive
hereby agrees as follows:
(A) Unless otherwise required to do so by law, including the order of a
court or governmental agency, Executive shall not during the term or
thereafter divulge or furnish any trade secrets (as defined in IND.,
CODE (S)24-2-3-2) of Employer or any confidential information acquired
by him while employed by Employer concerning the policies, plans,
procedures or customers of Employer to any person, firm or corporation,
other than Employer or upon its written request, or use any such trade
secret or confidential information directly or indirectly for
Executive's own benefit or for the benefit of any person, firm or
corporation other than
-6-
<PAGE>
Employer, since such trade secrets and confidential information are
confidential and shall at all times remain the property of Employer.
(B) If Employer's post-employment obligations are determined in accordance
with any subsection of Section 8, then for the period specified in the
subsection of Section 8 governing the Employer's post-employment
obligations, the Executive shall not (i) compete, directly or
indirectly, with the business of Employer (or in any business
involving, directly or indirectly, the manufacture or sale of
manufactured homes or recreational vehicles) as conducted within the
same geographic areas served by Employer during the Term (each such
person, firm or entity which so competes is referred to as
"Competitor"); (ii) solicit or accept business for or on behalf of any
Competitor; (iii) solicit, induce or persuade, any person to work for
or provide services to or provide financial assistance to, any
Competitor; (iv) solicit or accept, on behalf of, or for the benefit
of, any Competitor, any business from any person, firm or entity which
during the Term of this Agreement was a vendor or supplier to or
subcontractor for, or commercial purchaser from, Employer; or (v)
solicit any employee to leave the employment of Employer for any
reason.
(C) If Executive's employment by Employer is terminated for any reason by
either Executive or Employer, Executive will turn over immediately
thereafter to Employer all business correspondence, letters, papers,
reports, customers' lists, financial statements, records, drawings,
credit reports or other confidential information or documents of
Employer or its affiliates in the possession or control of Executive,
all of which writing are and will continue to be the sole and exclusive
property of Employer or its affiliates.
10. Any termination of Executive's employment with Employer as contemplated
by Section 7 hereof, except in the circumstances of Executive's death, shall be
communicated by written "notice of termination" by the terminating party to the
other party hereto. Any "notice of termination" shall indicate the specific
provisions of this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such
termination.
11. Anything to the contrary contained herein notwithstanding amounts
payable to or for the benefit of Executive pursuant to Section 8 shall be so
paid whether or not deductible by Employer for federal income tax purposes,
except as provided in Section 8(C).
12. If a dispute arises regarding this Agreement, said dispute shall be
resolved by binding arbitration determined in accordance with the rules of the
American Arbitration Association and if Executive obtains a final award in his
favor or his claim is settled by Employer prior to the rendering of an award by
such arbitration, all reasonable legal fees and expenses incurred by Executive
in contesting or disputing any such termination or otherwise pursuing his claim
shall be paid by Employer, to the extent permitted by law. If a dispute arises
regarding other provisions of this Agreement, including enforcement of the
confidentiality and noncompetition provisions hereof, then such shall be heard
only by the judge and not by a jury, in any court of general jurisdiction in
Elkhart County, Indiana, to which such sole and exclusive
-7-
<PAGE>
jurisdiction each party irrevocably consents. Each party agrees not to assert
and hereby waives any right of removal, consolidation or joinder with any other
action, or any transfer by reason of preferred venue. The prevailing party shall
be entitled to its costs, expenses and reasonable attorney's fees, not to exceed
$20,000. It is provided, however, that in either of arbitration or judicial
proceedings, if it is determined that Employer breached any of the material
terms or conditions of this Agreement, then as liquidated damages, Executive
shall be entitled to receive not less than the payments and benefits described
in Section 8. Executive understands that Employer would not have an adequate
remedy at law for the material breach or threatened breach by Executive of any
one or more of the covenants set forth in this Agreement and agrees that, in the
event of any such material breach or threatened breach, Employer may, in
addition to other remedies which may be available to Employer, file a suit in
equity, without the necessity of posting bond, to enjoin Executive from the
breach or threatened breach of such covenants.
13. Should Executive die after termination of his employment with Employer
while any amounts are payable to him hereunder, this Agreement shall inure to
the benefit of and be enforceable by Executive's executors, administrators,
heirs, distributees, devisees and legatees and all amounts payable hereunder
shall be paid in accordance with the terms of this Agreement to Executive's
devisee, legatee or other designee or, if there is no such designee, to his
estate.
14. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been given
when delivered or mailed by United States first class mail, courier or hand
delivery, addressed as follows:
If to Executive:
If to Employer: Shelter Components Corporation
Attention: General Counsel
2831 Dexter Drive
Elkhart, Indiana 46514-8225
or to such address as either party hereto may have furnished to the other party
in writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
15. The validity, interpretation, and performance of this Agreement shall
be governed by the laws of the State of Indiana without regard to conflicts of
laws.
16. Employer shall require any successor, assignee, distributee or other
transferee of all or substantially all of its or its subsidiaries' assets or
business ("Succession") (whether direct or indirect, by purchase, merger,
dissolution, liquidation, consolidation or otherwise) by agreement in form and
substance satisfactory to Executive to expressly assume and agree to perform
this Agreement in the same manner and same extent that Employer would be
required to perform it if no such Succession had taken place. Failure of
Employer to obtain such agreement prior to the effectiveness of any such
Succession shall be a material intentional breach of this Agreement and shall
entitle Executive to terminate his employment with Employer pursuant to
Subsection 7(C) hereof. As used in this Agreement, "Employer" shall mean
-8-
<PAGE>
Employer and its subsidiaries from time to time and any successor to its or
their business or assets as aforesaid.
17. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
Executive and Employer. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of dissimilar provisions or conditions at the same or any prior or
subsequent time. No agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
18. The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement which shall remain in full force and effect.
19. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
20. This Agreement is personal in nature and neither party hereto shall,
without consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder except as provided in Section 13 and Section 16 above.
Without limiting the foregoing, Executive's right to receive compensation
hereunder shall not be assignable or transferable, whether by pledge, creation
of a security interest or otherwise, other than a transfer by his will or by the
laws of descent or distribution as set forth in Section 13 hereof, and in the
event of any attempted assignment or transfer contrary to this paragraph,
Employer shall have no liability to pay any amounts so attempted to be assigned
or transferred.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have caused the Agreement to be executed
and delivered this ______ day of October, 1997.
"Executive" "Employer"
SHELTER COMPONENTS CORPORATION
By:
- ---------------------------- --------------------------------
Name: Its:
---------------------- -------------------------------
CONSENT:
-------
-----------------------------------
On behalf of the Independent
Committee of the Board of Directors
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<PAGE>
Exhibit 5
SUE ANNE GILROY
[LOGO] ARTICLES OF AMENDMENT OF THE SECRETARY OF STATE
ARTICLES OF INCORPORATION CORPORATIONS DIVISION
State Form 35333 (R7/4 ??) 302 W Washington St. Rm 4318
Approved by State Board of Accounts 1995 Indianapolis, IN 46204
Telephone: (317) 252-8578
INSTRUCTIONS: Use 8 1/2" x 11" white paper for Indiana Code 29-1-38-1 ?????
inserts.
Present original and one copy to Filing Fee: $30.00
address in upper right hand corner
????????
Please TYPE or PRINT.
- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
- --------------------------------------------------------------------------------
Name of Corporation
Shelter Components Corporation
- --------------------------------------------------------------------------------
The undersigned officers of:
Shelter Components Corporation
- --------------------------------------------------------------------------------
(hereinafter referred to as the "Corporation") existing pursuant to the
provisions of (Indicate appropriate act)
[X] Indiana Business Corporation Law [ ] Indiana Professional Corporation
Act of 1963
as amended (hereinafter referred to as the "Act"), desiring to give notice of
corporation action effectuating amendment of certain provisions of its
Articles of Incorporation certify the following facts:
- --------------------------------------------------------------------------------
ARTICLE I Amendment(s)
- --------------------------------------------------------------------------------
SECTION 1 The date of incorporation of the Corporation is:
June 22, 1987
- --------------------------------------------------------------------------------
SECTION 2 The name of the Corporation following this amendment to the Articles
of Incorporation is:
Shelter Components Corporation
- --------------------------------------------------------------------------------
SECTION 3
The exact text of Article(s) V, Sec. 5.1 of the Articles of Incorporation is now
as follows:
The total number of shares which the Corporation has authority to issue shall
be Twenty-six Million (26,000,000) shares consisting of Twenty-five Million
(25,000,000) common shares (the "Common Shares") and One Million (1,000,000)
special shares (the "Special Shares"). The Corporation's shares shall have a
par value of $.01 per share.
- --------------------------------------------------------------------------------
SECTION 4 Date of each amendment's adoption:
May 22, 1997
- --------------------------------------------------------------------------------
(Continued on the reverse side)
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE II Manner of Adoption and Vote
- --------------------------------------------------------------------------------
Strike inapplicable section:
- --------------------------------------------------------------------------------
[_] SECTION 1 This amendment was adopted by the Board of Directors or
incorporators and shareholder action was not required.
- --------------------------------------------------------------------------------
[_] SECTION 2 The shareholders of the Corporation entitled to vote in respect
to the amendment adopted the proposed amendment. The amendment
was adopted by:
A. Vote of such shareholders during a meeting called by the Board
of Directors. The result of such vote is as follows:
--------------------------------------------------------------
7,680,000 Shares entitled to vote.
--------------------------------------------------------------
5,819,458 Number of shares represented at the meeting.
--------------------------------------------------------------
4,635,737 Shares voted in favor.
--------------------------------------------------------------
1,168,626 Shares voted against. 15,094-Shares vote abstain
--------------------------------------------------------------
B. Written consent executed on ______________, 19___and signed by
all such shareholders.
- --------------------------------------------------------------------------------
ARTICLE III Compliance with Legal Requirements
- --------------------------------------------------------------------------------
The manner of the adoption of the Articles of Amendment and the vote by
which they were adopted constitute full legal compliance with the
provisions of the Act, the Articles of Incorporation, and the By-Laws of
the Corporation.
- --------------------------------------------------------------------------------
I hereby verify, subject to the penalties of perjury, that the statements
contained herein are true, this 27th day of June, 1997.
- --------------------------------------------------------------------------------
Signature of current officer Printed name of officer
/s/ SAS Steven A. Salzer
- --------------------------------------------------------------------------------
Officer's Title
Vice President
- --------------------------------------------------------------------------------
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
SHELTER NEWCO, INC.
SHELTER NEWCO, INC. (hereinafter referred to as the "Corporation"),
having duly elected to be governed by IC 23-1-18 through IC 23-1-54 (except for
IC 23-1-18-3, IC 23-1-21 and IC 23-1-53-3) effective July 29, 1987, and desiring
to amend and restate its Articles of Incorporation effective October 23, 1987,
pursuant to the provisions of the Indiana Business Corporation Law (hereinafter
referred to as the "Corporation Law"), submits the following Restated Articles
of Incorporation:
ARTICLE I
Name
The name of the Corporation is SHELTER COMPONENTS CORPORATION.
ARTICLE II
Purposes and Powers
Section 2.1. Purposes of the Corporation. The purposes for which the
Corporation is formed are (a) to engage in the general business of conducting
and operating a holding company, and to carry on such activities of every kind
or nature as may be allied or incidental to such business, and (b) to engage in
the transaction of any or all lawful business for which corporations may now or
hereafter be incorporated under the Corporation Law.
Section 2.2. Powers of the Corporation. The Corporation shall have (a)
all powers now or hereafter authorized by or vested in corporations pursuant to
the provisions of the Corporation Law, (b) all powers now or hereafter vested in
corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the Corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its By-Laws as from time to
time in effect.
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ARTICLE III
Term of Existence
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
Registered Office and Agent
The street address of the Corporation's registered office at the time
of adoption of these Restated Articles of Incorporation is Circle Tower,
Indianapolis, Indiana, 46204 and the name of its Resident Agent at such office
at the time of adoption of these Restated Articles of Incorporation is Prentice
Hall Corporation System, Inc.
ARTICLE V
Shares
Section 5.1. Authorized Classes and Number of Shares. The total
number of shares which the Corporation has authority to issue shall be Eleven
Million (11,000,000) shares, consisting of Ten Million (10,000,000) common
shares (the "Common Shares") and One Million (1,000,000) special shares (the
"Special Shares"). The Corporation's shares shall have a par value of $.01 per
share.
Section 5.2. General Terms of All Shares. The Board of Directors of
the Corporation has authority to authorize and direct the acquisition by the
Corporation of the issued and outstanding Special Shares and Common Shares at
such times, in such amounts, from such persons, for such considerations, from
such sources and upon such terms and conditions as it may, from time to time,
determine upon, subject only to the restrictions, limitations, conditions and
requirements imposed by the Corporation Law, other applicable laws and these
Restated Articles of Incorporation, as the same may, from time to time, be
amended. Shares of the Corporation purchased, redeemed or otherwise acquired by
it shall constitute authorized but unissued shares, unless prior to any such
purchase, redemption or other acquisition, or within thirty (30) days
thereafter, the Board of Directors adopts a resolution providing that such
shares constitute authorized and issued but not outstanding shares.
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The Board of Directors of the Corporation has authority to authorize
and direct the issuance by the Corporation of Special Shares and Common Shares
at such times, in such amounts, to such persons, for such considerations and
upon such terms and conditions as it may, from time to time, determine upon,
subject only to the restrictions, limitations, conditions and requirements
imposed by the Corporation Law, other applicable laws and these Restated
Articles of Incorporation, as the same may, from time to time, be amended.
Shares may be disposed of, issued and sold to such persons, firms or
corporations as the Board of Directors may determine, without any preemptive or
other right on the part of the owners or holders of other shares of the
Corporation of any class or kind to acquire such shares by reason of their
ownership of such other shares.
The Corporation shall have the power to declare and pay dividends or
other distributions upon the issued and outstanding shares of the Corporation,
subject to the limitation that a dividend or other distribution may not be made
if, after giving it effect, the Corporation would not be able to pay its debts
as they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (calculated without regard to
any amounts that would be needed, if the Corporation were to be dissolved at the
time of the dividend or other distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
of the holders of shares receiving the dividend or other distribution, unless
otherwise expressly provided with respect to a series of Special Shares in the
provisions of an amendment to these Restated Articles of Incorporation adopted
by the Board of Directors pursuant to Section 5.5 hereof describing the terms of
such series). The Corporation shall have the power to issue shares of one class
or series as a share dividend or other distribution in respect of that class or
series or one or more other classes or series.
Section 5.3. Voting Rights of Shares.
(a) Common Shares. Except as otherwise provided by the Corporation Law
and subject to such shareholder disclosure and recognition procedures
(which may include voting prohibition sanctions) as the Corporation may by
action of its Board of Directors establish, the Common Shares have
unlimited voting rights and each outstanding Common Share shall, when
validly issued by the Corporation, entitle the record holder thereof to one
vote at all shareholders' meetings on all matters submitted to a vote of
the shareholders of the Corporation.
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(b) Special Shares. Except as required by the Corporation Law or by
the provisions of an amendment to these Restated Articles of Incorporation
that may be adopted, from time to time, by the Board of Directors pursuant
to Section 5.5 hereof describing the terms of Special Shares or a series
thereof, the holders of Special Shares shall have no voting rights or
powers. Special Shares shall, when validly issued by the Corporation,
entitle the record holder thereof to vote as and on such matters, but only
as and on such matters, as the holders thereof are entitled to vote under
the Corporation Law or under the provisions of an amendment to these
Restated Articles of Incorporation adopted by the Board of Directors
pursuant to Section 5.5 hereof describing the terms of Special Shares or a
series thereof (which provisions may provide for special, conditional,
limited or unlimited voting rights, including multiple or fractional votes
per share, or for no right to vote, except to the extent required by the
Corporation Law) and subject to such shareholder disclosure and recognition
procedures (which may include voting prohibition sanctions) as the
Corporation may by action of the Board of Directors establish.
Section 5.4. Other Terms of Common Shares. The Common Shares shall be
equal in every respect insofar as their relationship to the Corporation is
concerned, but such equality of rights shall not imply equality of treatment as
to redemption or other acquisition of shares by the Corporation. Subject to the
rights of the holders of any outstanding Special Shares issued under Section 5.5
hereof, the holders of Common Shares shall be entitled to share ratably in such
dividends or other distributions (other than purchases, redemptions or other
acquisitions of shares by the Corporation, if any, as are declared and paid from
time to time on the Common Shares at the discretion of the Board of Directors.
In the event of any liquidation, dissolution or winding up of the Corporation,
either voluntary or involuntary, after payment shall have been made to the
holders of the Special Shares of the full amount to which they shall be entitled
under this Article V, the holders of Common Shares shall be entitled, to the
exclusion of the holders of the Special Shares of any an all series, to share,
ratably according to the number of shares of Common Shares held by them, in all
remaining assets of the Corporation available for distribution to its
shareholders.
Section 5.5. Other Terms of Special Shares. The Board of Directors of
the Corporation is vested with authority to determine and state the designations
and the relative
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preferences, limitations, voting rights, if any, and other rights of the Special
Shares and of each series of Special Shares by the adoption and filing in
accordance with the Corporation Law (which adoption and filing will be effective
without any shareholder approval or other action), before the issuance of any
Special Shares or series of Special Shares, of an amendment or amendments to
these Restated Articles of Incorporation as the same may, from time to time, be
amended, determining the terms of such Special Shares or series of Special
Shares. All Special Shares of the same series shall be identical with each other
in all respects.
ARTICLE VI
Directors
Section 6.1. Number. The number of Directors comprising the Board of
Directors at the time of adoption of these Restated Articles or Incorporation is
nine (9), and the number of Directors shall be fixed by the By-Laws and may be
changed from time to time by amendment to the By-Laws, but which number shall in
no event be greater than twelve (12). The By-Laws may provide for staggering the
Directors' terms in the manner and to the full extent permitted by the
Corporation Law.
Section 6.2. Qualifications and Nominations. Directors need not be
shareholders of the Corporation or residents of this or any other state in the
United States. Nominations for the election of Directors may be made by the
Board of Directors or by any shareholder entitled to vote for the election of
Directors. Except as may be otherwise provided in any amendment to these
Restated Articles of Incorporation adopted by the Board of Directors pursuant to
Section 5.5 hereof describing the terms of the series of Special Shares,
nominations for the election of Directors other than by the Board of Directors
shall be made by notice in writing, delivered or mailed by first class United
States mail, postage prepaid, to the Secretary of the Corporation no less than
ninety (90) days prior to the first anniversary of the date of the last meeting
of shareholders of the Corporation called for the election of Directors.
Each notice shall set forth (i) the name, age and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the shareholder is a holder of record
of stock of the Corporation entitled to vote at the meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) the
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name, age, business address and, if known, residence address of each nominee
proposed in such notice; (iv) the principal occupation or employment of each
such nominee; (v) a description of all arrangements or understandings between
the shareholder and each such nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the shareholder; (vi) such other information regarding each such
nominee as would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had each
nominee been nominated, or intended to be nominated, by the Board of Directors
of the Corporation; and (vii) the consent of each such nominee to serve as a
Director of the Corporation if so elected.
The Chairman of any meeting of shareholders may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he or she should so determine,
the Chairman shall so declare to the meeting and the defective nomination shall
be disregarded.
Section 6.3. Vacancies. Vacancies occurring in the Board of Directors
shall be filled in the manner provided in the By-Laws or, if the By-Laws do not
provide for the filling of vacancies, in the manner provided by the Corporation
Law. The By-Laws may also provide that in certain circumstances specified
therein, vacancies occurring in the Board of Directors may be filled by vote of
the shareholders at a special meeting called for that purpose or at the next
annual meeting of shareholders.
Section 6.4. Liability of Directors. A Director's responsibility to
the Corporation shall be limited to discharging his or her duties as a
Director, including his duties as a member of any committee of the Board of
Directors upon which he or she may serve, in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner the Director reasonably believes to be in the
best interests of the Corporation, all based on the facts then known to the
Director.
In discharging his or her duties, a Director is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the Corporation whom the
Director reasonably be-
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lieves to be reliable and competent in the matters presented;
(b) Legal counsel, public accountants, or other persons as to matters
the Director reasonably believes are within such person's professional or
expert competence; or
(c) A committee of the Board of which the Director is not a member if
the Director reasonably believes the committee merits confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 6.4 unwarranted. A Director may, in considering the best interests
of the Corporation, consider the effects of any action on shareholders,
employees, suppliers and customers of the Corporation, and communities in which
offices or other facilities of the Corporation are located, and any other
factors the Director considers pertinent.
A Director shall not be liable for any action taken as a Director, or
any failure to take any action, unless (a) the Director has breached or failed
to perform the duties of the Director's office in compliance with this Section
6.4, and (b) the breach or failure to perform constitutes willful misconduct or
recklessness.
Section 6.5. Removal of Directors. Any one or more of the members of
the Board of Directors may be removed only for good cause at a meeting of the
Board of Directors for which notice of the purpose of the meeting has been
given, by a vote of at least a majority of all persons then serving as
Directors. In addition, any one or more of the members of the Board of Directors
may be removed only for good cause at a meeting of the shareholders called
expressly for that purpose, by the affirmative vote of the holders of
outstanding shares representing at least sixty-six and two-thirds percent
(66-2/3%) of all the votes then entitled to be cast at an election of Directors.
No Director may be removed except as provided in this Section 6.5.
Notwithstanding any provision in these Restated Articles of Incorporation to the
contrary, the provisions set forth in this Section 6.5 may not be amended,
altered, changed or repealed, nor may any provision inconsistent with this
Section 6.5 be added to these Restated Articles of Incorporation or to the By-
Laws of the Corporation, as from time to time in effect, except upon the
affirmative vote of the holders of not less than sixty-six and two-thirds
percent (66-2/3%) of all outstanding
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shares of the voting stock of the Corporation voted as a single class.
Section 6.6. Election of Directors by Holders of Special Shares. The
holders of one (1) or more series of Special Shares may be entitled to elect all
or a specified number of Directors, but only to the extent and subject to such
limitations as may be set forth in the provisions of an amendment to these
Restated Articles of Incorporation adopted by the Board of Directors pursuant to
Section 5.5 hereof describing the terms of the series of Special Shares.
ARTICLE VII
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
Section 7.1. By-Laws. The Board of Directors shall have the exclusive
power to make, alter, amend or repeal, or to waive provisions of, the By-Laws of
the Corporation by the affirmative vote of a majority of the entire number of
Directors at the time, except as expressly provided by the Corporation Law.
Provisions for the regulation of the business and management of the affairs of
the Corporation not stated in these Restated Articles of Incorporation may be
stated in the By-Laws. The Board of Directors may adopt Emergency By-Laws of the
Corporation and shall have the exclusive power (except as may otherwise be
provided therein) to make, alter, amend or repeal, or to waive provisions of,
the Emergency By-Laws by the affirmative vote of a majority of the entire number
of Directors at such time.
Section 7.2. Interest of Directors. (a) A conflict of interest
transaction is a transaction with the Corporation in which a Director of the
Corporation has a direct or indirect interest. A conflict of interest
transaction is not voidable by the Corporation solely because of the Director's
interest in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the Director's interest
were disclosed or known to the Board of Directors or a committee of the
Board of Directors and the Board of Directors or committee authorized,
approved, or ratified the transaction.
(2) The material facts of the transaction and the Director's interest
were disclosed or known to
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the shareholders entitled to vote and they authorized, approved, or
ratified the transaction.
(3) The transaction was fair to the Corporation.
(b) For purposes of this Section 7.2, a Director of the Corporation has
an indirect interest in a transaction if:
(1) Another entity in which the Director has a material financial
interest or in which the Director is a general partner is a party to the
transaction; or
(2) Another entity of which the Director is a director, officer, or
trustee is a party to the transaction and the transaction is, or is
required to be, considered by the Board of Directors of the Corporation.
(c) For purposes of Section 7.2(a) (1), a conflict of interest transaction
is authorized, approved, or ratified if it receives the affirmative vote of a
majority of the Directors on the Board of Directors (or on the committee) who
have no direct or indirect interest in the transaction, but a transaction may
not be authorized, approved, or ratified under this section by a single
Director. If a majority of the Directors who have no direct or indirect interest
in the transaction vote to authorize, approve, or ratify the transaction, a
quorum shall be deemed present for the purpose of taking action under this
Section 7.2. The presence of, or a vote cast by, a Director with a direct or
indirect interest in the transaction does not affect the validity of any action
taken under Section 7.2(a) (1), if the transaction is otherwise authorized,
approved, or ratified as provided in such subsection.
(d) For purposes of Section 7.2(a) (2), a conflict of interest transaction
is authorized, approved, or ratified if it receives the affirmative vote of the
holders of shares representing a majority of the votes entitled to be cast.
Shares owned by or voted under the control of a Director who has direct or
indirect interest in the transaction, and shares owned by or voted under the
control of an entity described in Section 7.2(b), may be counted in such a vote
of shareholders.
(e) This Section 7.2 shall not be construed to require authorization,
approval, or ratification by the shareholders of any conflict of interest
transaction, or to invalidate any
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such transaction, that would otherwise be valid under the common and statutory
law applicable thereto.
Section 7.3. Indemnification of Officers, Directors and Other
Eligible Persons.
(a) To the extent not inconsistent with applicable law, every Eligible
Person shall be indemnified by the Corporation against all Liability and
reasonable Expense that may be incurred by him or her in connection with or
resulting from any Claim, (i) if such Eligible Person is Wholly Successful with
respect to the Claim, or (ii) if not Wholly Successful, then if such Eligible
Person is determined, as provided in either Section 7.3(f) or 7.3(g), to have
acted in good faith, in what he or she reasonably believed to be the best
interests of the Corporation or at least not opposed to its best interests and,
in addition, with respect to any criminal claim is determined to have had
reasonable cause to believe that his or her conduct was lawful or had no
reasonable cause to believe that his or her conduct was unlawful. The
termination of any Claim, by judgment, order, settlement (whether with or
without court approval), or conviction or upon a plea of guilty or of nolo
contendere, or its equivalent, shall not create a presumption that an Eligible
Person did not meet the standards of conduct set forth in clause (ii) of this
subsection (a). The actions of an Eligible Person with respect to an employee
benefit plan subject to the Employee Retirement Income Security Act of 1974
shall be deemed to have been taken in what the Eligible Person reasonably
believed to be the best interests of the Corporation or at least not opposed to
its best interests if the Eligible Person reasonably believed he or she was
acting in conformity with the requirements of such Act or he or she reasonably
believed his or her actions to be in the interests of the participants in or
beneficiaries of the plan.
(b) The term "Claim" as used in this Section 7.3 shall include every
pending, threatened or completed claim, action, suit or proceeding and all
appeals thereof (whether brought by or in the right of this Corporation or any
other corporation or otherwise), civil, criminal, administrative or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party or otherwise:
(i) by reason of his or her being or having been an Eligible Person,
or
(ii) by reason of any action taken or not taken by him or her in his
or her capacity as an Eligible Person, whether or not he or she continued
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in such capacity at the time such Liability or Expense shall have been
incurred.
(c) The term "Eligible Person" as used in this Section 7.3 shall mean
every person (and the estate, heirs and personal representatives of such person)
who is or was a Director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee,
agent or fiduciary of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other organization or entity,
whether for profit or not. An Eligible Person shall also be considered to have
been serving an employee benefit plan, at the request of the Corporation if his
or her duties to the Corporation also imposed duties on, or otherwise involved
services by, him or her to the plan or to participants in or beneficiaries for
the plan.
(d) The terms "Liability" and "Expense" as used in this Section 7.3
shall include, but shall not be limited to, counsel fees and disbursements and
amounts of judgements, fines or penalties against (including excise taxes
assessed with respect to an employee benefit plan), and amounts paid in
settlement by or on behalf of, an Eligible Person.
(e) The term "Wholly Successful" as used in this Section 7.3 shall mean
(i) termination of any Claim against the Eligible Person in question without any
finding of liability or quilt against him or her, (ii) approval by a court or
agency, with knowledge of the indemnity herein provided, of a settlement of any
Claim, or (iii) the expiration of a reasonable period of time after the
threatened making of any Claim without commencement of an action, suit or
proceeding and without any payment or promise made to induce a settlement.
(f) Every Eligible Person claiming indemnification hereunder (other than
one who has been wholly successful with respect to any Claim) shall be entitled
to indemnification (i) if special independent legal counsel, which may be
regular counsel of the Corporation or other disinterested person or persons, in
either case selected by the Board of Directors, whether or not a disinterested
quorum exists (such counsel or person or persons being hereinafter called the
"Referee"), shall deliver to the Corporation a written finding that such
Eligible Person has met the standard of conduct set for in Section 7.3(a)(ii),
and (ii) if the Board of Directors, acting upon such written finding, so
determines. The Board of Directors shall, if an Eligible Person is found to be
entitled to indemnification pursuant to the preceding sentence, also determine
the reasonableness of the
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Eligible Person's Expenses. The Eligible Person claiming indemnification shall,
if requested, appear before the Referee, answer questions that the Referee deems
relevant and shall be given ample opportunity to present to the Referee evidence
upon which he or she relies for indemnification. The Corporation shall, at the
request of the Referee, make available facts, opinions or other evidence in any
way relevant to the Referee's finding that are within the possession or control
of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to Section
7.3(f) is found not to be entitled thereto, or if the Board of Directors fails
to select a Referee under Section 7.3(f) within a reasonable amount of time
following a written request of an Eligible Person for the selection of a
Referee, or if the Referee or the Board of Directors fails to make a
determination under Section 7.3(f) within a reasonable amount of time following
the selection of a Referee, the Eligible Person may apply for indemnification
with respect to a Claim to a court of competent jurisdiction, including a court
in which the Claim is pending against the Eligible Person. On receipt of an
application, the court, after giving notice to the Corporation and giving the
Corporation ample opportunity to present to the court any information or
evidence relating to the claim for indemnification that the Corporation deems
appropriate, may order indemnification if it determines that the Eligible Person
is entitled to indemnification with respect to the Claim because such Eligible
Person met the standards of conduct set forth in Section 7.3(a)(ii). If the
court determines that the Eligible Person is entitled to indemnification, the
court shall also determine the reasonableness of the Eligible Person's Expenses.
(h) The rights of indemnification provided in this Section 7.3 shall be in
addition to any rights to which any Eligible Person may otherwise be entitled.
Irrespective of the provisions of this Section 7.3, the Board of Directors may,
at any time and from time to time, (i) approve indemnification of any Eligible
Person to the full extent permitted by the provisions of applicable law at the
time in effect, whether on account of past or future transactions, and (ii)
authorize the Corporation to purchase and maintain insurance on behalf of any
Eligible Person against any Liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability.
(i) Expenses incurred by an Eligible Person with respect
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to any Claim, may be advanced by the Corporation (by action of the Board of
Directors, whether or not a disinterested quorum exists) prior to the final
disposition thereof upon receipt of any undertaking by or on behalf of the
Eligible Person to repay such amount unless he or she is determined to be
entitled to indemnification.
(j) The provisions of this Section 7.3 shall be deemed to be a contract
between the Corporation and each Eligible Person, and an Eligible Person's
rights hereunder shall not be diminished or otherwise adversely affected by any
repeal, amendment or modification of this Section 7.3 that occurs subsequent to
such person becoming an Eligible Person.
(k) The provisions of this Section 7.3 shall be applicable to Claims made
or commenced after the adoption hereof, whether arising from acts or omissions
to act occurring before or after the adoption hereof.
ARTICLE VIII
Miscellaneous Provisions
Section 8.1. Amendment or Repeal. Except as otherwise expressly
provided for in these Restated Articles of Incorporation, the Corporation shall
be deemed, for all purposes, to have reserved the right to amend, alter, change
or repeal any provision contained in these Restated Articles of Incorporation to
the extent and in the manner now or hereafter permitted or prescribed by
statute, and all rights herein conferred upon shareholders are granted subject
to such reservation.
Section 8.2. Redemption of Shares Acquired in Control Share
Acquisitions. If and whenever the provisions of IC 23-1-42 apply to the
Corporation, it is authorized to redeem its securities pursuant to IC
23-1-42-10.
Section 8.3. Headings. The headings of the Articles and Sections of
these Restated Articles of Incorporation have been inserted for convenience of
reference only and do not in any way define, limit, construe or describe the
scope or intent of an Article or Section hereof.
IN WITNESS WHEREOF, the undersigned officer of Shelter Newco, Inc.
has executed these Restated Articles of Incorporation this 21st day of October,
1987.
/s/ Arthur M. Borden
---------------------------
Arthur M. Borden,
Assistant Secretary
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EXHIBIT 6
SHELTER COMPONENTS CORPORATION
2831 DEXTER DRIVE
ELKHART, INDIANA 46514
October 28, 1997
To Our Shareholders:
On behalf of the Board of Directors of Shelter, I am pleased to inform you
that Shelter has entered into an Agreement and Plan of Merger with Kevco, Inc.
Pursuant to this agreement, Kevco has today commenced a cash tender offer to
purchase all of the outstanding shares of the common stock of Shelter at
$17.50 per share in cash. Shelter's directors and executive officers have
agreed to tender to Kevco 1,091,113 shares owned by them which as of the date
hereof, equals approximately 14% of Shelter's outstanding shares.
Subject to certain conditions specified in the merger agreement, including
that there has been no material adverse change in Shelter since September 30,
1997, the offer will be followed by a merger in which any remaining Shelter
shares not tendered will be converted into the right to receive $17.50 in
cash.
In the opinion of the Board of Directors, the offer and merger are in the
best interests of Shelter and its shareholders and are fair to the
shareholders. The Board of Directors has therefore approved the offer and
merger and recommends that the shareholders of Shelter accept the offer and
tender their shares pursuant to the offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including,
among other things, the opinion of SBC Warburg Dillon Read Inc., Shelter's
financial advisor, that, as of the date of such opinion, the $17.50 per share
to be offered to the shareholders of Shelter in connection with 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 attached Schedule
14D-9, and you are urged to read the opinion in its entirety.
In addition to the attached Schedule 14D-9, also enclosed is Kevco's Offer
to Purchase dated October 28, 1997, together with related materials, including
a Letter of Transmittal, to be used in tendering your shares in the offer.
These documents state the terms and conditions of the offer and the merger and
provide instructions as to how to tender your shares. We urge you to read
these documents carefully in making your decision with respect to tendering
your shares pursuant to the offer.
I appreciate very much the opportunity I have had to serve as the chief
executive officer of Shelter. I hope you are as pleased as I am that your
investment in Shelter has led to the opportunity afforded by the Kevco offer.
Shelter Components Corporation
/s/ Larry D. Renbarger
Larry D. Renbarger
Chief Executive Officer
<PAGE>
EXHIBIT 7
OPINION OF
SBC WARBURG DILLON READ INC. DATED OCTOBER 21, 1997
<PAGE>
[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.
<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 8
FORM OF
INDEMNIFICATION AGREEMENT
-------------------------
THIS AGREEMENT is made this 26th day of July, 1994, between Shelter Components
Corporation, an Indiana corporation (the "Company"), and _____________________,
("Indemnitee").
Competent and experienced persons are becoming more reluctant to serve as
directors and/or officers of corporations unless they are provided with adequate
protection against claims and actions against them for their activities on
behalf or at the request of such corporations, generally through insurance
and/or indemnification.
Uncertainties in the interpretations of the statues and regulations, laws, and
public policies relating to indemnification of corporate directors and officers
are such as to make adequate, reliable assessment of the risks to which
directors and officer of such corporations may be exposed difficult,
particularly in light of the proliferation of lawsuits against directors and
officers generally.
The Board of Directors of the Company, based upon its business experience, has
concluded that the continuation of present trends in litigation against
corporate directors and officers will inevitably make it more difficult for the
Company to attract and retain directors and officers of the highest degree of
competence committed to the active and effective direction and supervision of
the business and affairs of the company and its subsidiaries and affiliates and
the operation of its and their facilities. In fact, the Board deems such
consequences to be so detrimental to the best interest of the Company that it
has concluded that the Company should act to provide its directors and officers
with enhanced protection against inordinate risks attendant on their positions
in order to assure that the most capable persons otherwise available will be
attracted to, or will remain in, such positions. In such connection, such
directors have further concluded that it is not only reasonable and prudent but
necessary for the Company to obligate itself contractually to indemnify, to the
fullest extent permitted by applicable law, financial responsibility for
expenses and liabilities which might be incurred by such individuals in
connection with claims lodged against them for their decisions and actions in
such capacities.
The General Corporation Law of the State of Indiana, under which law the Company
is organized, empowers a corporation organized in Indiana to indemnify persons
who serve as directors and/or officers of the corporation, or persons who serve
at the request of the corporation as directors and/or officers of an affiliated
corporation and further specifies that the indemnification provided by such law
"shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders, or disinterested directors or otherwise," and further empowers a
corporation to "purchase and maintain insurance" on behalf of such persons
"against any liability asserted against him or incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against any such liability under the
provision of" said law.
<PAGE>
The Certificate of Incorporation and By-laws of the Company permit
indemnification to the fullest extent permitted by applicable law.
The Company has: (1) reviewed the type of insurance available to insure the
directors and officers of the Company and of its affiliates against costs,
expenses (including attorneys' fees and disbursements), judgments, penalties,
fines, and amounts paid in settlement actually and reasonably incurred by them
in connection with any action, suit, or proceeding to which they are, or are
threatened to be made, a party by reason of their status or decisions or actions
in such positions; (2) studied the nature and extent of the coverage provided by
such insurance and the cost thereof to the Company; (3) concluded at the present
time not to obtain such insurance in view of the costs and limited benefits
thereof; and (4) concluded, in part based upon the Company's decision not to
obtain such insurance, that it would be in the best interests of the Company and
its stockholders for the Company to enter into agreements to indemnify certain
of such persons in the form of this Agreement. The Company has, moreover,
concluded that it would continue to be in the best interests of the Company to
enter into such agreements with such persons even if the Company should, in the
future, obtain any such insurance inasmuch as such insurance is, and is likely
to continue to be, subject to certain significant exclusions and limitations or
could cease to be reasonably available on any basis.
The Company desires to have Indemnitee serve or continue to serve as a director
and/or officer of the Company, and/or as a director, officer, employee, partner,
trustee, agent, and/or fiduciary of such other corporations, partnerships, joint
ventures, employee benefit plans, trusts, and/or other enterprises (herein
referred to as "Company Affiliate") of which he or she has been or is serving,
or will serve on behalf of or at the request of or for the convenience of, or to
represent the interests of the Company, free from undue concern for
unpredictable, inappropriate, or unreasonable claims for damages by reason of
his or her being, or having been, a director and/or officer of the Company,
and/or a director, officer, employee, partner, trustee, agent, and/or fiduciary
of a Company Affiliate, or by reason of his or her decisions or actions on their
behalf.
Indemnitee is willing to serve, or to continue to serve, or to take on
additional service for, the Company and/or the Company Affiliate in such
aforesaid capacities on the condition that he or she be indemnified as provided
for herein.
Accordingly, in consideration of the premises and the covenants contained
herein, the Company and Indemnitee do hereby covenant and agree as follows:
1 Services to the Company: Indemnitee shall serve or continue to serve
as a director and/or officer of the Company (in the case of a
Company officer, at the will of the Company or under separate
contract, if any such contract exists or shall hereafter exist),
and/or as a director, and/or officer, or fiduciary of a Company
Affiliate, faithfully and to the best of his or her ability so long
as he or she is duly elected and qualified in accordance with the
provisions of the
2
<PAGE>
By-laws or other applicable constitutive documents thereof;
provided, however, that: (a) Indemnitee may at any time and for any
reason resign from such position (subject to any contractual
obligations which Indemnitee has assumed apart from this Agreement);
and (b) neither the Company nor the Company Affiliate will have any
obligation under this Agreement to continue the Indemnitee in any
such position.
2 Right to Indemnification: The Company shall, except to the extent
prohibited by applicable law as then in effect, indemnify any
Indemnitee who is or was involved in any manner (including, without
limitation, as a party or witness), or is threatened to be made so
involved, in any threatened, pending, or completed investigation,
claim, action, suit, or proceeding whether civil, criminal,
administrative, or investigative (including, without limitation, any
action, suit, or proceeding by or in the right of the Company to
procure a judgment in its favor) (herein referred to as a
"Proceeding"), by reason of the fact that such person is or was a
director or officer of the Company, and/or is or was serving at the
request of the Company as a director or officer, of any Company
affiliate, against all expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such
Proceeding; provided, however, that, except as provided in Paragraph
3.4, the foregoing shall not apply to a director or officer of the
Company with respect to a Proceeding that was commenced by such
director or officer. Such indemnification shall include the right to
receive payment in advance of any expenses incurred by Indemnitee in
connection with such Proceeding, consistent with the provisions of
applicable law as then in effect.
3 Advancement of Expenses; Procedures; Presumptions and Effect of
Certain Proceedings; Remedies: In furtherance, but not in
limitation, of the foregoing provisions, the following procedures,
presumptions, and remedies shall apply with respect to advancement
of expenses and the right to indemnification hereunder:
3.1 Advancement of Expenses: All reasonable expenses incurred by or on
behalf of the Indemnitee in connection with any Proceeding shall,
after initial approval in accord with paragraph 3.2 be advanced to
the Indemnitee by the Company within 20 calendar days after the
receipt by the Company of a statement or statements from the
Indemnitee requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the expenses
incurred by the Indemnitee and, if required by law at the time of
such advance, shall include or be accompanied by an undertaking by
or on behalf of the Indemnitee to repay the amounts advanced if it
should
3
<PAGE>
ultimately be determined that the Indemnitee's is not entitled to be
indemnified against such expenses hereunder.
3.2 Procurement for Determination of Entitlement to Indemnification:
---------------------------------------------------------------
3.2.1 To obtain indemnification as herein provided, as Indemnitee shall
submit to the President or Secretary of the Company a written
request, including such documentation and information as is
reasonably available to the Indemnitee and reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification (herein referred to as the "Supporting
Documentation"). The determination of the Indemnitee's entitlement
to indemnification shall be made not later than 60 calendar days
after receipt by the Company of the written request for
Indemnification together with the Supporting Documentation. The
Secretary or President of the Company shall, promptly upon receipt
of such a request for indemnification, advise the Board of Directors
in writing that the Indemnitee has requested indemnification.
3.2.2 The Indemnitee's entitlement to indemnification hereunder shall be
determined in one of the following ways (each of which shall give
effect to the presumptions set forth in Paragraph 3.3): (a) by a
majority vote of the Disinterested Directors (as hereinafter
defined) if they constitute a quorum of the Board of Directors; (b)
by a written opinion of Independent Counsel (as hereinafter defined)
if a quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, a majority of
such Disinterested Directors so directs; (c) by the stockholders of
the Company (but only if a majority of the Disinterested Directors,
if they constitute a quorum of the Board of Directors, presents the
issue of entitlement to indemnification to the stockholders for
their determination); or (d) as provided in Paragraph 3.3. In the
event that subparagraph 3.2.2 applies, stockholder approval will be
deemed to have been received if the holders of a majority of the
Company's total common stock outstanding vote in favor of such
approval.
3.2.3 If the determination of entitlement to indemnification is to be made
by Independent Counsel pursuant to Subparagraph 3.2.2(b) above, a
majority of the Disinterested Directors, if any, shall select the
Independent Counsel to which the Indemnitee does not reasonably
object. If there shall be no Disinterested Directors, such
Independent Counsel shall be selected by a majority of the
Directors, but only an Independent Counsel to which no Indemnitee
reasonably objects.
3.3 Presumptions and Effect of Certain Proceedings: Except as otherwise
expressly provided herein, the Indemnitee shall be presumed to be
entitled to indemnification hereunder upon submission of a request
for indemnification
4
<PAGE>
together with the Supporting documentation in accordance with
Paragraph 3.2.1, and thereafter the Company shall have the burden
of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered
under Paragraph 3.2 to determine entitlement to indemnification
shall not have been appointed or shall not have made a determination
within 60 calendar days after receipt by the Company of the request
therefor together with the Supporting Documentation, the Indemnitee
shall be deemed to be entitled to indemnification, and the
Indemnitee shall be entitled to such indemnification unless the
Company establishes as provided in the final sentence of Paragraph
3.4.2 or by written opinion of Independent Counsel that: (a) the
Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification or in the Supporting
Documentation; or (b) such indemnification is prohibited by law. The
termination of any Proceeding described in Paragraph 2, or of any
claim, issue, or matter therein, by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, adversely affect the right of the Indemnitee
to indemnification or create a presumption that the Indemnitee did
not act in good faith and in a manner which the Indemnitee
reasonably believed to be in, or not opposed to, the best interests
of the Company or, with respect to any criminal Proceeding, that the
Indemnitee had reasonable cause to believe that his or her conduct
was unlawful.
3.4 Remedies of Indemnitee:
-----------------------
3.4.1 In the event that a determination is made pursuant to Paragraph 3.2
that the Indemnitee is not entitled to indemnification hereunder:
(a) the Indemnitee shall be entitled to seek an adjudication of his
or her entitlement to such indemnification either, at the
Indemnitee's option, in (x) an appropriate court of the State of
Indiana or any other court of competent jurisdiction, or (y) an
arbitration to be conducted by a single arbitrator, selected by
mutual agreement of the Company and Indemnitee (or, failing such
agreement by the then sitting Chief Judge of the United States
District Court for the Northern District of Indiana), pursuant to
the commercial arbitration rules of the American Arbitration
Association; (b) any such judicial proceeding or arbitration shall
be de novo, and the Indemnitee shall not be prejudiced by reason of
such adverse determination; and (c) in any such judicial proceeding
or arbitration, the Company shall have the burden of proving that
the Indemnitee is prohibited by applicable law. If any such
determination is made, the Indemnitee shall be entitled, on five
days' written notice to the Secretary of the Company, to receive the
written report of the persons making such determination, which
report shall include the reasons and factual findings, if any, upon
which such determination was based.
5
<PAGE>
3.4.2 If a determination shall have been made, or deemed to have been
made, pursuant to Paragraph 3.2 or 3.3 that the Indemnitee is
entitled to indemnification, the Company shall be obligated to pay
the amounts constituting such indemnification within five days after
such determination has been made or deemed to have been made and
shall be conclusively bound by such determination unless the Company
establishes as provided in the final sentence of this paragraph
that: (a) the Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the
Supporting Documentation; or (b) such indemnification is prohibited
by law. If either (x) advancement of expenses is not timely made
pursuant to Paragraph 3.1, or (y) payments of indemnification is not
made within five calendar days after a determination of entitlement
to indemnification has been made or deemed to have been made
pursuant to Paragraph 3.2 or 3.3, the Indemnitee shall be entitled
to seek judicial enforcement of the Company's obligation to pay to
the Indemnitee such advancement of expenses or indemnification.
Notwithstanding the foregoing, the Company may bring an action, in
an appropriate court in the State of Indiana or any other court of
competent jurisdiction, contesting the right of the Indemnitee to
receive indemnification hereunder due to the occurrence of an event
described in subclause (a) or (b) of this clause (3.4.2) (herein
referred to as a "Disqualifying Event"); provided, however, that in
any such action the Company will have the burden of proving the
occurrence of such Disqualifying Event.
3.4.3 The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Paragraph 3.4
that the procedures and presumptions of this paragraph 3 are not
valid, binding, and enforceable and shall stipulate in any such
court or before any such arbitrator that the company is bound by all
of the provisions of this Agreement.
3.4.4 If the Indemnitee, pursuant to this Paragraph 3.4, seeks a judicial
adjudication of, or an award in arbitration to enforce, his or her
rights under, or to recover damages for breach of, this Agreement,
the Indemnitee shall be entitled to recover from the Company, and
shall be indemnified by the Company against, any expenses actually
and reasonably incurred by the Indemnitee if the Indemnitee prevails
in such judicial adjudication or arbitration. If it shall be
determined in such judicial adjudication or arbitration that the
Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in connection with such judicial
adjudication or arbitration shall be prorated accordingly.
3.5 Definitions: For purposes of this Paragraph 3:
6
<PAGE>
"Disinterested Director" means a director of the Company who is not
or was not a party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
"Independent Counsel" means a law firm or a member of a law firm
that neither presently is, nor in the past five years has been,
retained to represent: (a) the Company or the Indemnitee in any
matter material to either such party; or (b) any other party to the
Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of
professional conduct then prevailing under the laws of the State of
Indiana would have a conflict of interest in representing either the
company or the Indemnitee in an action to determine the Indemnitee's
rights hereunder.
4. Other Rights to Indemnification: The indemnification and advancement
of costs and expenses (including attorneys' fees and disbursements)
provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may now or in the future be
entitled under any provision of applicable law, the Certificate of
Incorporation, or any By-law of the Company or any other agreement,
or any vote of directors or stockholders or otherwise, whether as to
action in his or her official capacity or in another capacity while
occupying any of the positions or having any of the relationships
referred to in Paragraph 1 of this Agreement.
5. Duration of Agreement:
5.1 This Agreement shall be effective from the date hereof, and shall
continue until and terminate upon the later of: (i) the tenth
anniversary after Indemnitee has ceased to occupy any of the
positions or have any of the relationships described in Paragraph 1
of this Agreement; or (ii) (a) the final termination or resolution
of all Proceedings with respect to Indemnitee commenced during such
ten-year period, and (b) either (x) receipt by Indemnitee of the
indemnification to which he or she is entitled hereunder with
respect thereto, or (y) a final adjudication or binding arbitration
that Indemnitee is not entitled to any further indemnification with
respect thereto, as the case may be.
5.2 This Agreement shall be binding upon the Company and its successors
assigns and shall inure to the benefit of the Indemnitee and his or
her heirs, devisees, executors, administrators, or other legal
representatives.
6 Severability: If any provision or provisions of this Agreement are
held to be invalid, illegal, or unenforceable under any particular
circumstances or for any
7
<PAGE>
reason whatsoever: (a) the validity, legality, and enforceability of
the remaining provisions of this Agreement (including, without
limitation, all other portions of any paragraph or clause of this
Agreement that contains any provision that has been found to be
invalid, illegal, or unenforceable, that are not themselves invalid,
illegal, or unenforceable) or the validity, legality, or
enforceability under any other circumstances shall not in any way be
affected or impaired thereby; and (b) to the fullest extent possible
consistent with applicable law, the provisions of this Agreement
(including, without limitation, all other portions of any paragraph
or clause of this Agreement that contains any such provision that
has been found to be invalid, illegal, or unenforceable, that are
not themselves invalid, illegal, or unenforceable) shall be deemed
revised and shall be construed so as to give effect to the intent
manifested by this Agreement (including the provision held invalid,
illegal, or unenforceable).
7 Identical Counterparts: This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute one and
the same Agreement. Only one such counterpart signed by the party
against whom enforceability is sought needs to be produced to
evidence the existence of this Agreement.
8 Headings: The headings of the paragraphs of this Agreement are
inserted for convenience and shall not be deemed to constitute part
of this Agreement or to affect the construction thereof.
9 Modification and Waiver: No supplement, modification, or amendment
of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
10 Notification and Defense of Claim: Indemnitee agrees to notify the
Company promptly in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information, or other
document relating to any matter which may be subject to
indemnification hereunder, whether civil, criminal, or
investigative; provided, however, that the failure of Indemnitee to
give such notice to the Company shall not adversely affect
Indemnitee's rights under this Agreement except to the extent the
Company shall have been materially prejudiced as a direct result of
such failure. Nothing in this Agreement shall constitute a waiver of
the Company's right to seek participation at its own expense in any
Proceeding which may give rise to indemnification hereunder.
11 Notices: All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if: (i)
8
<PAGE>
delivered by hand and receipted for by the party to whom said notice
or other communication shall have been directed; or (ii) mailed by
certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed, in either
case:
(a) if to Indemnitee, at the address indicated on the signature
page hereof;
(b) if to the Company:
Shelter Components Corporation
27217 County Road 6
Elkhart, Indiana 46514
or to such address as may have furnished to either party by the
other party.
12. Governing Law: The parties hereto agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws
of the State of Indiana.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SHELTER COMPONENTS CORPORATION
By: /s/ Larry D. Renbarger
------------------------------
Larry D. Renbarger, President
- -----------------------------------
Indemnitee
9
<PAGE>
EXHIBIT 9
NEWS
FOR IMMEDIATE RELEASE
- ---------------------
Contact: Kevco, Inc. Contact: Shelter Components Corporation
Ellis L. McKinley, Jr. Mark Neilson
Chief Financial Officer Chief Financial Officer
(817) 332-2758 (800) 571-6929
KEVCO AND SHELTER COMPONENTS ANNOUNCE MERGER AGREEMENT
---------------
MERGER TO ESTABLISH THE LEADING DISTRIBUTOR
TO MANUFACTURED HOUSING INDUSTRY
FORT WORTH, Texas (October 22, 1997) - Kevco, Inc. (Nasdaq/NM:KVCO) and Shelter
Components Corporation (ASE: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.
Kevco expects to commence its cash tender offer no later than October 28, 1997.
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 essentially complement the plumbing fixtures, wood products and other
building components that Kevco markets through our
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<PAGE>
Kevco And Shelter Components Announce Merger Agreement
Page 2
October 22, 1997
- --------------------------------------------------------------------------------
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 $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.
-END-
<PAGE>
EXHIBIT 10
Shelter Components
Separation Allowance Plan
for Salaried Employees
10/14/97
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Separation Allowance Plan for Salaried Employees
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INTRODUCTION
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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
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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
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This policy and related procedures apply to all facilities and subsidiaries of
the Company employing salaried personnel unless specifically excluded.
ADMINISTRATION
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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.
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DEFINITIONS
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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
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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.
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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.
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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
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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
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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.
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OTHER
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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.
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GENERAL INFORMATION
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Name and address of the Plan Sponsor
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Shelter Components Corporation
PO Box 4026
Elkhart, IN 46514
(219) 262-4541
Name and address of the Plan Administrator
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President
Shelter Components Corporation
PO Box 4026
Elkhart, IN 46514
(219) 262-4541
Name and address of Designated Agent for Service of Legal Process
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Corporate Attorney
Shelter Components Corporation
PO Box 4062
Elkhart, IN 46514
(219) 262-4541
Internal Revenue Service and Plan Identification Number
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The corporate tax identification number assigned by the Internal
Revenue Service is 35-1844944. The Plan number is 503.
Plan Type
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The Plan is a Welfare Benefits Plan as defined by Employee Retirement Income
Security Act of 1974 (ERISA).
Type of Administration
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The administation of this Plan is performed by Shelter Components Corporation.
Plan Year
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The Plan year is from November 1st to October 31st.
Funding
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The Plan is funding from the general assets of the Company.
Plan Effective Date
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The Plan is effective November 1, 1997.
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RIGHTS OF PARTICIPANTS
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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 $100 a day until you
receive the materials unless the delay is beyond the control of the Plan
Administrator. If the people who operate the Plan misuse the Plan's money, or if
you are discriminated against for enforcing your rights, you may seek assistance
from the U.S. Department of Labor or file suit in federal court. If you do file
suit, the court will decide who should pay court fees and legal fees. If your
case is upheld by the court, the court may order the person or organization you
have sued to pay related expenses. If you lose or the court finds your case
frivolous, you may be ordered to pay the court costs and legal fees.
If you have any questions about the Plan, contact the Plan Administrator. If you
have any questions about your rights, contact the office of the U.S. Department
of Labor-Management Services Administration, Department of Labor.
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Appendix A
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SEPARATION AND RELEASE AGREEMENT
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The purpose of this document is to set forth the agreement between SHELTER
COMPONENTS, INC., ("COMPANY") and EMPLOYEE ("EMPLOYEE") regarding his/her
employment by COMPANY and the termination of that employment.
1. COMPANY agrees as to pay EMPLOYEE the total sum of ________________________
__________________________________________ and 00/100 Dollars
($___________) 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.
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(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.
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This Agreement is executed as of __________ day of _________________, 1997.
EMPLOYEE __________________________________________________________________
EMPLOYEE
Date: ________________________________________________________
Shelter Components, Inc.
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By:
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Its:
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Date:
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EXHIBIT 11
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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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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<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
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<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.
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<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
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SHAREHOLDERS:
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<PAGE>
AGREED TO AND ACKNOWLEDGED
(with respect to Section 5):
COMPANY:
SHELTER COMPONENTS CORPORATION
By:
------------------------------------------
Name: Larry D. Renbarger
Title: President
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<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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